The inconsistencies between Clausing 1.0 and Clausing 2.0 are indicative of an economics profession that has eschewed its own humble insights.
Coverage of the recent National Conservatism conference has highlighted the growing divisions in the conservative movement, especially when it comes to the exertion of political power in economic life. The intellectual roots of this conflict were on display earlier this year when Intercollegiate Studies Institute held a two-day conference on conservative political economy funded by the William and Flora Hewlett Foundation. As one would expect, the conference was a lively affair and featured a range of perspectives from the right. The old fusionists could look forward to Don Devine and Jay Richards. Libertarians heard from Julia Norgaard and Amity Shlaes. Those interested in what elected officials had to say could listen to Senators Jeff Sessions and Marco Rubio. The insurgent “National Conservatives” like Josh Hammer and Julius Krein made a splash. The event in its entirety revealed that the fissures among conservatives over issues of economic liberty, industrial policy, and the competent use of federal power have only grown since 2010.
Some might think that 2015 is the better benchmark year, but the 2010 Tea Party Movement featured a populist anger that revealed an odd incoherence perhaps best summarized by the Tea Party signs that said things like, “Get your hands off my Medicare.” On the one hand, regular conservative populists were angry at government mismanagement of the 2008 Great Recession, and this among other events drove them to lose faith in their leaders. However, one reason for the anger is the sense that Republicans were betraying the middle-class entitlements that conservative populists regarded as their birthright. The Romney/Paul 2012 ticket promised cutbacks to these very entitlements—precisely the opposite of what this faction wanted. When the next presidential nomination came around, the ground was fertile for a populist champion to claim them and turn them out, as the GOP was becoming increasingly working-class, as suburban white voters started to lean more Democratic. Donald J. Trump was just the figure to take advantage of this, not only because of his brash, larger-than-life persona but also because he had long associated with populist third parties and the attending conspiracies, such as those concerning Barack Obama’s citizenship. As of now, the GOP is at a crossroads, as party members look for signs from Mar-a-Lago. Until the GOP knows its political future for certain, the intellectual division within the conservative movement will persist and perhaps worsen.
How Conservatives Got Here
Since the start of the modern conservative movement of the 1960s, conservatives have clashed over issues of political economy. Libertarians usually see themselves as the heirs to the Austrian School of Hayek and Mises. As such, they continue to insist that large government entities suffer from the “knowledge problem.” Statistical measures and bureaucratic expertise cannot substitute for local knowledge. Such a view was easy to square with social conservatives, who had witnessed the mid-century Progressive consensus advocate for secularization of public institutions and legalization of abortion, all while mocking religious faith as superstition. In addition, the labor arbitrage with China, a regional or even global opponent, worsened economic decline, which in turn brought a decline in civil society. Foreign policy hawks could recommend the proper end for a strong federal government where it counted most, namely in defeating America’s communist and—after the end of the Cold War—terrorist enemies. More radical libertarians would decry the ever-growing “military-industrial complex,” and social conservatives would become increasingly impatient for the overturning of Roe v. Wade, Lemon v. Kurtzman, and the self-inflicted wound of Employment Division v. Smith.
The end of the Bush administration brought these tensions into open conflict. The decision to bail out American financial firms ran afoul of a principle of competitive capitalism—namely, that unprofitable businesses ought to fail, since entering a free market entails precisely that risk. Social conservatives were frustrated with the narrowly avoided appointment of Harriet Miers to the Supreme Court. While Samuel Alito satisfied social conservative court-watchers, Chief Justice John Roberts proved far too risk-averse to give them much confidence that Bush had really changed the composition of the Supreme Court.
The two terms of the Obama administration saw the ascendance of large web-based firms like Facebook, Alphabet, and Amazon. Their new status closed the internet frontier. These large platforms generated immense profits by reducing the cost of navigating the web. Obama captured the imaginations of firm leaders and management, thus providing him both the money and talent he needed to win messaging battles when both campaigning and governing. Indeed, something of a revolving door emerged between the White House and Big Tech board rooms.
In the meantime, Obama continued the bailouts and saw his Affordable Care Act pass Congress by the narrowest of margins. The implementation went poorly. His Left flank grew increasingly angry, as revealed in the Occupy Wall Street movement of 2011. Republicans thought such a weakened Obama had proved unready and unserious, especially after the 2010 Tea Party Movement that had delivered a “shellacking” in Obama’s words.
Today’s young conservatives might find this hard to believe (they were, if you can believe it, born around 2000), but GOP leaders in 2012 were supremely confident that a ticket based on economic austerity would win the day. Instead, Romney and Ryan struggled to generate enthusiasm for drawing down American welfare commitments while preserving an increasingly unpopular global presence. The hope in 2012 was that GOP regulars would come home and that the enthusiasms of Tea Party activists for protecting entitlements flowed from ignorance and not deeply held policy preferences. They were wrong. Obama was reelected, and during his second term, the Supreme Court handed down Obergefell v. Hodges, stunning and demoralizing social conservatives. The fact that the author of the decision was a Reagan appointee crystalized their opinion that fusionism could not hold.
Trump’s Influence on Conservative Priorities
With this background in mind, Trump’s rise makes sense. He understood the conservative populist attachment to federal benefits, the unpopularity of Washington-consensus foreign policy, and the general sense of economic decline felt by the middle class. The fact that he was shunned by most Republican leaders only reinforced the idea that he was the torch-bearer for the emerging conservative populist rebellion. Trump was the sole representative of the populist position in 2016, while the rest of the field divided up the flagging old consensus. In the 2016 general election, he was lucky to face a Democratic candidate under federal investigation, without much gift for campaigning, and deeply hobbled by a brutal nomination battle with a hard-left hero, Senator Bernie Sanders.
Trump’s presidency had one major piece of domestic legislation, a tax cut that included a reduction to the SALT deduction. He also permanently changed the consensus on China from possible future partner to serious geo-strategic threat. He appointed three justices to the Supreme Court, including the vital addition of a sixth conservative in Amy Coney Barrett. He rescinded the Dear Colleague letter that threatened to turn university campuses into kangaroo courts.
Of course, he also fomented racial divisions, wasted time and money on an ill-advised border wall, and never managed to repeal Obamacare. His handling of COVID-19 was poor, though it has seemed just as vexing to his successor, Joe Biden. He found himself suddenly banned from the various social media platforms in an apparent collusion among social media giants, thus provoking outrage over the rediscovered Section 230 protections these firms enjoyed. His greatest failure came to pass when he declined to control his own followers during the January 6 attack on the US Capitol.
National Conservatives Behaving Badly
Only after this review of events does the deep division at ISI’s conference begin to make sense. The panel devoted to facing the Chinese threat featured a range of conservative opinion, but offered a strong consensus in favor of treating China as an enemy. The classical liberal Sam Gregg found some relief in the increasing Chinese failure to preserve their investments, but retired US Air Force brigadier general Robert Spalding warned that Chinese decline will not come soon enough to fend off a likely invasion of Taiwan, especially given American inaction in Hong Kong. A panel on social media saw a bit more disagreement, with some panelists agreeing that the existing Silicon Valley giants are beginning to encounter competition. Yet others suggested that developing alternatives to firms like Amazon for server hosting will prove difficult. These two panels suggested paths for conservative cooperation over specific policy questions. But it should not escape notice that the more intractable disagreements are rooted in the Trump experience. These panel topics closely reflected Trump’s preoccupation with China and the power of social media. Even when panelists never said his name, Trump was always in the room.
The consensus over these narrow policy discussions, however, contrasted with the divergence in worldviews that appeared during a panel on “crony capitalism.” Decrying “crony capitalism” became de rigueur among conservatives in the post-2008 economy. There was a consensus that financial services firms successfully insulated themselves from competition by capturing regulatory agencies. A revolving door existed between the staff of regulatory agencies and lucrative positions at these firms. This cozy relationship shaped the language of regulations and laws.
Representing National Conservatism, Hammer and Krein disdained this longstanding account of crony capitalism. They insisted that conservatives must let go of their anxiety over crony capitalism because, they believe, genuinely free competitive enterprise is a fantasy. Since a level playing field is not possible, America should protect its firms from foreign competition. They viewed the idea that this might interfere with international gains from trade as irrelevant—it is simply a cost of national greatness. After all, the cost of leaving Americans to the mercy of competition is greater: wage stagnation, increasing welfare dependency, and deaths from despair. When Devine and Norgaard objected that this placed industry in the hands of government, Hammer invoked Adrian Vermeule’s call for conservatives to “integrate from within” the administrative state to use its regulatory power for rightwing policy goals. Someone will wield federal power over the market, and if conservatives refuse to do so, as they have for so long, progressives will wield it by default.
Devine seemed downright surprised to hear this view expressed at a conservative event. He fell back on the traditional free-market position emphasizing the power of independent market actors seeking opportunities that governments are simply unable to locate. Krein rudely described Devine’s reply as a “get off my lawn speech” and commented that Devine’s position explained why the Reagan administration—in which Devine served—had failed to get a handle on this problem.
Norgaard explained the well-documented shortcomings of industrial policy during the twentieth century, earning shrugs and smirks from her interlocutors, who replied that to presume markets could be “neutral” on matters of politics was naïve. One issue on which Krein and Hammer had no ready reply was the matter of how much individual freedom we ought to retain against state power. Krein had already suggested his indifference to individual freedom when he praised the Putin regime in Russia. He favorably contrasted Putin with the shambolic Yeltsin government, for proving ruthlessly efficient in ensuring Russian firms operated when he needed them to. In other words, Putin made the deals run on time.
For all the fireworks of this panel, when a more capable National Conservative, Oren Cass, took the stage to debate Jay Richards, the disagreements began to vanish. Cass and Richards differed over the relative need for an industrial policy, but Cass was happy to concede that a competitive marketplace was better than a command-and-control variety defended by Krein and Hammer. One questioner seemed distraught that Cass and Richards had found a way to put aside their differences and tried to provoke greater disagreement. After all, the debate was pitched as Cass representing Alexander Hamilton, who defended tariffs to protect American industry and supply chains, and Richards representing Adam Smith, who saw international trade as a source for greater wealth and even peace. Richards recognized that American markets could be too exposed in their supply lines, but he kept Cass to the free market position over the corporatist one. The disagreement, in the end, came down to the emphasis on domestic producers versus international gains from trade, one reflected in the Rubio speech and Sessions conversation.
A Movement in Suspended Animation
Libertarian political economists proved capable of presenting a coherent vision of free markets and free citizens, as well as a possible constituency for this vision. The problem is that the coherent vision maps poorly onto the current circumstances and has in the conservative movement a rapidly shrinking number of real constituents. Advancing a vision of small, competitive enterprises is very attractive to young people who have easy access to credit, certainty about the economic future, and trust in government to arbitrate disputes and otherwise stay out the way. In a country awash with debt, half under lockdown, and polarized over government power, such a vision seems believable to the already convinced.
National Conservatives understand this, but they have a real interest in command-and-control authoritarianism. Any advantage they might have in offering a less disconnected vision evaporates when they offer a conspiracy to infiltrate the administrative state to usher in an American Putin. In the months since the conference, command-and-control economies have seen a serious downturn in reputation, as Chinese real estate firms like Evergrande and Fantasia Holdings Group are currently unable to make debt payments despite Beijing scrambling to shore the firms up. Perhaps crony capitalism is a problem after all? If not that, then they merely wish to consider protecting a handful of industries, which does not require some grandiose ideological realignment. The neo-conservative George W. Bush raised steel tariffs in 2002 only to have them rescinded in 2005 because they failed to protect the steel industry and hurt industries that relied on steel.
Most regular Republican voters would probably not like either option, but the consequences of this are relatively small. The real lesson from this conference was how conservatives cannot hope to reconsider their views on political economy while held hostage to a possible Trump 2024 candidacy. While both sides hope to persuade Republican members of Congress, those members themselves are also waiting to see what happens in 2024. Unfortunately, in the meantime, the rest of the country still has lives to live.
Where is all of this headed? Recent political developments might suggest that the divisions may not have to be reconciled at a practical level. Statewide races in New Jersey and Virginia revealed that Democrats may need Trump more than Republicans do. Vanquished Democratic candidate for Virginia governor Terry MacAuliffe desperately sought to paint his rival, Republican candidate Glenn Youngkin, as an agent of Trump. Meanwhile, Youngkin kept Trump at arm’s reach and campaigned as an affable generic Republican concerned about woke radicalism in the schools. Meanwhile, Winsome Sears, the incoming Republican Lieutenant Governor, campaigned as a Marine, a Jamaican immigrant who lived the American Dream but also proudly represented Americans of African descent. Her campaign had a populist style but a rather plain Republican message. Republican candidates, in other words, did not need Trump to win and, in Sears’s case, to achieve populist credibility when the former president is not dominating the headlines.
So perhaps the path forward for conservatives is the one lit by the modus vivendi struck by Cass and Richards. There may be differences in emphasis, but these differences can be hashed out in the political process should conservatives be in the position to govern again in the near future. Then again, everyone should by now have learned never to underestimate the Donald. If there is another trip down the escalator, it could once again change everything.