It wasn’t always thus. “The nineteenth century American economy was laced with government involvement in the marketplace,” they write. But in the 20th century, American business leaders began a campaign to construct what the authors call an “intellectually coherent — if historically and logically misleading — framework for market fundamentalism.” Led by industry groups like the National Association of Manufacturers and the National Electric Light Association, business leaders fought child-labor laws and workmen’s compensation as unfair limits on companies while insisting that “anything less than total business freedom was a step on the road to socialism, or worse.”
Even some of the philosophical fathers of free-market enterprise, like Adam Smith, whose phrase “the invisible hand” has become the defining cry of capitalism, and Friedrich Hayek, whose book “The Road to Serfdom” argued that preserving economic freedom is the key to preserving political freedom, were not as dogmatic as we might think. Smith advocated for restraints on the marketplace to “protect public safety” and even taxation to pay for public goods. “We bought the myth that the invisible hand could do things even Adam Smith didn’t think it could do,” Oreskes and Conway write. Hayek, for his part, did worry that government involvement would start a slippery slope to communism, yet he also acknowledged that the “free” market isn’t really free and supported social security, workmen’s compensation and even a guaranteed minimum income. “Hayek argued that the key to deciding whether a government intervention was warranted was to consider the scale and gravity of the social ill or unmet social need to which the intervention was addressed,” the authors write.
The campaign to change this to “market fundamentalism,” a belief that only markets have all the answers for everything, was both subterranean and sophisticated, so much so that modern business lobbying looks positively basic in comparison. Business interests worked to rewrite textbooks for high school and college students, to summarize Smith and Hayek for broader audiences in ways that eliminated their nuances, to pay academics to promote business-friendly ideas, and to infiltrate popular culture. The popular TV show “General Electric Theater” “was not just pitching electricity, it was pitching capitalism.” Of course, Ronald Reagan, who hosted the program, essentially turned into a character who could have been one of the show’s heroes. The forces shaping Rose Wilder, Laura Ingalls Wilder’s radical daughter, were more diffuse than corporate interests, but they led her to rewrite the “Little House on the Prairie” books into paeans to “heroic individualism,” even though the real story of the Ingalls family was anything but that.
The path to this fundamentalism was paved with stones of hypocrisy. The National Association of Manufacturers was created in the late 19th century “to advocate for the federal imposition of protective tariffs, and to encourage the U.S. government to build the Panama Canal.” Business talked about the glory of competition but embraced the creation of monopolies to fend off any such thing. From the failure of the market to provide electricity to rural customers in the 1930s to the financial crisis in 2008, those who touted the power of markets rarely acknowledged when they didn’t work as intended. Most of all, those who talked most grandly of freedom usually meant their own freedom — certainly not freedom for enslaved people, for children or for workers who had little choice of employment.
As the world has evolved, there’s been an increasingly ridiculous refusal on the part of market fundamentalists to recognize what has become obvious. As Oreskes and Conway write, “Economic liberalization does not necessarily lead to political liberalization.” Hello, China! Nor have safety nets for the vulnerable in European societies destroyed democracy. (Some argue that such things might preserve democracy.) There’s also an absurdity at the heart of the argument that rules are inherently destructive. As the authors write, to claim that any reforms are “a step toward unfreedom is like claiming that road signs, stop lights and speed limits are steps toward the elimination of driving.”
For the most part, the book is admirably nuanced. The authors acknowledge that markets do have a role in generating information and allocating resources, one that central planning has never been able to replicate. Their argument is not that capitalism is bad but rather that we should acknowledge its limits. “We need a more realistic vision of what markets are and are not good at, of where they succeed and where they fail,” they write. Indeed.
But especially as the book progresses, the authors slip into cursory rewrites of well-known history and other elisions that, while sometimes small, nevertheless undermine their credibility. About Paul Volcker, the onetime Federal Reserve chairman who is legendary for taming inflation, Oreskes and Conway write that his interest rate hikes “hit hundreds of millions of people” by shocking them with higher rates, causing unemployment and triggering financial crises in several countries — and that the hikes failed to “vanquish inflation.” If there should be a retelling of the Volcker-as-hero narrative, it needs to be more substantive than this and at least acknowledge that while the cure for inflation may hurt the least well-off, high inflation hurts them even more. Oreskes and Conway blame the “five hundred thousand dead from opioids” on unfettered capitalism, ignoring that it was a government agency — the Food and Drug Administration — that had the power to stop the opioid crisis from ever happening. And they write that during the coronavirus pandemic, “things changed in America when Joe Biden was elected and mobilized the capacities of the federal government to expedite vaccine production.” Failing to note the well-known role played by the Trump administration’s Operation Warp Speed might be ideologically convenient, but it made me wonder about the truth of all the other assertions Oreskes and Conway make where I don’t already know the full story.
Another theme in the book is that even those thinkers who have voiced skepticism about an unfettered market have not calibrated exactly what the role of government should be. “The key question — one that Hayek never adequately answers — is how to evaluate the social costs and judge when government should act and when it should not,” they write. That surely is the key question for our times. But instead of attempting to answer it, Oreskes and Conway fall into the same trap by approaching the problem from the other direction. “Our most consequential problems have arisen not because of too much government, but because of too little,” they write in the last two sentences of the book. “Government is not the solution to all our problems, but it is the solution to many of our biggest ones.” Those are awfully broad and cliched assertions, especially coming from authors who have spent the previous 425 pages eviscerating the overreach of those on the other side.
Bethany McLean is a contributing editor at Vanity Fair and the author of “Saudi America: The Truth About Fracking and How It’s Changing the World.”
How American Business Taught Us to Loathe Government and Love the Free Market
By Naomi Oreskes and Erik Conway
A note to our readers
We are a participant in the Amazon Services LLC Associates Program,
an affiliate advertising program designed to provide a means for us to earn fees by linking
to Amazon.com and affiliated sites.