“The paradox of markets,” Mr. Gregg adds, “is that people pursuing their rational self-interest unintentionally produce many benefits for others, while dirigiste policies intended to help people often hurt them. Minimum wages, to take one example, seek to help the poor but price them out of labor markets, often robbing them of entry-points into the workforce.”
The great surprise is that for all its alleged moral failings, capitalism somehow far outperforms all its rivals. Then again, maybe it’s not so surprising from a system in which success depends on meeting other people’s needs. In a free market for autos, Ford would be building cars Americans want to buy—not cars Joe Biden prefers.
“Markets produce the growth that gets us out of poverty,” Mr. Gregg says. “But they also encourage virtues that make us better people while simultaneously working with, rather than against, human nature. All these things make markets morally superior to all the alternatives.”
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The Invisible Hand Strikes Back
Bradley Prize winner Samuel Gregg stands athwart the populist economic tide.
ET
These days it isn’t only the Democratic left that has harsh words for the free market. The Republican right has soured on it too. From Donald Trump’s across-the-board tariffs to Marco Rubio’s industrial policy, up goes the cry: Reaganomics is dead!
This is why the Bradley Foundation’s decision to award Samuel Gregg its annual prize is so counterrevolutionary. An Australian by birth and American by choice, Mr. Gregg is an Oxford-educated scholar at the American Institute for Economic Research. In articles, books and debates he makes the case that the invisible hand not only delivers better results than the populist alternatives, it’s also superior morally. On Tuesday night in Washington, he will be honored at a gala emceed by the Journal’s Kim Strassel.
“Popular understanding of capitalism today is driven by mythological narratives,” Mr. Gregg says. “Capitalism’s defenders also have to address the narratives.” One thing these narratives often miss is something economists from Adam Smith to F.A. Hayek acknowledged: The free market depends on virtues it rewards but can’t create itself.
These days full-throated capitalist champions such as Mr. Gregg are as rare as a Trump supporter at National Public Radio. They’ve been replaced by pundits, think tankers and politicos—conservatives included—who argue that free markets worked in the past but have seen their day. These critics point to the threat from communist China, which unlike the old Soviet Union is also a formidable global market competitor that doesn’t play by the rules.
But capitalism, Mr. Gregg says, is better not only when everyone plays fairly. Even when nations cheat, protectionist retaliation harms those who impose it—such as tariffs that raise the price of foreign steel. While those tariffs may make things better for U.S. steel producers, they make things worse for the many more Americans who consume steel, from construction companies to car buyers. Some critics liken tariffs to trying to defeat your enemy by blockading your own ports.
“The way to beat China is not to become more like China,” Mr. Gregg says. “It’s to make our economy even more competitive.” He points out that when people were complaining about corporate inversions—U.S. firms reincorporating overseas to avoid taxes—Hillary Clinton pitched imposing exit taxes to punish them for leaving. Instead, the 2017 corporate tax cuts made America more competitive and eliminated much of the incentive for inversions.
Ditto for industrial policy. Right now we are in the thick of the Democratic version. President Biden’s Green New Deal perversely encourages China’s electric-car industry. The GOP version is to give domestic manufacturing preferred treatment. Both suffer from a want of modesty and a profound lack of appreciation for unintended consequences.
Advocates of Republican industrial policy say they’ll avoid the mistakes the Democrats make, without ever really explaining how. They seem to believe intervention on such a scale can somehow be done without waste, fraud or cronyism. Those who respond as Mr. Gregg does—that “basic economic truths about the human condition don’t change”—are mocked as “market fundamentalists” or “zombie Reaganites.”
But that’s just name-calling. “Conservatives like Sen. Rubio and progressives like Sen. [Elizabeth] Warren pushing industrial policy should recognize that it’s fatally flawed by conceptual errors that don’t magically disappear because we live in the 2020s rather than the 1980s,” he says.
Feeding the Republican cry that free-market policies are passé is the idea that American workers today are worse off than they were before. Certainly many Americans are struggling in the Biden economy. But the idea that the market is to blame for their problems or that working class Americans have been left behind isn’t supported by the evidence.
“Blue-collar people today are economically much better off than they were in, say, the 1950s or 1970s,” Mr. Gregg says. “Their inflation-adjusted average overall income and benefits are considerably higher, their houses are bigger, and they have access to labor-saving technologies their grandparents couldn’t even envisage.”
“The paradox of markets,” Mr. Gregg adds, “is that people pursuing their rational self-interest unintentionally produce many benefits for others, while dirigiste policies intended to help people often hurt them. Minimum wages, to take one example, seek to help the poor but price them out of labor markets, often robbing them of entry-points into the workforce.”
The great surprise is that for all its alleged moral failings, capitalism somehow far outperforms all its rivals. Then again, maybe it’s not so surprising from a system in which success depends on meeting other people’s needs. In a free market for autos, Ford would be building cars Americans want to buy—not cars Joe Biden prefers.
“Markets produce the growth that gets us out of poverty,” Mr. Gregg says. “But they also encourage virtues that make us better people while simultaneously working with, rather than against, human nature. All these things make markets morally superior to all the alternatives.”
Write to mcgurn@wsj.com.
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