Both Parties Are Abandoning Free Markets. It’s Time for Voters to Push Back

By Roger Ream

Saturday, March 16, 2024

 

As the presidential campaign for the 2024 general election now begins in earnest, many Americans will begin to pay closer attention to President Joe Biden’s and former president Donald Trump’s plans for a second term. Many of the policy disagreements that separate the two candidates are known and predictable. Whether it’s health care, immigration, abortion, education, or national security, voters know what Biden, Trump, and the two parties think. However, Americans may be surprised by the two parties and their platforms when it comes to one of the most important issues of all: our economy.

 

Lately, Biden has taken to arguing that “democracy is on the ballot” this November. It’s true that we should thank the unique system of government envisioned by the Founders for the stability Americans have enjoyed for nearly 250 years. But shouldn’t our leaders also be discussing ways to protect and advance our system of free-market American capitalism, which has brought untold economic prosperity that makes our modern way of life possible?

 

Indeed, despite many gloomy projections from government and private sources, the free-market system continues to perform remarkably well. The U.S. economy grew a stronger-than-expected 3.2 percent in Q4 2023, easing recession fears and seemingly achieving the “soft landing” of decreased inflation alongside continued growth. Worldwide, the U.S. economy still paces the field. Worries that the U.S. economy would soon be overtaken by the EU or China have fallen flat. After China’s GDP hit an all-time high of 75 percent relative to U.S. GDP in 2021, China’s position has declined for two straight years and now sits at just 65 percent.

 

Despite these favorable economic indicators, our leaders often talk more about what’s wrong with our economy (and their varied proposals for “fixing” it) rather than what it gets right. This is concerning. While not perfect, our system is the core driver of human flourishing in America and around the world. Our politics must reflect this key fact; otherwise, we risk being led down the primrose path to supporting policies that would hamper, not strengthen, the key source of our prosperity.

 

International trade is one worrisome example. Thanks to specialization and the principle of comparative advantage, free trade lets us produce things we excel at making and sell them to people in other countries, while also buying things others can produce more economically for us. Many observers have noted what one economist recently stated pithily: Free trade is “the best antidote to international plunder and violence, the status quo for most of human history.”

 

Despite this, Trump imposed tariffs on more than $300 billion worth of Chinese goods during his first term — tariffs that Biden has largely left in place. The Biden administration also pushed the Inflation Reduction Act and its “Buy American” provisions into law, even though these protectionist policies are illegal under World Trade Organization rules.

 

Now, Trump is apparently considering a new flat 60 percent tariff on all Chinese imports, and has also floated a 10 percent “universal baseline” tariff on trade with all countries, including trading partners and allies. These tariffs and trade restrictions simply raise costs for Americans while doing little to increase domestic production of goods and services.

 

Both parties also seek to use government power to regulate private industry in new ways that inject uncertainty into the market and make it harder to do business. The Biden administration recently gave in to climate activists by pausing federal approvals for new liquefied-natural-gas (LNG) export projects — hindering a growth market where the U.S. has become the world’s No. 1 supplier. The administration has also stopped private businesses from merging with one another through an unprecedented use of antitrust review of proposed corporate deals.

 

Meanwhile, prominent congressional Republicans are supporting a variety of proposals — including clawing back executive pay at failed banks, eliminating noncompete agreements, and subsidizing U.S. semiconductor manufacturing — that restrict private commerce, distort the market, and let the federal government pick winners and losers.

 

In The Wealth of Nations, Adam Smith argued that a free-market economy organizes individuals in a mutual system of self-interest and interdependence. Smith’s “invisible hand” promotes the best use of scarce resources in such a way that advances the interests of individuals and society. In the 248 years since Smith’s words were published, this fundamental economic principle has been proven time and again.

 

Unfortunately, the inconspicuous way the free-market system operates may obscure its benefits and risk fostering public ambivalence, or worse. Only 21 percent of Americans currently have a “very positive” view of capitalism, according to a 2022 survey. The public’s ongoing support for this system is crucial for supporting our shared economic future. This political season, we should demand that our leaders recall anew — in word and deed — this fundamental fact: Free-market capitalism is good for America!