American capitalism

Economic freedom and its (conservative) discontents

Did the Industrial Revolution impoverish workers? Was Progressive-era regulation necessary to tame the extremes of capitalism? Was the Great Depression a failure of capitalism? Did free trade hollow out American manufacturing? Did deregulation cause the financial crash of 2008? Is income inequality high/rising in America? Is poverty a failure of capitalism?

It is widely believed that the answers to some — if not all — of these questions are “Yes.” Proving that the real answer to each is “No” is the task economists Donald J. Boudreaux and Phil Gramm set for themselves in “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism.” They do a convincing job. This book is essential reading for anyone interested in America’s economic history, and it poses questions for conservatives as well as liberals.

The Industrial Revolution was, Boudreaux and Gramm write, a product of increased economic freedom. “Individuals were freed and empowered to think their own thoughts and, ultimately, have a voice in their government,” they explain. “Men and women secured the right to worship as they chose, as well as to own the fruits of their labor, thrift, risk-taking, and entrepreneurial activity.” “Laborers and savers, working in increasingly competitive markets to raise their own level of economic attainment,” they write, “accomplished what no benevolent king’s redistribution, no loving bishop’s charity, no mercantilist’s protectionism, and no powerful guild ever did — namely, they delivered a massive increase in productive capacity that continues to enrich our world today.”

But industrialization had its discontents. Where Boudreaux and Gramm see economic freedom and growth, the poet William Blake saw “dark Satanic mills.” The Industrial Revolution fundamentally altered life, and many looked to an idealized past, felt a sense of loss, and, out of this, the “romantic” movement emerged. This blended into Toryism in the 19th century, which opposed Whiggery and free trade. Another Romantic poet, William Wordsworth, was a “liberal” when he eulogized unspoiled nature with lines like “I, so long / A worshipper of Nature” in 1798, but he became a small ‘c’ conservative, a Tory, as he saw the changes industrialization unleashed: He sought to “conserve” the old social order from the consequences of economic freedom.

We see a similar phenomenon in manufacturing and trade. “American industry dominated postwar global manufacturing,” Boudreaux and Gramm write, “and manufacturing formed the cornerstone of American prosperity.” They note that, in 1975, “when the postwar period ended,” manufacturing’s share of total employment was “still at 22 percent.” “Unemployment during this period was consistently low, and wage growth was consistently high,” they write.

This is the supposedly lost world of the “Old Economy Steve” meme, when The Simpsons could afford that house on one blue collar wage. Liberals, like Presidents Barack Obama and Joe Biden, eulogize it, but so, too, do an increasing number of conservatives. In 2018’s “The Once and Future Worker,” a key text of “National Conservatism,” American Compass’s Oren Cass looked back to the end of the postwar period and noted that: “Between 1975 and 2016, the share of men aged twenty-five to thirty-four earning less than $30,000 per year rose from 25 to 41 percent.” Amid a list of culprits, including higher taxes and regulations — restrictions on economic freedom — he noted that “free trade increased the supply [of low wage workers available to employers] by billions — to the advantage of those seeking to use such labor, but not those seeking to provide it.”

Boudreaux and Gramm refute this: “In real purchasing-power dollars, 66.3 percent of all American households currently have incomes that would have put them in the top 20 percent of income recipients in 1967,” they note. While in October 2024 “the absolute number of Americans employed in manufacturing was down by 34 percent from its peak in June 1979,” and its share of total employment was down to 8.1 percent, manufacturing output “was 12.3 percent higher than when China joined the WTO” in 2001. Workers, meanwhile, have moved to service sector jobs that “pay more and offer better working conditions.”

But while this is true, it still represents change, which anyone seeking to conserve the existing social order will oppose. This “Toryism” can run counter to a “Whig” conservatism that seeks to conserve economic freedom. The tensions between these two, occasionally exclusive conservatisms — conserving a social order or conserving a system of beliefs, including economic freedom — divide the American right today.

We aren’t surprised when leftists like Howard Zinn or Bernie Sanders decry the economic freedom that gave us the Industrial Revolution or manifests in free trade, but it comes from conservatives, too. All varieties should read this excellent book.