Editors’ Note:

This essay is adapted from a James Madison Program event on April 10, 2024, in Princeton, New Jersey. Oren Cass and Samuel Gregg discussed the right and the future of capitalism in the American founding and offered their perspectives on the conservative approaches to markets and the economy.

The editors lightly revised the transcripts for clarity and added the links to sources with more information on the points discussed.

Yesterday, we shared Oren Casss remarks. Today, we are sharing Samuel Greggs. 

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Over the past eight years, we’ve witnessed major debates about the market’s place in American conservatism. The Right is now fractured on this topic. That seems unlikely to change—at least in the near future. 

As a participant in those debates, I found they have enhanced my understanding of why some conservatives have become more inclined to interventionism. It has underscored two things.

First, these conservatives are asking good questions that merit considered responses. They are right, for example, to highlight the dysfunctionalities that presently mark America. Who can deny the rise in social pathologies among particular demographic groups?

Second, however sympathetic I am to these worries, I think these conservative critiques of marketsand the proposed remediesare problematic. I think that they overlook insights patiently developed through sound economic theory for the past 250 years. Such insights include our tendency to act in self-interested ways, the dysfunctionality of state bureaucracies, the dangers of meddling with free prices, and the need for what I call epistemological humility. 

But let me start in a different place. Many conservatives’ concerns about markets begin not with America but with another country. 

Since 2012, China’s behavior has caused many conservatives to question whether economic freedom is a force for magnifying liberty around the world. In the 1990s, many argued that the more that nations like China allowed scope for economic liberty, the harder they would find it to put the freedom genie back in the bottle. That idea is now clearly discredited. Incidentally, Milton Friedman arrived more or less at the same conclusion not long before he died in 2006. 

Expanding China’s access to global markets certainly brought many benefits to America. It significantly reduced the cost of many products for American consumers, especially poor Americans. It opened up new export markets for American businesses that created millions of jobs for Americans in areas as different as farming and high-tech manufacturing. It also exposed the American economy to more competitive pressures, and I think that the more competition to which the U.S. economy is exposed, the better for America.

But contrary to expectations, Beijing has never shown any interest in relaxing its grip on Chinese society. Beijing’s authoritarianism is accelerating, and that tightening has now extended to China’s economy. 

I should mention that Beijing’s embrace since 2008 of more state-centric economic policies is costing China dearly. The problems include massive capital misallocations as state-controlled banks lend to inefficient state enterprises, the growing corruption that inevitably goes along with that, as well as falling productivity and declining foreign investment. 

Scott Lincicome’s extensive analyses of the Chinese use of industrial policy, for instance, show massive failures in areas like semiconductors, 3G mobile technologies, and automotive manufacturing. It’s not coincidental that China’s National Bureau of Statistics is becoming progressively more selective about what economic data it releases. In August 2023, China stopped releasing information about its youth unemployment rate. I wonder why.

But putting aside these facts, China’s behavior has caused many conservatives to become more skeptical of things like free trade and more open to things like industrial policy. 

I think adopting such policies would be counterproductive. For one thing, there’s no evidence that these policies will change China’s behavior. We know, for instance, that the 2017 Trump tariffs didn’t change China’s behavior—something publicly conceded on pages 502–504 of the 2019 Economic Report of the President. The report went on to say that it only produced retaliation against groups like farmers.

Which leads me to another point. Economic nationalist policies aimed at other countries end up hurting America and Americans. The historical evidence for this is conclusive.

Consider, for example, the 1930 Smoot–Hawley Tariff Act and its disastrous effects on the American economy at the worst possible time. It produced massive retaliation from countries across the globe. Or consider Henry Clay’s American System, much of which was underpinned by Clay’s hostility to Britain. As the economic historian John Larson illustrates, the internal improvements constructed under the American system were largely determined by congressmen and senators pursuing their pet projects, which were justified, Larson shows, on increasingly dubious claims of national significance. Likewise, as Phillip W. Magness has stressed, the setting of tariffs by Congress accentuated regional tensions between North, West, and South as politicians struggled to devise a tariff schedule that could reconcile conflicts between manufacturers, raw material producers, and agriculture. 

Tariffs, in fact, had little to do with the emergence of America as an economic superpower in the nineteenth century. America’s emergence as an economic superpower was a result of entrepreneurship, rich natural resources, imports of capital, lots of immigration, free internal trade, and private property rights and the rule of law being maintained. Tariffs actually retarded growth. One reason that we know this is that the parts of the American economy that grew the fastest in this period were those that were not subject to tariffs. That was recognized at the time by the economist Frank W. Taussig but also confirmed by subsequent research by Douglas Irwin and Brad DeLong. Irwin comes loosely from the “conservative” side of the economic spectrum. DeLong comes loosely from the more “progressive” side. 

Trade issues don’t agitate some conservatives just because of foreign actors. Some maintain that trade liberalization has wreaked havoc on America’s manufacturing regions. Blue-collar communities, they argue, can no longer look to the local factory for jobs that once allowed people with relatively low education to earn wages sufficient to marry and have children in economically secure environments. As we know, many young men in these communities have turned to alcohol and narcotics to fill the void.

When I hear conservatives say that we can’t leave entire communities of Americans to rot, I can only agree. But solutions to problems require accurate diagnoses of the sickness and prescriptions likely to help rather than hurt, and I think some conservatives are misdiagnosing the problem and proposing counterproductive solutions. 

Let’s begin with the claim that America has deindustrialized. I think that’s mistaken. Certainly, the number of people employed in manufacturing declined from 19 million in 1972 to about 12 million in 2016. And it has maintained that level more or less since then. But in the same period, total employment in America grew from 99 million to 150 million, dwarfing the loss of manufacturing jobs. Millions of people who might have been employed in manufacturing fifty years ago are now employed elsewhere, especially in the service sector. 

But here’s the other important number. Real U.S. manufacturing production grew by 180 percent between 1972 and 2007. There was a blip because of the Great Recession, but by 2019, America was back to pre-Great Recession levels in manufacturing output. According to all the major international manufacturing indices, America is still in the top three manufacturing countries in the world.

That doesn’t sound like de-industrialization to me. 

Solutions require prescriptions likely to help rather than hurt. Some conservatives are misdiagnosing the problem and proposing counterproductive solutions.


It’s important to remember that an industry’s productivity isn’t measured by the number of people that it involves. The growth in manufacturing output and fall in manufacturing employment primarily reflects technological improvements and a shift in America’s comparative advantage toward high-tech manufacturing as well as the service sector. The most up-to-date studies illustrate that the China Shock from roughly 2000 to 2009 accounted for only 16 percent of manufacturing employment decline in that decade. 

I think conservatives should consequently ask themselves some questions. Should we pretend that technology has not displaced certain types of manufacturing employment? Should we ignore the fact that manufacturing employment is declining across the world as millions shiftoften quite happilyinto economic sectors where they are generally paid more for less strenuous work?

Perhaps some conservatives’ response to this would be: “Yes, the government should intervene directly to help distressed communities throughout Rust Belt regions. We cannot stand by and do nothing. Surely, everyone should be willing to pay a little more to help communities economically reliant on steel and aluminum production.”

Fair enough, but unfortunately, such aspirations encounter problems.

First, neither protectionism nor industrial policy is effective in achieving goals like preserving (let alone bolstering) steel and aluminum production jobs. Such efforts have failed overwhelmingly. Yes, you can subsidize manufacturing, but, as the economist Veronique de Rugy writes, it won’t produce manufacturing jobs anywhere near the scale imagined, precisely because manufacturing today relies heavily on automation.

Let me say that again: industrial policy won’t significantly bolster manufacturing jobs. Even if it produced a manufacturing boom—about which I have doubts—it wouldn’t produce a boom in manufacturing jobs.

Moreover, a 2021 Brookings study of the Northeast and Midwest suggests that of the 185 counties identified as having a disproportionate share of manufacturing jobs in 1970, 115 had managed to successfully switch away from manufacturing by 2016. Of the other 70 counties, 40 exhibited strong economic performance.

Also revealing is that the most successful transitions in places like Grand Rapids, Michigan, or Greenville, South Carolina, by and large didn’t use industrial policy. Changes occurred through bottom-up innovation that changed Grand Rapids from primarily a furniture and car town to also being a medical, aeronautical, and educational hub that has provided jobs in health care support, banking, education, health sciences, etc.: jobs that required more education than a 1970s factory worker but not the education of a lawyer or a doctor or, God forbid, an economist.

By contrast, less than 200 miles away, Detroit opted not to adapt. It opted to lobby for tariffs and subsidies. And Detroit’s subsequent decline is a poster child for the economic inefficiency and cronyism that is part and parcel of industrial policy. 

Second, using tariffs to try to protect blue-collar communities has backfired, not least by taking away jobs from other blue-collar workers. Let’s go back to the Trump steel and aluminum tariffs. A 2019 Federal Reserve study estimated these tariffs resulted in a net loss of 75,000 jobs. Why? Because as 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, like farm equipment and machinery, harming their competitive position in domestic and foreign markets (by reducing their exports and increasing other imports).”

How did steel-using industries react? They lowered their costs by cutting jobs. Those 75,000 lost jobs were mostly blue-collar jobs, mostly located in blue-collar towns.

Those are just a few economic critiques of economic nationalism. And if they’re accurate, conservatives should be skeptical about interventionist policies.

Let’s turn to another part of the discussion: the social pathologies that characterize parts of American society, such as prime-age blue-collar men dropping out of the workforce or collapsing marriage rates among similar demographics. Some conservatives have argued that these pathologies resulted from economic changes. I agree that economic changes can have powerful social effects, but I think some of these pathologies owe more to factors other than economics.

Consider the decline of work among prime-age American males without college degrees. That’s a real trend and it’s a worrying trend. But as the economist Nicholas Eberstadt points out, the prime-age American male’s long march out of the labor force began in the 1960s and it’s been rising at a remarkably consistent rate since then.

Eberstadt also shows that events like the Great Recession and China’s entry into the WTO had little impact on American prime-age male inactivity rates. He then suggests that the more relevant pieces of the puzzle are factors like changing family structures, government benefit dependence, and mass incarceration.

I think there’s little reason to imagine that state interventionism can fix these problems. No family income supplement is going to encourage these men to get out of their parents’ basements. Substance addiction can’t be addressed by tariffs. In fact, there’s evidence that not even economic prosperity will necessarily change some of these dynamics. 

Take, for example, the fracking boom. It certainly created higher wages and well-paid jobs in many blue-collar communities. Yet as one 2017 NBER working paper by two University of Maryland economists illustrates, there was no change in the low marriage rate among these populations or any reduction in out-of-wedlock births.

The problems that I’ve highlighted haven’t inhibited conservatives from proposing policies like direct family payments, promoting unions, and even a return to the activist state of Franklin Roosevelt’s New Deal. But such policies have a track record. And when we examine that record, we discover hard lessons.

Here, may I draw your attention to two books written by the economic historian Amity Shlaes. Her 2008 study of the New Deal, The Forgotten Man, illustrates the Roosevelt administration’s failure to reduce unemployment substantially. It also failed to ignite a significant economic recovery. Likewise, Shlaes’s 2019 book Great Society is a severe indictment of interventionist programs implemented by very intelligent, often well-meaning people and how these policies harmed many communitiesespecially black communities that they were designed to help.

What remains from these programs is an institutional landscape littered with legacy bureaucracies from these two systematic efforts to reorient the U.S. economy by intervention: bureaucracies, I might add, full of people who have little sympathy for conservative ideas. 

Let me close with some thoughts about the future. I agree that our economic status quo is not tenable. American conservatives do need to embrace an economic reform agenda. For me, such a reform agenda would go broadly something like this:

One: Creating space in America for bottom-up-driven entrepreneurship, fierce competition, and dynamic trade inside and outside America’s borders.

Two: Creating that space by de-clogging the U.S. economy of the regulatory and bureaucratic sludge that envelops it.

Three: Reforming the Federal Reserve to focus it on a single mandate of monetary stability.

Four: Decentralizing as many welfare responsibilities as possible to civil society.

Five: Reforming our immigration system so it is easy for migrants to come here, but to do so legally and in a way that affirms American sovereignty.

Six: Focusing government on fulfilling those particular economic responsibilities that it alone can dolike defending property rights, upholding the rule of law, providing monetary stability, and providing a last resort rather than a first resort welfare function.

These are not small economic responsibilities for the government. Moreover, I’d argue that government in America is presently performing sub-optimally in these areas because it’s doing so many other things that it’s not well equipped to do.

The truth is that America isn’t a dynamic market economy. We’re a mixed economy with huge amounts of regulation, interventionism, welfarism, bureaucracy, and cronyism, all of which benefit politically connected businesses and political insiders at everyone else’s expense. Our federal code of regulations alone has grown from 77,000 pages in 1975 to 154,000 pages today. The Index of Economic Freedom shows that America’s economy is less free than some European nations that we used to deride as welfare addicted social democracies.

That’s the institutional side. But I think there’s something else in many ways more substantive that conservatives can bring to thinking about capitalism. The best free market thinkers (people like Adam Smith, Michael Novak, Friedrich Hayek, etc.) have always understood that markets must be grounded in a specific type of culture. In a 1978 interview, for example, Hayek said: “Capitalism presumes that apart from our rational insight we also possess a traditional endowment of morals.”

Adam Smith was a powerful proponent of markets, but he acknowledged the social challenges associated with commercial societies. Smith recognized how greater wealth can seriously warp our sense of what’s important. How many people, he lamented in his Theory of Moral Sentiments, ruined themselves “by laying out money on trinkets of frivolous utility”?

In the section entitled “Of the Character of Virtue,” Smith explains that commercial virtues require supplementation by classical virtues like magnanimity and justice, as well as habits of benevolence like charity, generosity, and friendship. Smith didn’t see these virtues simply as extra grease for market exchanges. Virtue, Smith wrote, is nothing less than “excellence, something uncommonly great and beautiful.” Virtue civilizes our use of liberty in markets while also expanding our horizons beyond the achievements of markets. 

Here, it seems to me, lie real opportunities for conservatives to shape American capitalism. How do we help people in dynamic markets understand that certain things should never be bought and sold? How do we revive Tocquevillian and Burkean ideas about bottom-up associationism that binds people together in extra-economic ways and exorcizes the demon of soft despotism?

I don’t underestimate the difficulties in trying to shape the culture in which our markets operate. They are indeed formidable. But undertaking that type of work helps define, I suggest, what it means to be a conservative in the modern world.