Something about our economy is broken. On that most conservatives can agree. But what that something is, and what to do about it, is no small cause for disagreement. Should we be worried that inflation has outpaced wages for a generation? Do the results of free-market competition represent the best of all possible worlds? Are the loss of manufacturing jobs and the movement of major American industries overseas bad signs? And if so, should we design government policy and allocate public resources to do something about them? The impasse over these questions has real effects, including on election outcomes—conservatives can complain, but what positive vision are they going to put forward?

To his great credit, Samuel Gregg understands how deep these questions go. His new book, The Next American Economy, not only wades into a contentious debate but dives to its real level of disagreement. Gregg sees that, at their core, these arguments reflect differing understandings of what America is about, and what its economy is for. They’re as much a matter of values and ideals as of dollars and data. He takes aim at three popular economic proposals: trade protectionism (the use of tariffs and quotas to regulate America’s international trade), industrial policy (government intervention to invest or preserve jobs in a particular economic sector, for instance domestic manufacturing), and stakeholder capitalism (the idea that firms should pursue social causes put forward by particular groups, not just shareholder returns). Though associated with different sides of the political aisle, these three proposals share a discontent with the status quo. They all suggest skepticism about the free market’s ability to ensure stability in key sectors, living wages for American families, or broad social justice and cohesion. Against these, Gregg champions free-market competition as fundamental to America’s national identity as a “commercial republic.” For Gregg, the free market is the answer to what ails our economy.

What’s most helpful about The Next American Economy is its clarity over what the debate isn’t about. For one thing, it isn’t about whether our current economy is a utopia. Gregg will “readily acknowledge that substantial domestic problems confront the United States,” and argues that more people on the free-market, free-trade side of the debate need to admit it, too. To the extent that defenders of free trade pretend all the promises of globalization—like that China would become a free liberal democracy—were fulfilled, or that the post-1990s economy has been working for everyone, they simply aren’t going to be very convincing. Neither will anyone inclined to cry “socialism” at any suggestion of public spending or market regulation—Gregg is consistent in referring to his interlocutors not as “socialist” but as “corporatist” or “state capitalist.” He defines the latter as endorsing “an economy in which the government . . . engages in extensive interventions into the economy from the top down.” Its “goal is not to extinguish private property and free exchange” but “to shape and even direct many activities . . .  to realize very specific economic and political objectives.”

In other words, The Next American Economy aims for realism and precision, both of which can only improve the conversation. But what is Gregg’s argument, if not the name-calling to which so many others resort? The book raises several economic critiques of protectionism, industrial policy, and stakeholderism, most often charging them with inefficiency. Interlocutors are bound to take issue with them on a strictly factual basis. They would point out, for instance, that Gregg seems to have a way of attributing economic prosperity under industrial policy to factors other than the industrial policy, while attributing economic decline under industrial policy to industrial policy alone. However, these fights are better left to those who know more about economics than I do. Again, the real disagreement is deeper. There’s one broad critique that comes up again and again in The Next American Economy: that proposed alternatives to free-market competition are partial. State capitalism is “focused on achieving greater economic security for specific groups” and “promotes particular businesses over others.” “Protectionist policies are all about elevating influential sectional interests over the economic well-being of all Americans.” Stakeholderism “shift[s] the economy’s focus away from meeting the economic needs and wants of 330 million American consumers” and toward the interests of a few. Once elevated, these chosen sectors will be prone to cronyism, inefficiency, and even corruption.

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This concern is understandable. It’s easy to see why we would want an economic approach that tries to lift all boats. And using politics to prioritize some boats can seem arbitrary. From a macroeconomic perspective, a dollar in value added via manufacturing contributes just as much to national GDP as a dollar spent on a retail purchase. Why use government to favor one over the other? But there are a few problems with this objection.

The Next American Economy aims for realism and precision, both of which can only improve the conversation.


The Partial Economy

The first is the “yeah, we know” problem. Defenders of industrial policy and stakeholderism know they’re prioritizing some things over others. In the case of stakeholderism, it’s baked into the definition. “Advocates of expansive theories of stakeholderism maintain,” Gregg writes, “that businesses are obliged to realize goals far beyond maximizing profit and shareholder value.” Simple enough. But only three pages later, Gregg identifies this as the first of his problems with so-called “Environmental, Social, and Governance” (ESG), the most common version of stakeholder capitalism: “It does not take much imagination to see how [ESG] criteria could be interpreted as requiring companies to endorse or advance specific ends that go far beyond solid financial returns.” This criticism is simply restating the definition of stakeholderism. Either the reader sees the concept of picking social causes over shareholder returns as inherently problematic or he doesn’t. To convince advocates of stakeholderism, one still has to make the argument that maximizing profit is a worthier pursuit than any given moral or political cause.

As for industrial policy, its advocates, too, are fully aware they’re prioritizing certain industries over others, protecting them from the market pressures that drive optimal efficiency. Saying so doesn’t answer their real contention, which is that some things are too important to lose. That includes not only the ability to make certain products, but the jobs that come with them. Work producing real, concrete things has benefits that you can’t find in just any job. It can give purpose in a way work in a cubicle or on a laptop does not, and it has (at least in the past) been able to bring home wages capable of supporting a family. The idea that producing has certain moral or psychological advantages over consuming has a long history in the American tradition of economic thought.

Nevertheless, Gregg seems baffled that anyone would prefer making over buying; that a protectionist would prefer exports to imports; that an advocate of industrial policy would prefer manufacturing to service jobs. But such preferences are not arbitrary. There may be good reason to accept instability and constant churn in some sectors, like the tech startups of Silicon Valley, but to opt for stability in others, like a locality’s traditional craft or basic necessities like food and housing. To ensure such stability, you’re going to have to be partial.

As for industrial policy, its advocates, too, are fully aware they’re prioritizing certain industries over others, protecting them from the market pressures that drive optimal efficiency.


Service Sector Favoritism

A second problem is that much of what’s understood as the blessings of free markets and free trade is no less the result of politics and partiality. Consider the much-discussed rise of service-industry jobs in America amid the decline of manufacturing. In Gregg’s words, thanks to the expansion of the service sector, “millions of jobs ha[ve] been created in the American economy that offset the decline in manufacturing employment several times over.” There’s “a ‘new middle’ of the labor market emerging in occupations like education, healthcare support, personal care, etc.” The biggest share of this increase has been in health care, which now employs more than 20 million Americans.

It’s common enough to explain the shift toward these jobs as a natural result of economic dynamism and comparative advantage, as Gregg does. But health care, education, and other “new middle” sectors are not exactly known for their efficiency and friendliness to everyday consumers—for many years, these very industries have been the biggest drivers of inflation. They’re also heavily regulated by the government, and many of the jobs they sustain exist because of those regulations. At any given college or hospital, how many offices, managers, and administrators are there to maximize funds from government programs, ensure legal compliance, or jump through bureaucratic hoops? Government programs and regulations related to health care, education, etc. ensure the stability of these institutions in their admittedly inefficient state and keep prices high for consumers, but also amount—intentionally or not—to a massive jobs program.

In short, the government has for decades been doing industrial policy for the service sector. Gregg would doubtless say these regulations should be removed and programs should be cut back. That would be fair enough—but then one would no longer be able to point to the massive growth of health care jobs as proof that the market alone will take care of anyone left unemployed by the loss of an industry. Subject health care or higher education to market pressures and watch the jobs, which rushed in to fill the vacuum left by manufacturing, vanish. With “new middle” sectors, as with manufacturing, we have to ask: what if the layers of bureaucracy, government red tape, and yes, even lobbying and political favors associated with industrial policy are the price of keeping people employed? Is losing those jobs a price worth paying to reduce government bloat?

Subject health care or higher education to market pressures and watch the jobs, which rushed in to fill the vacuum left by manufacturing, vanish.


An Economy of Entrepreneurs?

The biggest problem, however, is that Gregg’s own solution is a partial one. The key word of The Next American Economy is “entrepreneur.” It comes up all the time, and is central to Gregg’s proposed alternative. A dynamic free-market system does not mean big business dominating the economy, Gregg argues, but an ever-churning, hyper-mobile competitive environment where it’s easy to start new businesses. The figure of the “entrepreneur” is the one who thrives in such an environment and uses his ingenuity to forge its chaos into prosperity. Quoting Wilhelm Röpke, Gregg says “the ‘free economy stands or falls with the free entrepreneur.’”

Gregg’s proposals for renewing the American economy amount to making things easier for this particular group of people. The first is to “Deregulate. Deregulate. Deregulate”—that is, give entrepreneurs more flexibility and fewer obstacles and distractions. Second, improve access to “Capital. Capital. Capital”—that is, give entrepreneurs more money through venture capital and crowdfunding. Third, reduce barriers to “Migrants. Migrants. Migrants”—that is, increase our domestic supply of potential entrepreneurs.

But not everyone can be an entrepreneur. Not everyone can uproot their lives and bet their kids’ college fund on a small business that’s only got a fifty-fifty chance to make it five years; nor is it wise for many people to do so. Indeed, the very success of entrepreneurs depends on other people not becoming entrepreneurs—every new business needs workers who aren’t about to run off to go start their own new businesses. Of course, like anyone else arguing that public policy should prioritize a specific group, Gregg argues that benefiting his preferred group will benefit everyone else—that “the competitive pressures unleashed by entrepreneurship often lower prices in different economic sectors.” And it’s true, consumers benefit when prices are low relative to income. Yet for all the economic booms and deregulatory periods of the ’80s, ’90s, and 2000s, wages have simply not improved relative to prices (a fact Gregg only addresses once in The Next American Economy—by saying a different author, the American Enterprise Institute’s Michael Strain, questions it). It doesn’t help that one way new and small businesses establish their efficiency is by paying employees less, dampening the impact of any price reductions.

Not everyone can be an entrepreneur. Not everyone can uproot their lives and bet their kids’ college fund on a small business that’s only got a fifty-fifty chance to make it five years; nor is it wise for many people to do so.


One reason the economy doesn’t work equally well for everyone is that, to some extent, it can’t. There are always competing interests involved; a policy that works for families or for workers might not work for entrepreneurs, and vice versa. Employing more people and paying them wages sufficient to sustain a family may mean being less efficient and internationally competitive. These problems force us to ask: what is America for? Are we a “commercial republic” dedicated first to unleashing individual economic choice, in the belief that all else shall be added unto us later? Are we a national unit with strictly circumscribed borders and a set of common experiences? An experiment in communal self-government dedicated to human equality? An empire of liberal values? Or something else? Conservatives’ instincts are leading them to different answers. It’s hard to see what can build a new consensus, but at least we’re beginning to ask the right questions.