Across the world, the light for market-liberal ideas is sadly dimming. Not only have tariffs become the White House’s bipartisan trade policy of preference since 2017, but Republicans and Democrats alike have made it clear that any downsizing of the entitlement programs that constitute the bulk of US government spending is off the political table. We have strayed very far from the days of Ronald Reagan and, for that matter, Bill Clinton.

Industrial policy is also back in favor, with the European Union, China, and the United States accounting for almost half of the 2,500 new industrial policies implemented in advanced economies throughout 2023. As for deregulation, tax cuts, or reducing the state’s imprint on economic life, I know of no national government—save for Argentine Javier Milei’s administration—presently pursuing such standard-issue free market objectives with any consistency.

This global retreat from markets crisscrosses the political spectrum. Many on the right have joined the left in seeking government solutions to economic problems. Certainly, free market successes such as the ongoing advancement of school choice throughout America can be identified. Nonetheless, what F. A. Hayek called “the climate of opinion” in his 1949 essay, “The Intellectuals and Socialism,” is decidedly not with free market ideas.

Economic Arguments and Their Limits

The 2008 Financial Crisis is regularly identified as a prime culprit of this shift towards interventionism and economic populism. Despite considerable evidence to the contrary, the financial meltdown and Great Recession continue to be blamed on insufficient regulation. Then there is the widespread and equally disputable assertion that market liberalization has gone hand-in-hand with stagnating incomes for millions of middle-class and blue-collar workers.

To move forward, market liberalism must continue vigorously contesting such claims. As Hayek and earlier generations of free marketers well understood, engaging in debates about the past is crucial to achieving intellectual and policy successes in the present. Today’s critics of market economies are simply mistaken about many of the facts, and its defenders must put right the record.

Likewise, market liberals must continue critiquing the flawed economic theories of today’s dirigistes, whether their subject is wage growth or the effects of tariffs. Good economics can be a powerful antidote for any number of intellectual errors and policy sins. While it may not change the views of those who persist in promoting economic nationalist mythologies because their primary interest is in acquiring power, it will raise appropriate questions about their motives.

Victories in the realm of economic debate are, however, insufficient. People change their minds on economic issues for many reasons, and purely economic arguments are seldom the deciding factor. Hence, if market liberals want to shift the climate of opinion in a more friendly direction, they need to think harder about how to attach their proposals to broader arguments about their countries’ well-being. Here, contemporary market liberals can learn much from their predecessors.

We’ve Been Here Before

While market liberalism’s influence is waning today, things have been worse for its advocates in the past. In the lead-up to World War I, market liberalism appeared to have established an ascendency throughout the West. In his Economic Consequences of the Peace, John Maynard Keynes waxed lyrical about a pre-1914 world of Edwardian liberalism in which economic freedom was improving everyone’s living standards. Across the Atlantic, the US Congress passed the Underwood-Simmons Tariff Act in 1913 which lowered the average tariff rate from 40 percent to 27 percent—its lowest rate in 50 years. The world over, Keynes stated, more and more people were rising into the middle classes through hard work and enterprise.

Between 1914 and 1918, that world was obliterated. In the war’s wake came crippling inflation, crushing national debts, a global economy riddled with tariffs, a Bolshevik regime in Moscow committed to radical economic collectivism, and nationalist movements whose anti-capitalism was as intense as their anti-Semitism. More generally, the war had left millions of people of all classes and creeds inclined to look to the state for their economic salvation.

Conditions equally inimical to market liberalism prevailed after World War II. Though efforts to reduce trade barriers formed part of America’s postwar plan for the world, economic planning at the domestic level became the orthodoxy throughout the West. In Britain, the welfare state achieved an apotheosis in the National Health Service, while America embraced Lyndon B. Johnson’s Great Society. The ideas underlying these policies were reinforced by an economics profession thoroughly committed to the ideas of Keynes and his disciples.

Certainly, there were exceptions to this trend. The most notable was the West German economy’s liberalization in 1948, thanks partly to a small group of market liberals who exerted an intellectual influence far beyond their numbers. Western nations, however, generally moved in the opposite direction. Most political parties of the left and right were firmly in the camp of the planners. So too was the bureaucratic apparatus of governments whose presence, then as now, remained largely unaffected by changes at the top engendered by elections.

A Wider Agenda

Given these circumstances, it is remarkable that market liberals were able to alter the climate of opinion sufficiently that a revival of free market ideas occurred thirty years after the war. They also achieved this without anything like the resources that exist today for promoting economically liberal policies.

The story of how that occurred has been recounted in books like Angus Burgin’s The Great Persuasion: Reinventing Free Markets since the Depression and Richard Cockett’s Thinking the Unthinkable: Think-Tanks and the Economic Counter-revolution, 1931–1983. The inflationary outbreak of the 1970s, growing unemployment in advanced economies, and visible evidence of interventionism’s failures created an openness to free market ideas, especially on the right.

Nevertheless, one of the postwar market liberals’ singular achievements was to keep free market ideas alive over the preceding thirty years. In part, they were able to successfully build market liberal themes into wider messages about the need for political and social renewal. Subsequent decades’ free-market breakthroughs thus owed something to the broader arguments being made for a free society.

The free-market successes achieved under the Thatcher government and the Reagan administration exemplify this. A commitment to ending the default Keynesian settings for fiscal and monetary policy was central to their respective agendas. But this pledge was integrated into a bigger program: most notably, shaking off the general torpor and mentality of managed decline affecting America and Britain in the 1970s, much of which was inadvertently summarized by President Jimmy Carter in his 1979 “Malaise” speech.

The rhetoric deployed by Margaret Thatcher and Ronald Reagan throughout the late 1970s and 1980s reflected this strategy. Nowhere was the linkage more evident in Thatcher’s successful pivot from her 1982 victory over Argentina’s military junta in the Falklands to confronting Britain’s over-mighty unions. During and after the National Union of Mineworkers’ (NUM) 1984–1985 strike, Thatcher did not hesitate to associate her refusal to give in to the NUM’s demands with a more general effort to restore Britain’s self-respect and place in the world.

For decades, market liberals like Hayek had insisted that the legal privileges accorded to unions effectively gave them a monopoly of the labor supply. This, Hayek argued, undermined labor market flexibility and compromised rule of law. By the late 1960s, more than one commentator was wondering whether the General Secretary of Britain’s Trade Union Congress was more important than whoever occupied 10 Downing Street. Indeed, Ted Heath’s Conservative government lost the 1974 General Election after campaigning under the slogan, “Who governs Britain?”

Breaking trade union power was perhaps the greatest market liberal victory realized during Thatcher’s time as prime minister. But one major difference between 1974 and 1984 was that excessive union influence upon political and economic life had become so identified in many people’s minds with national decline that even Britain’s Labour Party was less than full-throated in its support of the NUM strike.

Likewise, millions of American blue-collar workers may have had their doubts about Ronald Reagan’s advocacy of free markets during the 1980 and 1984 presidential elections. But Reagan’s uncomplicated patriotism, firm anti-Communism, and patently sincere optimism about America’s future detached many such Americans from their traditional allegiance to a Democrat Party wedded to interventionism. Absent Reagan’s larger message of national revitalization, it is reasonable to wonder if his economic policies would have gotten off the ground.

Telling the Truth

Advancing market liberalism today likewise requires the incorporation of free market ideas into a more comprehensive narrative about a wider revival of America and other Western countries. But however market liberals go about this, there is one obligation of which they cannot lose sight: that concerns their duty to tell the truth, however hard it may be for policymakers and people more generally to hear it.

The German market liberal Wilhelm Röpke summed up this responsibility in a 1956 essay written in a festschrift for another liberal economist, Ludwig von Mises:

[Economics] has a humble but all the more useful mission. Amidst the passions and self-interest of politics, it must assert the logic of things, it must bring to light all the inconvenient facts and relationships, must put them in their proper place with dispassionate justice, must prick all the soap bubbles, must unmask illusion and confusion, and must defend before all the world the proposition that two and two make four. It should be the one science par excellence which disillusions, which is anti-visionary, anti-Utopian, and anti-ideological. Thus, it can render society the priceless service of cooling off political passion, of combating mass superstition, of making life hard for all demagogues, financial wizards, and economic prestidigitators.

At no time is the commitment to truth underlying this mindset more vital than in times of economic populism like our own. For free marketers who do not shirk this responsibility, it may mean unpopularity and even foregoing possibilities for career advancement. But, as Röpke stated, to do otherwise would be “to betray the sanctity that lies in the truth of science to the political passions and the social emotionalism of our era.”

Whether from the left or right, today’s economic populists are urging us to embrace demonstrably false ideas and thus flawed policies. But they are also employing rhetoric (“market fundamentalist”) designed to marginalize those who look behind the policy sleights-of-hand and reveal truths that contradict populist narratives: that, for example, we already live in highly regulated economies; or that underlying every industrial policy are special interests seeking favors as well as legislators inclined to bestow such privileges for reasons that have little to do with the general welfare.

Populist waves come and go, but the economic damage that they inflict lasts. So too does the harm that they do to the liberal constitutionalism that places principled limits upon government power, including in the economy. Reminding us of these deeper truths is the wider and indispensable service performed by market liberals in our present age of populism.