The Next American Economy: Nation, State, and Markets in an Uncertain World 
By Samuel Gregg.
Encounter Books, 2022.
Hardcover, 336 pages, $30.99.

Reviewed by John G. Grove.

Editor’s Note: See the Bookman’s episode of the Book Gallery with Samuel Gregg here

Samuel Gregg has written a thorough and convincing case against the new advocates for interventionist economic policy. The Next American Economy serves as a definitive handbook for refuting the arguments now popular on the left and the right for a more planned or politically managed economy.

Given recent ideological and partisan shifts, Gregg argues, America today faces a choice between the path of free markets or state capitalism. The latter he defines as active state intervention into economic life aiming to shape and direct certain activities “to realize very specific economic and political objectives.” The interventionist believes that if we apply just the right incentives from this or that government program (tariffs, subsidies, regulation, or corporate governance requirements) economic life can be guided toward a particular vision of justice or achieve specific outcomes.

With Adam Smith at his side (each chapter save the last begins with an epigraph by the great Scotsman), Gregg makes a negative case—refuting the common arguments made on behalf of neo-mercantilism and industrial policy—and a positive one, presenting the case that the true lover of his country ought to embrace the free economy.

The negative case, I believe, is the most important. Gregg systematically undercuts the major arguments for state capitalism by exploding the narratives that undergird it; by showing that economic interventionism is rarely able to achieve its stated aims; and by reminding readers of the incredible incentives for political cronyism that such policies introduce. In doing so, he brings to bear the wisdom of Smith, Milton Friedman, Friedrich Hayek, and others, and surveys America’s experience with selective trade restrictions and industrial policy. 

The current momentum on behalf of state capitalism is in part the result of a well-constructed narrative that ties free markets to borderless utopias, the Davos elite, and a preference for Wall Street over Main Street. The 2008 financial crisis factors heavily in that story, as does the rise of free trade and its supposed effect on manufacturing jobs. But readers are reminded that the 1990s and early 2000s were hardly a free market utopia. The “pendulum” had indeed been swinging toward a more free economy, but “it would be an error to claim that…America and other Western countries had somehow abandoned, holus-bolus, the Keynesian legacy.” There were plenty of policy missteps that contributed to the economic crisis. Gregg also brings to bear evidence that most of the American shift away from manufacturing jobs came about from technological innovations, not free trade. While trade did contribute to a certain degree, it also offered countless new jobs that would not otherwise be available for former blue-collar workers.

At a conceptual level, Gregg reminds readers of classic economic truths: Economic intervention inevitably suffers from knowledge problems, as its policies assume that “political leaders, civil servants, and technocrats possess the knowledge to comprehend all the technical details, possible methods of production, the range of incentives…and alternative uses of resources…that they would need to decide accurately the most optimal allocation of resources and course of action.” There are also those pesky unintended consequences. In attempts to prop up an industry, maintain certain kinds of jobs, or direct a corporation toward a preconceived notion of the common good, trade restrictions, industrial policy, and corporatism often serve up a backhanded slap to American consumers, stifle new ventures, and prevent companies from effectively providing the goods and services they are designed to.

Considerable effort is also devoted to the obvious but almost universally ignored truth that large, well-established businesses are rarely brought to heel by interventionist economic policy, but often benefit greatly and even advocate for it. The kind of sweeping regulations and restrictions emanating from Washington, D.C., even if made impartially, can be far more effectively absorbed by large, established corporations, and so interventionist economic policies serve as a form of protection against upstart competition. But the more important reality is that such policies are not made impartially. They are “created through political processes… especially open to capture” by rent-seekers. The more comprehensive and ambitious the policy goals, the more incentive there is to make lobbying a central part of your business model. There is reason the richest counties in the country surround Washington, D.C. 

Gregg believes, though, that opponents of state capitalism must make a more positive case for markets—one that better engages people’s non-economic sentiments, related not just to GDP numbers, but to the love of their country and their desire for justice and a healthy social life. He sees that much of the progress made against free market thinking is due to this sense that the case for markets hinges on abstract economic thinking to the detriment of real people in American communities.

The first part of this positive case, he argues, is identifying the kind of justice promoted by a free economy: “Free market thought invariably accords priority to the type of justice and equity associated with the rule of law rather than egalitarian economic outcomes.” A more extended treatment of this concept would have been worthwhile, but it is evident just under the surface throughout the book. Many of the arguments for state capitalism hinge on a belief that it is the task of the state to manage economic life in such a way that brings about a substantive social condition that comports with a particular, pure vision of justice. For all the reasons listed above, however, interventionist policies usually fail to accomplish this. And worse, they undermine the stable justice rooted in the rule of law. 

Gregg also returns again and again to the idea that these issues will come down to different conceptions of “what kind of nation America should be.” So he stresses the idea that a market-based, competitive, and commercial society is part of the American identity, and should be embraced as a normative model. 

Here I am less convinced. My difference with Gregg may be illuminated by a quotation by Alexis de Tocqueville. In America, Tocqueville observed, 

a man carefully builds a dwelling in which to pass his declining years, and he sells it while the roof is being laid; he plants a garden and he rents it out just as he was going to taste its fruit….He embraces a profession and quits it. He settles in a place from which he departs soon after so as to take his changing desires elsewhere….And when toward the end of a year filled with work some leisure still remains to him, he carries his restive curiosity here and there within the vast limits of the United States. He will thus go five hundred leagues in a few days in order better to distract himself from his happiness.

Gregg cites this passage as evidence that America always reflected the “spirit of enterprise” and entrepreneurialism.  We should embrace commerce as a key identifier of the American way of life and thereby show that there is no great tension between embracing commerce and loving our country. He does not draw attention to the fact, though, that the passage is part of Tocqueville’s critique of an America incapable of finding contentment despite great wealth—a tendency that led, he thought, to “insanity” and “burning” anxiety.

Undoubtedly, America is a country marked by enterprise, commerce, mobility, and innovation. And undoubtedly, those things have given us many blessings. But, in the spirit of Tocqueville, I would suggest that we often must counterbalance, rather than promote, society’s dominant tendencies. There is nothing inherently great about the family farm giving way to the more efficient agri-business, or the fact that fewer and fewer people have longstanding ties to the communities in which they reside or geographic connection to the products they buy. And there can be little doubt that American innovation and enterprise are driven at least in part by materialist impulses that we would do better to restrain insofar as we are able through our rhetoric and cultural influence.

The problem with the economic interventionists of the Left and the New Right is not necessarily that they critique these things, but that they think they possess some magic political bullet that can purify modernity or create a more virtuous citizenry by way of taxation and regulation. The presence of a social problem too often is taken to imply that there must be a political solution. If we see things like dislocation, materialism, and dying communities, then there just must be some policy solution that can address them. Endlessly subsidizing family farms or attempting to prop up businesses incapable of competing on an open market, as Gregg’s analysis shows, would merely create perverse incentives, block avenues to prosperity, and likely undercut the very virtues they are designed to foster. 

This may be a somewhat tragic outlook—one that sees that the inevitable, restless commerce of the modern world, for all its many blessings (and, I would admit, its certain virtues), also takes away some valuable things and can pull us in less healthy directions. But the conservative answer is not trust in the false promises of arbitrary power and centralized, technocratic management, even when they say things that sound beautiful. Nothing in The Next American Economy suggests that markets must be our only star and compass, but when embracing the vision of America as a commercial republic, we should stress that there are other qualities worthy of our estimation, too.

John G. Grove is the managing editor of Law & Liberty.

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