Strong Towns Need Strong Economies

Patrick Deneen recently wrote a valuable essay at American Compass, “Thinking Big to Act Small,” in which he stresses the importance of small communities and decentralization.

He worries that we have become a nation of “free radicals,” “people unmoored from contexts of meaning, communities thick with inheritances, practices born of limits, exercises in self and social constraints.” Deneen identifies the problems of consumerism, individualism, and the challenge of Marxism as a cultural phenomenon that still captures our imagination. Augusto Del Noce argued that Marxism “died in the East because it realized itself in the West.

Deneen rightly notes that market economies can collude with the state to promote individualism, centralization, and other social ills. “Woke capitalism” is just one manifestation of this. Robert Nisbet explained this alliance in his essential book, The Quest for Community. He noted how certain Manchester liberals and political centralizers joined forces to break down communities and other groups that resisted centralization. Nisbet echoed Alexis de Tocqueville’s larger dialectical critique and concern that individualism leads to centralization, and that centralization, in turn, exacerbates and encourages individualism.

This is an important point that both national conservatives and libertarians have often missed. The proper reaction to collectivism is not individualism but what could be called “associationalism.” As Tocqueville points out, local politics, vibrant civil society, and religion are key obstacles to centralizing tendencies and the “soft despotism” of the modern, schoolmarm state. 

American Compass and others in the national conservative movement have argued for a new industrial policy to strengthen “the people.” But this falls prey to the error of Rousseau: identifying all community with the political community. If Tocqueville is correct, then contrary to their wishes, the national conservatives will end up promoting more centralization and more individualism instead of resisting it.

I was happy to see Professor Deneen argue that:

The answer is not merely to get the right national economic plan in place, but to make sure any policies have as their “compass” the creation and preservation of human communities that are built from the bottom-up and can thus persist for a long period of time.

Despite my general agreement, I wonder if Deneen’s reaction against the rigged economy and the market of “free radicals,” fails to acknowledge fully the relationship between “strong towns” and dynamic local economies, which require economic freedom.

Market Fundamentalism

Deneen makes a strong critique of what he calls “market fundamentalism.” It is true that markets cannot provide the solution to some of our most pressing social problems. Free, competitive markets can do many things, and they are important for innovation, political and religious liberty, and widespread prosperity. But they are only one element of a free, just, and flourishing society. As my colleague Samuel Gregg has argued, the idea that capitalism would lead to a free China is deeply misguided. It is true that the implementation of market mechanisms can lead to prosperity for those given privileged access to them. But a free market economy—and a free society—includes more than this.

Part of the problem with “market fundamentalism” comes from the overvaluing of what markets can do. But there is also the problem of reducing a market economy to its surface technical elements. Deneen seems to fall prey to this reductive view.

For example, he critiques capitalism for its hostility to tradition. There is no doubt this can be true. But capitalism is also part of a tradition. The market economy rests upon key institutions of justice that developed over centuries. Capitalism cannot be reduced to Wall Street, Google, and consumerism. A free market economy relies upon a number of moral and juridical institutions including clear title to land, the right of free association, rule of law, participation in the formal economy, free exchange without undue burden, limited liability, and joint ventures. These institutions came out of the Jewish and Christian traditions and developed during the commercial revolution of the medieval period. They are part of our culture.

The strong towns and healthy communities that Deneen desires need a moral compass, to be sure. But they also need a vibrant economy.

This is where I think Burke’s understanding of tradition and Chesterton’s “democracy of the dead” are more accurate descriptions of the market economy than ones that only look at its technical aspects or consider it to be simply spontaneous order. We have serious economic challenges facing us today. As George Gilder and others have pointed out, there is a “materialist superstition” underlying much of how we understand ourselves and the economy.  My point here is that we cannot make the error of the social engineer or theoretician who equates a market economy with its technical mechanistic aspects or ignores history.

Deneen is right that many innovations are opposed to tradition and that “our social order is profoundly fragile.” The behavior modification of many tech firms is a prime example. But the idea that capitalism is opposed to tradition needs a lot more qualifying. This is not simply for historical clarity. Proper thinking about the role of the market and economic freedom can help us break up monopolies, fight crony and managerial capitalism, and pave the way for more decentralization, more localism, and more robust communities.

Commercial and Civil Society

A key theme of Deneen’s essay is rebuilding small communities and “strong towns.” What seems to be missing is the role that businesses and a free, competitive, market economy play in such a venture.

It is important to remember that businesses are as much a part of civil society as unions, schools, and mutual aid societies. As St. Thomas Aquinas explains:

Now a private society is one which is formed to carry out some business, as when two or three enter into association for the purpose of engaging together in trade.

Engaging in trade is an essential part of free society. Stepping out of the American context can shed light on this problem. The lack of free association and the obstacles to participation in the formal economy which exist in poor countries not only keep local communities poor, they make it difficult to build civil institutions and leave poor people exposed to foreign NGOs with an agenda very different from local interests.

The strong towns and healthy communities that Deneen desires need a moral compass, to be sure. But they also need a vibrant economy.

A big problem is domestic managerial, crony-capitalist policies that rig the system to benefit large corporations with powerful lobbyists and offices in Washington, DC. They do this, moreover, at the expense of small and medium-sized producers. A national economic and industrial policy that American Compass supports will only shift the rigging to another group of special interests with lobbying power. Professor Deneen focuses his critiques on libertarians and free marketers, but if we really want to reinvigorate small towns and regional economies, we need economic liberty and diversity. Let’s take just two examples: agriculture and manufacturing.

Reviving Agriculture and Manufacturing 

A key force in developing strong towns with contexts of meaning, communities thick with inheritances, practices born of limits, exercises in self- and social constraints” is decentralized food production.

This not only reduces fragility and dependence upon fossil fuels, it also strengthens local connections. The problem with agriculture today is not the radical freedom that Deneen worries about. It is a complex web of regulations that favors industrial agriculture and makes it difficult for smaller farmers to compete. Joel Salatin documents this struggle with national food policies in his book Everything I Want to Do Is Illegal. Deneen suggests that we need better laws to promote local communities. This is precisely why libertarian farmers like Salatin and Congressman Thomas Massie are advocating for the PRIME bill, which would de-regulate agriculture and allow smaller farmers and businesses to process their own meat.

Another major worry today is the loss of domestic manufacturing and the social toll this is having on poor communities. Angus Deaton has written about this in Deaths of Despair, and Brad Wilcox documents how lack of work has profoundly negative effects on lower-income families, especially men.

As David Goldman writes and the graphic below demonstrates,

Thirty years ago the United States had twice as many workers in factories than in restaurants, hotels and other leisure and hospitality businesses. Over those 30 years the number of manufacturing workers fell by about half and leisure-and-hospitality employment doubled.

Figure 1: Manufacturing v. Leisure/Hospitality Employment. Source: “The Economics of America’s Civil Unrest,” The Asia Times June 2, 2020, https://asiatimes.com/2020/06/the-economics-of-civil-unrest/

It is true that globalization, offshoring, and bad trade policy have sent many jobs abroad, but there is more going on. Many of these job losses were due to automation, not globalization. We have also seen re-shoring because of high transaction costs and new technologies like 3D printing. Small town job losses also have to do with regulations that create major barriers to entry for traditional manufacturing. We’ve seen a lot of new ventures in tech, but fewer in manufacturing.

Peter Thiel once quipped, “they promised us flying cars, but all we got is 140 characters.” Despite the amazing innovation in digital communication, we have not seen a parallel development in manufacturing and other industries. All the nifty tech in our lives is masking a lack of innovation in other areas. This echoes Robert Gordon’s thesis that, other than advances in computer technology, most of our life-changing innovation took place between 1870 and 1970, and that since then, there has been a stagnation in non-digital innovation.

There is debate around this topic of course. Manufacturing output and productivity is actually quite high. Erik Brynjolfsson and Andrew McAffee argue in The Second Machine Age that, just like steam power and electricity were general-purpose innovations that had widespread impact on many industries, so too will digital innovation amplify innovation in manufacturing.

A national industrial policy that tries to pick winners from Washington, DC will only continue to rig the economy in favor of those with political influence.

Nevertheless, there is not enough growth in manufacturing, and as people like Thiel, Balaji Srinivasan, and others have noted, it’s much easier to start companies in the digital world. This will harm the American social landscape. We can’t have all the focus on tech; it weakens America and makes us fragile. It also doesn’t provide help to the millions of people who can’t or don’t work in tech industries.

The key point here is that strong towns need a vibrant local economy, and vibrant local economies require economic freedom. It has to be reasonably easy to start and build businesses, farms, and factories where people can work. A small businessman who wants to open a gas station, a construction firm, or build a new factory cannot hire fancy lawyers to navigate the rules and regulations built on the collusion of big corporations and centralizing bureaucrats that Deneen fears. A national industrial policy that tries to pick winners from Washington, DC will only continue to rig the economy in favor of those with political influence—something most people in small towns don’t have.

A Libertarian Alliance?

In this essay and elsewhere, Deneen is critical of libertarians as part of the problem. He writes that he and American Compass “have libertarians in their sights” and criticizes them for individualism and market fundamentalism among other things. Yet many of his decentralizing goals seem more aligned with many libertarians than against them.

I am not a libertarian for many reasons. First and most important, because libertarianism is based on an erroneous concept of the human person—the same basic errors that plague liberalism, socialism, and most of modernity. Second, I find the increasing tendency of some libertarians toward social progressivism very problematic. Many even enthusiastically support the radically anti-libertarian move to use the state to redefine the sociological and biological reality of marriage. Third, many libertarians neglect the relationship between individualism and political centralization. Thus, despite their desire for a small state (one I share), their support of individualism and liberal anthropology actually undermines it.

Yet ironically, for all their huffing and puffing against libertarians, many national conservatives fall into the same trap from the opposite side. Their advocacy for a national industrial policy will only increase centralization and encourage the individualism they oppose.

It is also important to remember that libertarianism is not monolithic. There are many shades of libertarianism which align with Deneen’s analysis. A friend (and former libertarian) remarked that Deneen erroneously reduces all libertarians to one manifestation of “beltway libertarianism.”

I point this out because, despite philosophical differences (and these do really matter), there may be a possibility for an alliance. Both Deneen and many libertarians support decentralization and increased localism, and the groups would benefit from contact with one another.

A New Laissez Faire

In The Quest for Community, Nisbet argued for “a new laissez faire,” by which he meant a flowering of associations, more decentralization, and multiple layers of authority. There is no single solution to the problems we face, but decentralization, smaller-scale approaches, and “strong towns” are an important step. Here too we could see new alliances between a number of groups including the non-progressive Left and Right, small-government conservatives, traditionalists, libertarians, and some localist green movements.

I agree with Deneen that we need better laws and a moral compass. We also need to remove laws, rules, and regulations that “enervate” people as Tocqueville warned. We don’t need a “schoolmaster” state that manages the small town, that “directs industries, settles their estates, divides their inheritance.”

Yes, we need to think big. But acting small means we need to recognize that there is no social engineering plan or national industrial policy devised by “economists, sophists, and calculators” that can solve the problems of individualism and weak communities. This can only be done on a small scale where people have the freedom to solve their own problems. Deneen quotes Charles Marohn who exhorts us to embrace “an extended period of humility.” That is good advice. It should include deep skepticism about any national industrial policy that portends to solve our problems. It should commend us to be humble about what our big thinking can do.