In Defense of the Free Market

Free Market sign with clouds and sky background

Photo courtesy Published in Insurance Journal

Free Market sign with clouds and sky background

In an era of increasing polarization in American politics, the gray area is often diminished in favor of two equally extreme ends with which the average voter is unlikely to discover agreement.  On the question of the economy, we are often presented with a false dichotomy: we must accept either fundamentalist capitalism, in which we are told monopolies become unhinged and workers suffer, or Marxist-Leninism, whose abysmal track record causes an understandable distaste for most Americans. 

Yet the question of what economic system our nation ought to pursue becomes more difficult to answer when we see that many of the traditional fiscal understandings of the second half of the 20th century have been disrupted.  Republicans, who up until the 2016 ascendancy of Donald Trump had been known as the party of unabridged free-market fundamentalism have seen a faction of their party slowly begin to embrace populist economics while abandoning conservative principles of low taxation and minimal regulation.  Newly elected Republican lawmakers, including Senator J.D. Vance of Ohio, have focused their economic message not on slashing burdensome red tape but on “protecting American workers”—which they believe is best achieved through tightening government control over trade.  On the other hand, certain Democrats have initiated a stunning embrace of far-left economics, with major presidential candidates like Senator Bernie Sanders of Vermont openly declaring themselves to be “democratic socialists” and progressive lawmakers across the nation embracing Marx’s calls for class struggle—which they believe perfectly explains the root of America’s ills.  Left-wing legislators like Congresswoman Alexandria Ocasio-Cortez of New York have gone as far as to suggest that certain Americans should be taxed at a seventy percent rate—in other words, that they should surrender to the government seven dollars for every ten dollars that they make. 

But what if neither of these policy shifts is truly in the best interest of the nation?  It is time that we acknowledge the very economic system that has engineered unprecedented social mobility and though imperfect has given opportunity to millions of Americans.  Free market capitalism, with appropriate safeguards, has allowed a growing number of Americans to prosper.

American capitalism focuses not on guaranteeing equality of outcome but on ensuring equality of opportunity for all Americans.  Central to this concept is the idea that although one’s result is entirely dependent on hard work—and perhaps an ounce of luck—it is important that small businesses be empowered with the tools that they need to succeed in an economy that includes big-box retailers and Amazon.  Phil Gramm and John Early explain this concept in their January 6, 2023, article for The Wall Street Journal:

Is the American Dream in peril? Collectivists say yes and point to rising inequality of income. But they don’t understand the question. A commitment to equality of outcomes in life is totally alien to the American ethos. In the words of Abraham Lincoln, America is committed to “an open field and a fair chance for your industry, enterprise and intelligence.” Recognizing that, in the words of Will Durant, “freedom and equality are sworn and everlasting enemies and when one prevails the other dies,” America has always chosen freedom.

In their work, Messrs. Gramm and Early make an important distinction: it is not that every American is rising to the same level of income—that would be equality of outcome—but that all Americans, irrespective of their current income level, enjoy the ability to climb up the economic ladder.  They continue:

Measured by inflation-adjusted household income, 93% of children who grew up the bottom income quintile were better off than their parents. Of children in the middle three-fifths, 86% grew up to live in families with higher incomes than their parents. Even among those in the top income quintile, 70% were better off.

Additional to the point that the Journal makes are findings from Time Magazine, where Ran Abramitzky and Leah Boustan write:

What’s more, no matter which country their parents came from, children of immigrants are more likely than the children of the U.S.-born to surpass their parents’ incomes when they are adults. This pattern holds both in the past and today, despite major changes in U.S. immigration policy over the past century, from a regime of nearly open borders for European immigrants in 1900 to one of substantial restrictions in recent decades. Children of immigrants from Mexico and the Dominican Republic today are just as likely to move up from their parents’ circumstances as were children of poor Swedes and Finns a hundred years ago.

Many critics of free-market American capitalism claim that the system is fundamentally rigged against immigrants and their children, who collectivists believe are shortchanged and duped into coming to America to try to realize their American dream.  But the immigrants whose blood, sweat and tears have created a better life know the truth better than those who seek to characterize their experiences as filled with disappointment and failure in one fell swoop.

Of course, as in any responsible nation, there must be safeguards in a capitalist system.  Individuals who cannot help themselves deserve to receive assistance in meeting basic needs, including healthcare.  Predatory practices by gigantic conglomerates often come at the expense of shops on Main Street, so it is important that American small businesses and entrepreneurs be able to spend and invest their profits instead of paying it all to the Internal Revenue Service.  Corporations that choose to mislead the public because of their desire to make an extra buck should certainly be punished for doing so.

Perhaps the most convincing argument against the free market relies on the perceived decimation of America’s Rust Belt and the outsourcing of jobs to inexpensive foreign markets like Mexico and China.  To best protect American factory workers and blue-collar laborers who should be able to make ends meet, we must incentivize factories to move back to America through responsibly utilizing tax credits, investing boldly in 21st-century technology and emphasizing America’s role as a place where the government does not coerce private business to abandon its principles in order to serve as a proxy agent for the state.  Instead of pursuing an agenda of tariffs that hurt American businesses and manufacturers, we must balance competing goals of lowering costs for Americans while bringing jobs back stateside.  Ultimately, we will be more successful in reversing outsourcing by embracing free enterprise than by adopting the failed practices of oppressive economies abroad.

It is especially imperative in a time of rising costs and political division that we embrace the tried-and-true facets of American capitalism that have lifted millions of immigrants and native-born Americans out of poverty and that prove to be more essential than ever in extending the fruits of the American dream to those who seek a better life.  Politics aside, our policymakers must put the interests of the American people first: their right to keep the fruits of their labor, to engage in healthy economic competition, to enjoy the consequences of healthy fiscal policy from Washington D.C. and to build a future where their children and grandchildren end up in higher income brackets than they.

It is therefore past time that a coalition of liberals, moderates and conservatives unite in defending—in reinvigorating—a fundamental aspect of what unquestionably makes America the greatest country on Earth: the free market.  Everyday Americans deserve the opportunity to improve their lives.