Book Review: ‘The Next American Economy’ by Samuel Gregg

As the populist elements of the right and left converge on economics, a new text provides a much-needed corrective.

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Elizabeth Warren. (Photo by Tom Williams/Getty Images.)

Former President Donald Trump and Democratic Sen. Elizabeth Warren appear as polar opposites, but in 2019 Tucker Carlson observed a similarity between the two on economic policy. After approvingly quoting a Warren economic plan on-air—“Politicians love to say they care about American jobs, but for decades those same politicians have cited ‘free market principles’ and refused to intervene in markets on behalf of American workers”—the Fox News host declared, “She sounds like Donald Trump at his best.”

This wasn’t a one-off. Much of the progressive left and “national conservative” right have spent the past few years coalescing around the idea that government should play a bigger role in America’s economy. They may differ on the precise nature of the interventions but generally favor “state-directed capitalism”—an agenda embracing protectionism, industrial policy, “pro-worker” initiatives, and a corporatism whereby governments can jawbone companies for taking the wrong political or social stances.

Rather than lament these ideas as braindead errors, Samuel Gregg takes seriously the best arguments for such proposals in his excellent new book, The Next American Economy. More importantly, the economics writer and much-affiliated think tanker recognizes that wittering on about “deadweight losses” or economic inefficiencies in state-directed capitalism isn’t enough to convince those tempted by the new zeitgeist.

Gregg begins by explaining just how stark the turn away from free markets has been in recent years. After the Soviet Union collapsed and industrial policy-laden Japan’s bubble burst in the 1990s, the idea that the state could plan or tilt the sectoral composition of an economy toward prosperity seemed utterly discredited. Free markets and global economic integration were seen not only as guarantors of prosperity but a means of creating binding interests to spread freedom, peace, and prosperity. 

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  1. Avatar photo
    Ben Connelly

    “ A reduction in aggregate gross domestic product is acceptable to them if the primary goal is, say, incubating a domestic industry, or saving certain jobs, or greening the economy, or reviving manufacturing, or avoiding subservience from other countries, or even an intangible idea like spreading dignity.”

    Which assumes that government policy actually could achieve any of those goals. Or that it could do so without creating even greater harm somewhere else.

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  2. Kroneborge

    I'm all for free trade as long as it's on a level playing field. IE, our markets are open to the extend that other countries markets are open. Thus free trade with Europe, Canada etc could occur as long as they open up their markets as well.

    China on the other hand I think we should pretty much cut off trade with China (by keeping raising tariff's) until China stops stealing technology, stops oppressing Hong Kong and threatening Taiwan, closes the concentration camps, and of course opens up their own markets.

    The last point would make is that free trade requires roughly equal buying and selling. As in the country can't run a trade deficit long term.

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  3. Eric Evans

    Awesome essay!

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    George.Skinner

    Free markets always suffer from the problem of diffuse benefits and concentrated harms. Autoworkers and manufacturers in Detroit lament the decline of the car industry in the face of competition from other countries or even loss of jobs to other regions in the US, and have been grinding that axe for decades. In the meantime, the public has largely forgotten how the quality, safety, performance, and fuel efficiency of vehicles has soared over the same time due to competition.
    Businesses are definitely *not* committed to the free market - they're committed to their own success. Automakers and sports teams are all happy to demand subsidies and favorable tax treatment as a condition of doing business in a particular locale - it's all good for them. Similarly, libertarian tech giants like Facebook and Google will champion regulation if it means handicapping potential competitors who are more burdened by the resulting overhead. The problem is that we do those businesses and ourselves a disservice by caving to these impulses. It's the equivalent of letting somebody slouch on the couch and bringing them a stream of junk food rather than making them get on the treadmill for some exercise.
    All this means championing free markets is the same sort of thankless job as your doctor when they cajole you to eat healthier and exercise more. You know they're right, but it's annoying to be scolded and a hassle to actually do it. Still, somebody's got to do it or you know you'll pay for it in the future.

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    1. David.Butcher

      I would say it's more like taking a patient off their statin and telling them to eat better and exercise more to fix their cholesterol. The patient will probably die from heart disease before they change their behavior. And the problem is that when the patient dies, the costs are concentrated, as you note, but they're concentrated in a manner that's tied to geography, which is often neglected in this discussion.

      I'm grateful for creative destruction. I'm glad I'm writing this response on a laptop instead of a typewriter and mailing it to an editor. Net-net on the whole, creative destruction has been good, especially for knowledge workers like me. Not so much for the typesetters of the world, and even more so for the places where typewriters were manufactured. You can fairly easily wrap-up a typewriter business through bankruptcy, layoffs of workers, the sale of any remaining capital assets, etc. But there's no easy way to wrap-up the place where the factory was located.

      Businesses need to compete or die. When they don't compete and die, they just go away. But cities and towns built on those industries don't just go away. They become places of concentrated poverty and social pathology that then redirects other national resources for their support.

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  5. Token Liberal

    All so true. But, when you look closely at American capitolism you see the hand of government everywhere. The government gave land away to homesteaders, and eventually, huge farm subsidies. The Erie Canal, the Transcontinental Railway, all government partnerships. Bankers make profits, but when they lose money, they get bailouts. Big Sugar. A Dispatch fav, the Jones Act. So when Intel decided to build in my city, I was all for the Chips Act. May as well get mine. It may not be pretty, or even right, but how things really work is more complex than industrial policy versus pure capitolism.

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  6. Avatar photo
    Pastorfbt

    Could you PLEASE find another picture to head this column?!
    It's bad enough she's one of our (MA) Senators...

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    Synchronize Your Dogmas (Bill B)

    “The case for free markets will lose if it remains narrowly economic in its content and emphasis...”

    Perceptive admission that free market dogma isn't enough. There ought be some recognition that citizens don't serve the economy, the economy serves it's citizens. The nation should not be reduced under any model to nothing more than an agglomeration of deracinated individuals who make money from each other. There is a large arena of action between laissez faire capitalism and economic statism and to much of either isn't healthy.

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  8. Avatar photo
    EricRemcon@gmail

    So, no steel tariffs on Canada in the name of “National Security”. No retaliation against corporations (e.g., Disney) over personal slights. No state travel boycotts in protest of sanctuary cities or bathroom laws. I’m sure that it is a good book and I would probably agree with much of it, but I don’t see how those that need convincing will take the time to consider it at book length.

    I wish the author well and am glad there are still thoughtful measured thinkers (and those willing to publish them) but I don’t see the audience for this book right now on the populist left or right. Hopefully I am wrong and it sells like wild fire.

    I will add it to my list and save it for a moment of uplift when I am in an ebb of low despair….. maybe on Nov. 9th.

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    1. Philebus

      Totally agree. It may go on my reading list. The marketplace of ideas - good in theory.

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      Reading451

      I share your concerns. Perhaps this is where book tours and interviews on say, NPR or webinar type talks can reach larger audiences.

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