Law & Liberty contributors offer their reflections on the man and his achievements.
Much of the new conservative criticism of markets misses the mark, conflating “modern economy” with “market economy.” However, the key attributes of modern economies exist irrespective whether those economies are organized using markets or not. This matters. When conservatives blame markets for illnesses generic to all modern economies, they misdiagnose the cause and therefore prescribe faulty remedies.
For example, shifts in the terms of international trade resulting from shifts in comparative national advantages or changes in the cost of trade will occur no matter the underlying organization of the internal economies of the different countries. Unless conservative critics of markets recommend economic autarky—no international trade at all—then even economies organized entirely on non-market bases would face economic dislocation akin to market economies wherever shifts in production or transaction costs occur.
So, too, changes in production resulting from technological change. The invention of the computer chip, for example, changed demand for all sorts of workers—and this happens irrespective of whether markets allocate labor or whether some non-market alternative allocates labor.
None of these economic dislocations would be avoided by eliminating or muting markets in an economy.
Even dislocation caused by business cycles is not necessarily the result of markets. “Real business cycle” theory remains a controversial macroeconomic theory—perhaps more controversial today than when economists Finn Kyland and Edward Prescott won the Nobel Memorial Prize for it in 2004. Nonetheless, the theory explains business cycles as the result of changes in “real” economic factors like supply shocks or technological changes rather than a result of the failure of markets to clear in equilibrium.
There is then the question of the extent to which conservatives and libertarians take the existence of “crony capitalism” seriously. If “crony capitalism” is in fact a widespread, endemic aspect of the American economy, then the crony-capitalist portion of the U.S. economy is antithetical to a real market economy. Crony capitalism and its associated pathologies result from political intervention antithetical to free markets. Critically, the U.S. economy need not be all one or all the other. A “dual economy” might best describe the U.S. economy. This is one in which a politically privileged sector of state capitalism exists alongside, and to the detriment of, a competitive market sector. The problem here, though, is the crony-economy, not the market economy.
Finally, domestic losses are not the whole story. Economic and social losses—which are real losses, to be sure—in the U.S. as a result of shifts in the relative cost of production across nations. It is also true that changes in the transaction costs of international trade need to be weighed against gains in other parts of the world, as well as gains to yet other Americans. While Americans, and others, understandably prefer to advance the well-being of their fellow citizens over others, few would argue this in an unqualified way. The world has seen a stunning 1 billion people moved out of extreme poverty in recent decades. These gains are related to the losses of workers in the U.S. and in the West more generally—although, again, many Americans also gain from lower cost production overseas.
And, again, an economy would face these trade-offs whether it was a market economy or a non-market economy.
So what, exactly, is the conservative problem with markets per se, as opposed to a problem with generic aspects of modern economies, whether organized via markets or on a non-market basis?
First, implicit in much conservative criticism is the Polyani-like argument that the problem is not about change itself but about the pace of change. The complaint is that market systems translate changes from trade and technological shocks faster to the domestic economy than would more-politically controlled transitions. The remedy would be to slow down the pace of these changes to a more human scale, allowing more time to acclimate.
Criticisms such as Tucker Carlson’s suggest that American politicians, at the behest of elite economic interests, allow economic transitions to reflect lower-cost production overseas so quickly and abruptly that they cause unnecessary economic and social harm. Because this pain concentrates in lower socioeconomic strata, the argument goes, American political and economic elites do not care. Additionally, elites use the ostensible ideology of the autonomous market as an excuse to justify the neglect.
This objection, however, divides more along the lines of populist/elite governance than it does between market/non-market economies. After all, elites gain from these transitions whether or not the underlying economy is a market or non-market economy. Why would one think political elites in non-market economies would implement economic transitions slower than American politicians? Did common folk experience less exploitation at the hands of political elites in the old Soviet Union than they do in the U.S. because Soviet elites lacked the justification of the autonomous market?
The speed at which elites in a nation allow a transition that harms particular sectors within that nation seems more a reflection of the allocation of political power and political organization rather than a reflection of its internal economic organization. Perhaps Carlson and others have identified a problem with America’s politics rather than with American markets.
Beyond the speed of transition, however, the more radical conservative criticism takes on instrumentalist rationality—the cash nexus—engendered by the penetration of market relationships into life and consciousness relative to non-market systems.
Markets, and market rationality, the claim goes, liquidate traditional relationships. This is a well-known account, particularly in sociology, regarding the shift from “community” to “society” (or gemeinschaft to gesellschaft). This is a deeper objection to markets than the complaint that markets communicate economic transitions too quickly. Yet there are problems with the argument. It reflects economic determinism. This is ironic given the critics commitment to the superiority of the social over the economic. Beyond that, the argument reflects the temptation to romanticize pre-modern social and economic relationships.
Whatever the answer, however, here’s the rub: As a practical matter, how can American society replicate ostensibly more-humane, pre-industrial non-market economic organization of the past while maintaining the efficiencies reflected in advanced modern economies? I have yet to see even a remotely satisfying answer to that question on the right.