Reflections on the Present Conservative Discontent with Markets

Conservative critics of free markets are asking good questions, but their diagnosis of America’s economic challenges and proposed solutions leave much to be desired.

Over the past six years, there has been an eruption of disputes on the American right about the place of markets in modern conservative thought and policy. What had been a relatively standard position among American conservatives from the late 1970s onwards and formed a central plank of the Reagan Revolution and successive conservative policy platforms until about 2016 is now a point of fracture on the right, and it seems likely to remain so.

I have participated in those debates in the pages of Public Discourse and other publications. These have been instructive on many levels, not least in enhancing my understanding about why many conservatives—particularly younger social and religious conservatives—are increasingly skeptical about markets and inclined to experiment with various forms of interventionism that go beyond what limited government conservatives and classical liberals would normally accept as appropriate economic roles for the state.

These discussions have underscored to me two things. The first is that these conservatives are asking legitimate questions that merit considered responses. Second, however sympathetic I am to their worries, these conservatives’ critiques of markets and their proposed remedies are insufficiently cognizant of some important realities.

These conservatives are not wrong about the dysfunctionalities that presently mark much of America. Who can seriously deny the rise in social pathologies among particular demographic groups? Who can disagree that, for too long, sections of the right displayed relatively little interest in these matters? Market-skeptic conservatives have helped bring such problems to the forefront of public debate.

The same critics have also forced many market liberals to realize just how complacent they had become about acceptance of their ideas across the right. In some cases, it has helped them grasp that the bad habit I’ve witnessed in numerous settings of being dismissive of reasonable queries raised by some conservatives has come home to roost. “Just-Go-And-Read-Hayek” is a woefully inadequate response to genuine questions about, for example, how we help those who lose out in the short term from the process of creative destruction that is central to dynamic market economies.

Yet however real the past and ongoing inadequacies of many of those convinced of the market economy’s merits, the problems characterizing the alternatives to markets being advanced by some conservatives remain. Those problems aren’t just economic in nature. They also reflect an inattentiveness to realities about the human condition to which both sound economics and conservative thought relentlessly draw our attention.

For at the core of good arguments for markets—as opposed to merely ideological ones—are two things. The first is a genuine humility about what humans can know. Such modesty helps protect us from making serious errors at the political and policy level. The second is that there can never be enough attention given to historical experience, often painfully acquired. As it happens, both reference points are central to the conservative mindset.


A Chinese Corrective

Many conservatives’ concerns about market economies begin not with America, but with another country. China is challenging America’s place in the Asia-Pacific region and is clearly unwilling to play by the rules governing international commerce. China’s rise as a global power and increasingly aggressive behavior has raised questions about the faith many conservatives once put in free trade as a force for magnifying liberty and civilized behavior around the world.

In the late 1990s, there was considerable confidence (and not just on the right) that integration into globalizing markets would not only reduce poverty but also help liberalize authoritarian regimes. Once you allowed more scope for economic liberty, the argument went, it would not be possible to put the freedom genie back in the bottle.

This formed part of the calculus that led to the United States’ agreeing to China’s accession to the World Trade Organization on December 11, 2001. Twelve years earlier, China’s Communist masters had unleashed the People’s Liberation Army to crush those protesting in Tiananmen Square in favor of political liberalization. The hope, however, was that giving China wider entry to global markets would allow doux commerce to do what political protest couldn’t, and gradually produce a people and government more open to other expressions of freedom.

That line of reasoning has turned out to be one of America’s biggest post–Cold War geopolitical miscalculations.

Expanding China’s access to markets certainly helped millions of people escape back-breaking poverty. It has also significantly reduced the costs of many products and services for American consumers—something that matters a great deal for less well-off Americans. It also opened up new export markets for American businesses. But neither President Xi Jinping nor the Chinese Communist Party has shown any interest in relaxing their grip on Chinese society. Indeed, the opposite has occurred. That tightening vise has been extended to China’s domestic economy, where the regime has moved to dramatically curtail any genuinely free enterprise by bringing more and more Chinese businesses under direct state control.

In retrospect, those conservatives who favored China’s entry into the WTO made three errors. First, they underestimated the Chinese Communist Party’s willingness to do whatever it takes to crush anyone or anything likely to loosen its grip on power. Second, they implicitly accepted the proposition that free trade necessarily facilitates peace between nations. (This position, incidentally, was not held by Adam Smith and other Scottish Enlightenment luminaries who strongly advocated free trade. Scholars like Edwin van de Haar have done much to correct the record about Smith as well as marshal considerable evidence to suggest that the integration of markets through free trade does not necessarily lead to peace between nations.) Third, free traders misjudged the power of culture.

This is something that, in my estimation, remains a significant blind spot for many market liberals. China’s political culture has long been one of centralized authoritarianism. It deals with any actual or perceived threats directly, systematically, and brutally. In this light, the probability of expansive trade with other nations wearing away at such ingrained habits of ruling in China was never high.


But this raises the question: should American conservatives distance themselves from arguments for free trade? Once upon a time, the party of Lincoln was the party of protectionism. Should conservatives return to this tradition?

I would say no, primarily because it is highly likely that economic nationalist policies will hurt America. There are numerous historical examples of how such policies damage the countries that adopt them. These range from the 1930 Smoot-Hawley Tariff Act’s disastrous effects on America to the ways in which Japan’s use of industrial policy contributed significantly to two decades of stagnation, as Japan’s own economic ministry conceded in 2001.

It’s also the case that conservatives can advance the case for free trade without buying into some of the redundant geopolitical garb with which trade liberalization was hitherto clothed. It should be possible to be 1) realistic about the Chinese regime’s nature while 2) simultaneously taking appropriate steps to protect America’s national security interests and 3) recognizing that it would be folly to deny realities like comparative advantage, the deep political and economic problems that come with protectionism, or the fact that China’s market of 1.4 billion people does create opportunities for American businesses.

No doubt, developing a policy vis-à-vis China based on these three principles will require tremendous economic statesmanship on America’s part. No less than Adam Smith argued that pursuing free trade is extremely difficult at the best of times, given the sheer number of special interests seeking privileges and legislators’ susceptibility to advancing such interests over the country’s well-being. That, however, is all the more reason for conservatives who say that they take America’s national interest seriously to rethink their present dalliance with economic nationalist policies. Such policies will not serve America’s long-term national interests.

Domestic Disturbance

Trade issues don’t just agitate some conservatives because of worries about particular foreign actors. Many conservatives maintain that trade liberalization has wreaked social and economic havoc on manufacturing regions throughout the United States.

The decline in manufacturing jobs has, it is maintained, principally affected blue-collar communities. They can no longer look to the local factory for jobs that, in the not-so-recent past, allowed people with relatively low educational levels to earn wages sufficient to marry and raise children in an economically secure environment. Entire communities have been subsequently devastated. Large numbers of people, especially young men, living in rust-belt states have turned to alcohol, narcotics, and opioids to fill the void and dull the pain.

All of us know of towns in which things starting going downhill quickly when the local manufacturing plant downsized or closed. Many people living in these areas voted for Barack Obama twice but then voted for Donald Trump in 2016, partly because he claimed that he would do something to redress manufacturing’s apparent decay and his willingness to speak about problems like opiate abuse in these communities. He didn’t dismiss their angst with throwaway “Learn-To-Code” lines.

When I hear conservatives say that we cannot leave entire communities of Americans to rot, I can only agree. But solutions to problems require 1) accurate diagnosis of the sickness and 2) prescriptions likely to help rather than aggravate the situation. In both respects, many conservatives writing about these questions are seriously misdiagnosing the problem and proposing counterproductive solutions.

In the first place, as Scott Lincicome points out, it is a mistake to claim that we are seeing deindustrialization. The number of people employed in the manufacturing sector has certainly declined. But real manufacturing production grew by 180 percent between 1972 and 2007. By 2019, it was back to pre–Great Recession levels.


This growth reflects technological improvements and a shift in America’s comparative advantage toward high-tech manufacturing. Conservatives consequently need to ask themselves two questions. Putting aside genuine national security concerns, why would we use industrial policy or tariffs to try and maintain in place forms of manufacturing where America does not enjoy a comparative advantage? Should we also pretend that technology has not displaced certain types of manufacturing employment?

Perhaps some conservatives’ response would be, “Yes, we should use such measures to help distressed communities throughout rust-belt towns and states. We cannot stand by and do nothing. Surely everyone should be willing to pay a little more to help communities that are economically reliant on steel and aluminum production.”

Unfortunately, such aspirations encounter two problems. First, protectionist measures are not especially effective in achieving goals like preserving steel and aluminum production jobs. Second, the same measures will hurt other Americans economically. This includes the employment prospects for blue-collar workers. A recent example is the Trump Administration’s imposition of steep tariffs on steel and aluminum in March 2018.

A Federal Reserve study released in December 2019 estimated that, on balance, these tariffs resulted in a net loss of 75,000 jobs. Why? Because, as America’s leading trade economist Douglas A. Irwin observes, “Many more workers are employed in steel-using industries than in the steel industry itself. Higher steel prices penalized domestic producers of steel-intensive products, such as farm equipment and machinery, harming their competitive position in domestic and foreign markets (by reducing their exports and increasing other imports).”

This is an instance of a policy having effects that might not have been intended but were predictable. It may well be that President Trump’s tariffs helped preserve several thousand steel jobs. Yet, as a 2020 Brooking study illustrates, “any gains in importing-competing sectors appear to have been more than offset by losses in industries that use imported inputs and face retaliation on their foreign exports.”

That’s what tariffs do. They involve choices for one economic sector over others, and therefore jobs in one sector rather than another. The costs can be high. Those 75,000 jobs lost as a consequence of the March 2018 tariffs were mostly blue-collar jobs located in mostly blue-collar towns. How, I ask, can tariff-supporting conservatives who care about American working-class families defend this?

The other part of this debate that puzzles me is the weight conservatives give to economics when explaining various social pathologies with which they are concerned. That changes in the economy have powerful effects on society is not in dispute. Some experience the destruction part of creative destruction more than others. Yet I would wager that many of the pathologies presently manifesting themselves throughout much of America owe more to cultural, social, and political factors than economic policy.

A far from exhaustive list of such factors might include the following: the Sexual Revolution’s family-destroying effects, which have now reached the point of telling us that biology is largely irrelevant to who we are as men and women; the disintegration of mores and moral habits once enculturated by organized religion, (which, in many cases, has collapsed into sentimental humanitarianism and whose leaders have zero public credibility because of horrific sexual and financial scandals); and the collapse of marriage rates among working-class Americans.

Economic policy does not have a primary role in addressing these problems because many of them are, at their root, derived from confusion and outright error about fundamental matters of human anthropology, the nature of reason and free choice, the ends of sex, the character of virtue, and the purpose of religion (to name just a few). No family-income supplement is going to encourage negligent fathers to assume their responsibilities to their hitherto neglected children. Substance addiction cannot be addressed by the Federal Reserve’s lowering interest-rates.

These are also problems that economic prosperity cannot fix. The fracking boom, for instance, resulted in a growth of well-paid jobs in many blue-collar communities. Yet as another Brookings study illustrates, it did not bolster the low marriage rate among these segments of the population.

Social conservatives have proved exceptionally good at identifying the deeper causes of widespread social pathologies and potential solutions, not least because they are not allergic to normative questions and they don’t reduce morality to “liberty-liberty-liberty,” “rights-rights-rights,” or “equality-equality-equality” mantras. To use an economic term, this is their comparative advantage. It would be a loss for them to be distracted from this work by the enticement of economic tinkering.

Tinkering Can Hurt

Such tinkering appears to preoccupy many conservatives these days, and often on a scale that goes beyond tinkering. In conservative publication after conservative publication, we’re seen proposals such as direct payments to families, promoting trade unions with a conservative bent, imposing worker codetermination policies, encouraging businesses to pursue “slow but organic growth,” and even arguments for something like “the activist state of Franklin Roosevelt’s New Deal.”

That’s just a sampling of ideas being floated by various conservative thinkers. Many of them have been tried before. That means there is a track record to assess. When we examine that record, we discover some hard lessons to which conservatives should be attentive.

One example is raising minimum wages, a cause long embraced by the left but now also some conservatives. They regard this as a practical way of increasing blue-collar incomes. But those advancing such positions should recognize that while the cost of mandating minimum wage increases may be affordable for large corporations, they are not so absorbable by the type of company often favored by conservatives—small, often family-owned businesses, which is where most minimum wage-earners are found.

Living off often razor-thin margins, such businesses find themselves having to respond to minimum wages increases by reducing their employee numbers. Perhaps some such employees are students looking for some actual job experience. Others might be late-middle-aged blue-collar women with low skills. In any case, mandating minimum wage increases will result in these and others finding themselves being priced out of the labor market via state fiat.


A similar dynamic manifests itself with regard to regulation. Many of the proposals being advanced by conservatives today involve more regulation. But the costs of increased regulatory compliance are far more easily absorbed by large businesses than small and medium-sized companies. Indeed, there is evidence to suggest that large corporations often support increased regulation because they know that the compliance costs for smaller and medium-sized competitors are proportionately higher.

Or let’s consider the proposal to encourage businesses to engage in slow but organic growth and remain rooted in their surrounding communities. For a start, what constitutes slow growth? Is it 10 percent, 20 percent, or 2 percent a year? According to what criteria is this determined? Who determines it? Is it being suggested that an entrepreneur whose company grows too fast (however we define “too fast”) should be penalized for expanding at a faster clip than other start-ups? Perhaps the speed reflects the willingness of some entrepreneurs and their employees to work harder and make more sacrifices than others. Are conservatives really willing to penalize such businesses for this?

As for localism in business, should a small business in Cleveland be required to purchase lower-quality material from an inefficient but more geographically proximate producer in the same city at a higher price than the price offered for higher-quality material produced by a more efficient company in, say, Indianapolis? Should a business be obstructed from moving from a once-prosperous city (think Detroit) that has been run into the ground by crony career politicians, corrupt union officials, and compliant corporate executives to another, more business-friendly town on the grounds that such a move would disrupt the communities being exited?

These are some of the real-world complications that conservatives seeking to use regulation to achieve particular ends seem disinclined to acknowledge. That goes hand-in-hand with a wider problem: their new-found faith in top-down engineering.

Technocratic Temptations

At particular points during the twentieth century, the U.S. government gave technocrats a great deal of latitude to try to achieve some significant reorientations of the American economy. One such occurrence was during the Great Depression; another was in the 1960s. In both instances, presidential administrations pursued interventionist policies that sought to improve the economic and social well-being of large numbers of Americans. In neither case were the results impressive.

Here I would suggest that conservatives should consider reading two books by the economic historian Amity Shlaes. Her lengthy study of the New Deal, The Forgotten Man (2008) illustrates the Roosevelt administration’s failure to reduce unemployment substantially or ignite a significant economic recovery. Likewise, Shlaes’s 2019 book, Great Society, is a severe indictment of programs implemented by some very intelligent, often well-meaning people and how these policies harmed the communities they were designed to help.

All governments rely to various degrees on people who have specialized knowledge: lawyers, economists, scientists, military personnel, etc. Expertise is an important part of any policy mix.

But expertise is no guarantee of correctness. A major difficulty confronting everyone in the area of economic policy design is the sheer complexity of society, especially those with millions of individuals and communities. There are just too many factors, variables, and side effects of chosen actions that we cannot know about in the present and future. State economic interventions are bound to have unintended consequences, and many of them will be detrimental.


Complexity does not rule out any proposed intervention whatsoever. The fact of imperfect information is not a reason to do nothing. If it were, none of us would make any free choices. It is, however, a good reason for conservatives to be extremely cautious about using state power to achieve specific economic goals, however worthy such ends might be.

In the realm of economic policy, the ability to foresee that X will necessarily follow from Y is often limited. Yes, there are many things economists can predict with some degree of certainty. But such knowledge is the result of economists’ spending decades engaging in empirical studies, developing hypotheses in crucial areas like price theory, and reflecting on historical experience.

Even then, there will be many side effects of economic policies, some of which we can reasonably foresee but others that we can’t. None of those policymakers (some of whom were market-friendly conservatives) who tried to design housing policies in the late 1990s that would increase homeownership among minorities could have known that these measures would help set off a chain of events that eventually culminated in the 2008 financial crisis. Among those who suffered the most were the minorities whom these housing policies were supposed to help.

I don’t hear many of those conservatives advocating major interventions in the economy (some have even proposed that America embrace a corporate state) acknowledging these and related realities. Two hundred years before F. A. Hayek was highlighting the knowledge problem, the man regarded as a major lodestone of Anglo-American conservatism, Edmund Burke, made similar arguments about the inherent limits to what government officials could know about the factors shaping the decisions of different parties engaged in economic exchanges. He subsequently concluded that government interventions were likely to have many unforeseen negative effects. Burke did not go on to say that governments should do nothing; rather, his point was caveat emptor.

More Than Economics

Economics as a social science was still in an embryonic state in Burke’s time. Adam Smith’s Wealth of Nations represented the first effort to systematize economic insights that had been floating around for centuries.

But Smith and Burke weren’t blind to the moral and social challenges associated with modern commercial societies. Smith recognized how the growth of wealth can seriously warp people’s sense of what is important. “How many people,” he lamented in his Theory of Moral Sentiments, “ruin themselves by laying out money on trinkets of frivolous utility?” Part VI of his Theory, which he added to his first book several years after the Wealth of Nations’ publication, details the commercial, classical and religious virtues that Smith believed were needed in commercial societies.

Likewise, Burke’s cautious advocacy of markets and his generally critical view of mercantilism did not blind him to the political threat posed by the ideologues in Paris. He had no illusions that free trade with Revolutionary France would somehow tame the beast. Nor did Burke cease insisting that commercial societies had to be embedded in a particular moral, social, legal, political, and religious context.

Herein, it seems to me, lie real opportunities for social and religious conservatives to shape debates about the place of markets in the wider social order. How, for instance, do we ensure that relationships of a commercial nature don’t become the paradigm through which people think about family dynamics in societies with market economies? How do we help people in the same societies understand there are certain things that should never be bought and sold?

I don’t underestimate the difficulties in addressing such matters. It means directly questioning the utilitarian mentality and soft relativism that prevail across the American political spectrum. It also involves enormous investments of time in the hard work of forming people in the virtues while living in a culture whose true religion is increasingly a combination of emotivism and scientism. But undertaking such work is what it means, in many respects, to be a conservative in the modern world.

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