As Economic Freedom Goes Global, Conservatives Go Wobbly

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"Capital is not a free gift of God or of nature. It is the outcome of a provident restriction of consumption on the part of man.” – Ludwig von Mises, The Non-Economic Objections to Capitalism, p. 51

In his 1955 mission statement that launched National Review, William F. Buckley made plain that while it’s the job of centralized government to “protect its citizens’ lives, liberty and property,” all “other activities of government tend to diminish freedom and hamper progress.” Buckley added that the “profound crisis of our era is, in essence, the conflict between the Social Engineers, who seek to adjust mankind to conform with scientific utopias, and the disciples of Truth, who defend the moral organic order.”

The creation of the great National Review (NR) had much to do with blocking the growth of government, all the while celebrating the genius of freedom. NR would yell "stop" as it were. To pick up a copy of NR was to read extraordinarily well written defenses of freedom combined with muscular critiques of politicians eager to fix things. The answer to what ailed the world was freedom. Freedom was what people needed in order to thrive. Period.

That’s why a recent piece by NR editor Rich Lowry was so puzzling. Writing about the recent midterm elections, Lowry opined that they “suggest that President Trump needs to double down on populism, just not the sort that’s been his signature to this point.” Lowry was no doubt making a political point that people of differing views can debate, but the disappointing thing is that he was also making a policy point. Though NR was arguably the most prominent and effective voice in support of personal and economic freedom during the second half of a 20th century defined by a murderous lack of same around the world, Lowry seems to be apologizing for too much freedom in the 21st. Americans in particular are victims of freedom’s globalization in the 21st, and Lowry’s not alone among conservatives in his call for government to step in to “stand athwart” the alleged hurt visited on people who are too free.

What’s unfortunate is that Lowry is calling for the subsidization of the American worker allegedly harmed by the unshackling of workers around the world, workers who are much more mobile in pursuit of opportunity than they were in the past.. While conservatives used to properly cheer on the division of work among free people that ensured the specialization that drives individual productivity skyward (Adam Smith’s pin factory arguably the most famous description of the latter, and one long cribbed by conservatives), Lowry thinks the Trump administration should “crib” very “freely” from Oren Cass’s new book in which he calls for a “wage subsidy” for American workers supposedly burdened by “low-wage work.” NR’s original mission statement, which stressed a strictly limited federal government, is apparently no longer operative?

Interesting about all this is that Cass works at the Manhattan Institute (MI), a very prominent conservative think tank co-founded in 1977 by noted Cold Warrior William Casey. More notable is that in a recent speech given at MI, Hoover Institution (another highly prominent institution standing athwart communism and other forms of coercive government in the 20th century) scholar Peter Berkowitz suggested that “plunging marriage rates, a rise in births to unwed mothers, erosion of men’s industriousness, surging crime, and a steep decline in religious faith” are an effect of “globalization, workplace automation and opioids.”

Not explained by any of the three is why freedom from taxation (more on that in a bit), freedom to trade, automation, and a growing division of labor could cause bad decisions, lower wages, and most troubling of all, create the need for activist government to right the alleged wrongs of economic freedom with subsidy. Seemingly all three thinkers have forgotten that pre-globalization, the United States itself was a wildly successful example of what happens when people are free to exchange without government barriers, and also free to migrate to the best opportunity without similar barriers. The why behind the success of the U.S. would have been obvious at the time, but should be particularly obvious in retrospect given the clarity created by hindsight. Stating what’s blindingly simple, jobs aren’t finite as Berkowitz, Cass and Lowry intimate, they’re infinite. Where there’s productivity investment follows, so it’s no surprise that a free movement and trade zone like the U.S. attracted the copious investment without which there are no jobs. Globalization worked in the U.S. on a somewhat smaller scale because the division of labor relentlessly improves the individuals who comprise what we call an economy. What works in a country works even better for the whole world given the obvious correlation between work divided, specialization, and surging productivity.

The abundant result of unrestrained trade and movement in the U.S. has been immense prosperity, prosperity that’s been a magnet for the world’s frequently impoverished strivers who’ve long risked their lives immigrating to the U.S. Arguably the underlying goal of Hoover, MI and NR at the end of the 20th century was the export of freedom globally. Not only was it pro-humanity, the addition of billions of workers to the global labor force would enable even greater specialization among Americans than had already revealed itself when the U.S. was an island of freedom unto itself.

Importantly, the freedom fighters of the 20th were proven correct. As evidenced by Apple selling 20 percent of its iPhones in formerly impoverished China, the globalization of economic freedom has increased the economic chances of workers around the world in profoundly amazing ways. A country (China) that as recently as 1976 had per capita income of $175 is increasingly populated by individuals who walk the streets in their name-brand clothes with supercomputers in their pockets.  

Crucial here is that none of this has harmed the American worker. Evidence supporting the previous claim is the pure market signal indicating where humans most want to live and work. It remains the United States. Lowry implicitly admits the latter given his troubles with immigration. Whether readers are for it or against it, the simple truth is that the U.S. wouldn’t have an immigration “problem” if opportunity here were stagnant. For Lowry, Cass or anyone else to suggest otherwise would be for them to say that markets are stupid, that people migrate without regard to the opportunities that await them after migration. Importantly, this movement of humans is decidedly not anti-wage. If it were, then it would also be true that outmigration throughout U.S. history from Mississippi to Tennessee, West Virginia to Virginia, Delaware to New York, and Oregon to California wrecked the wages of those living in the states that were the recipients of human capital. So even if the immigrants desperate to reach the U.S. today are somehow different from the immigrants and descendants of immigrants who were “restless amid abundance” (de Tocqueville) in the U.S. of the past, it’s hard to make a case that the city or state attracting the most people is the one with the most stagnant wages. Basic market logic suggests the opposite.

So if we can dismiss the argument that freedom of movement pushes wages down such that government must stop in, we have to ask why now, nearly 30 years after the end of the Cold War, that Americans of all people need wage subsidies as Cass and Lowry contend. Figure that neither would say with a straight face that workers around the world have suffered in a wage sense from their freedom, so are we to believe that Americans have? Has the end of murderous socialism and communism outside the U.S. somehow brought on an unintended consequence for the American worker, one that requires fixing by government despite the presumed fix running counter to conservative thinking? Has the economic freedom that has plainly lifted living standards around the world somehow brought harm to the U.S.? It’s hard to take such a view seriously, or the view that American workers need federal relief from all this freedom. No, government shrinkage always redounds to the worker simply because private property relentlessly pushed to its highest use is the path to higher wages.

That’s what’s so interesting about Lowry’s lament that Trump’s tax cut was right “out of Republican Central Casting.” Lowry’s implicit point there was that “Trump” cut taxes for the rich against his natural instincts, as opposed to a “fantastical middle class tax cut” that Lowry plainly wanted, and that Trump apparently did instinctually. On this point, if we ignore how overdone is Lowry’s assumption that the vastly overrated (by Republicans) 2018 tax cuts had anything to do with limiting the tax burdens on the rich, Lowry can’t have it both ways. He can’t be in favor of higher wages for workers while being against tax cuts that would most boost worker wages. Lowry has forgotten that compensation is always and everywhere an effect of savings and investment. Always. There’s no economic school that can get around the previous truth. So if Lowry is in fact a supporter of more and higher compensated jobs, he must be in support of reducing the tax burdens on those most capable of saving and investing: the rich. Sorry, but middle class tax cuts are irrelevant to economic growth and rising wages simply because the savings from excess government are spent. That’s all well and good if you’re a Keynesian, but Lowry isn’t. Since he’s not, it’s worth stressing that wages are once again an effect of investment. Nothing else matters.

What’s puzzling and unsettling at the same time is that Lowry doesn’t just fail to tie wage growth to investment, and intrepid, job-creating investment to government not penalizing whole classes of workers solely because of their commercial accomplishments. Instead, he oddly ties a “healthy labor market” to a government-sponsored “wage subsidy for low-wage work.” Ok, but Lowry must know what’s obvious, that the government is us. For government to decree a subsidy or a living wage, it must reach into someone else’s pocket to reduce their pay. That the left regularly call for just this kind of government force whereby they decree prosperity is a sad fact of life in modern times, but when conservatives (let alone National Review editors) call for it, there’s reason for concern.

Worse is that Lowry’s concern for the worker isn’t rooted in anything tangible. Indeed, unless Lowry truly believes that the freedom his magazine and other conservative groups fought so hard for has actually resulted in a downtrodden outlook for the American worker, unless he thinks American companies became the most valuable in the world by routinely stiffing the very individuals who make companies valuable (a Marxist view if there ever was one), he would be wise to rethink his stance. A suggested driver of the rethink would be the very American workers he’d like to subsidize with the money of others, and who have so much within their grasp (including supercomputers that fit in our pockets) relative to the Cold War-era past when life was rather primitive relative to the present. American wages aren’t stagnant (if they were we wouldn’t have to worry about our borders, nor would American companies be the most valuable in the world), rather they command a great deal more in total while also commanding a fraction of all the abundance that’s available. Unless Lowry truly believes economic freedom and high corporate valuations correlate with falling to stagnant wages, he must acknowledge that the frustration of the American worker is to some degree an effect of abundance, not an absence of it. Even the low-wage American worker has access to goods and services today that the richest of the rich couldn’t come close to accessing not too long ago, but that same worker yearns for so much more of capitalism’s plenty…

If the global freedom that has ushered billions into the global workforce has hurt the American worker, then so was that same worker harmed by freedom of movement and trade within the United States before 1990. Except that no one loses when work is divided up (globalization), and no one loses when they have the whole world competing to serve their needs (an absence of tariffs). What made the U.S. undeniably great in an economic sense is not what will neuter it if the rest of the world mimics to varying degrees what made the U.S. prosperous. Free exchange and work divided always improve us. There are no exceptions to this basic truth simply because no one is harmed by bargains or the ability to showcase their individual expertise.

Here’s hoping Berkowitz, Cass, Lowry and other conservatives remember this amid their internal crises of confidence about freedom. It always works, while government intervention nearly always penalizes us.

John Tamny is a speechwriter and writer of opinion pieces for clients, he's editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is The End of Work, about the exciting explosion of remunerative jobs that don't feel at all like work.  He's also the author of Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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