Foundations for American Renewal

July 7, 2020 - Conservative Economics


Great works of political economy tend to be long and dense, and these are no exception. Readers may want to sample from them selectively, or seek out commentary on their central arguments. It is important, regardless, to be aware of their presence alongside the standard canon of Smith and Marx, Keynes and Hayek, and of their influence on subsequent writers.

Friedrich List, The National System of Political Economy. List, a German émigré, was a leading member of the “American School” of political economy and a critic of Adam Smith and classical economics. His analysis emphasized a nation’s “power of production” as more important than its stock of accumulated wealth, and so argued for policies that would place a nation on a trajectory toward a robust and diversified economy rather than those that maximized the immediate value of exchange.

Liberty Fund, 1841. 366 pages.

Karl Polanyi, The Great Transformation. Examining the changes wrought by the industrial revolution, Polanyi argues that the emergence of market economies was historically contingent, not a natural outgrowth of a human instinct to “truck, barter, and trade” as Adam Smith had said. Polanyi distinguishes earlier economic systems in which markets were discrete mechanisms of exchange embedded within a textured social fabric, from the modern “self-regulating market,” in which all features of society must operate within the commoditized logic of a market mechanism. This new “Market Society,” he argues, is incompatible with human nature and ultimately unsustainable, devouring all other facets of life unless forcefully checked.

Beacon Press, 1994. 360 pages.

Robert Nisbet, The Quest for Community. In what Ross Douthat has dubbed “arguably the 20th century’s most important work of conservative sociology,” Nisbet traces the vicious cycle of centralizing state power and individualism. He argues that the erosion of traditional mediating institutions, such as families, churches, neighborhoods, labor unions, and voluntary associations, creates a widespread sense of alienation that fuels the centralization of government. Though written in an era considered notable for its social cohesion, it has become a foundational text for studies of the social fabric and its fraying in the twenty-first century.

Intercollegiate Studies Institute, 1953. 330 pages.

Daniel Bell, The Cultural Contradictions of Capitalism. Bell argues that modern society faces strong and mounting tensions between economic, political, and cultural realms characterized by capitalism, liberal democracy, and modernism. The economy depends upon hard-working, productive individuals, while the culture promotes consumerism and instant gratification and the politics demands an ever-larger welfare state. Bell perceived these tensions as manifest in the upheavals of the 1970s, but they may have only grown stronger and less sustainable in the decades since.

Basic Books, 1976. 301 pages.

—Part I: The Failed Consensus—

The Fallible Market

Market capitalism is at once the greatest economic system ever devised, and also one deeply flawed and in need of constant tending and channeling. This was the distinctive view of the original neoconservatives and one that careful analysts of rapid globalization sought to impress upon a generation of economists and politicians eager to accelerate the movement of goods, people, and capital as quickly as possible. More recently, the basic questions of value and investment have come to the forefront, as the financialization of the American economy has led the private sector to pursue profits in ways that failed to benefit workers and the nation.

Irving Kristol, Two Cheers for Capitalism. This anthology of Kristol’s columns in the Wall Street Journal and essays in The Public Interest harkens back to a time when “neoconservative” referred to a strain of conservative thought that rejected Milton Friedman’s market fundamentalism and looked with skepticism upon the idea that free markets would of themselves deliver optimal outcomes. “The idea of bourgeois virtue has been eliminated from Friedman’s conception of bourgeois society,” Kristol laments, “and has been replaced by the idea of individual liberty. The assumption is that, ‘in the nature of things,’ the latter will certainly lead to the former. There is much hidden metaphysics here, and of a dubious kind.”

Basic Books, 1978. 274 pages.

Excerpt: “On Corporate Capitalism in America,” The Public Interest, Fall 1975.

Edward Luttwak, “Will Success Spoil America?” Luttwak is best known for his work on grand strategy and military history, but his thinking on political economy has proved prescient. “I believe that one ought to have only as much market efficiency as one needs,” he once observed. “Because everything that we value in human life is within the realm of inefficiency – love, family, attachment, community, culture, old habits, comfortable old shoes.” This essay, published just after the Gingrich GOP won control of Congress, is a striking and succinct analysis of “the blatant contradiction at the very core of what has become mainstream Republican ideology (‘family values’ and dynamic economic growth).”

The Washington Post, November 1994. 3000 words.

See also: Turbo Capitalism: Winners and Losers in the Global Economy, HarperCollins, 2000. 308 pages.

Clyde Prestowitz, The Betrayal of American Prosperity. Prestowitz has spent the past four decades in the arena, serving in a variety of high-ranking roles responsible for advancing globalization of the economy. He has also spent much of that time warning of the process’s dangers and downsides. In Trading Places (1988), Prestowitz provided the definitive account of Japan’s economic strategy and its effect on America. In Betrayal, he focuses on America’s disastrous choice to abandon the formula that drove its own economic success and the massive but unacknowledged dangers of the simplistic orthodoxy that has taken hold.

Free Press, 2010. 352 pages.

See also: Trading Places: How We Allowed Japan to Take the Lead, Basic Books, 1988. 365 pages.

Mariana Mazzucato, The Value of Everything. Economic analysis requires a “theory of value” for determining what something is “worth.” While modern economics takes for granted that market price determines value, this was not always the case, nor does it always work well. Mazzucato looks through this lens at the history of political economy and then focuses it on the financialization of the modern economy. Which of the activities that command high prices and deliver lavish rewards in the marketplace are in fact value-creating as opposed to value-extracting? If society were to tell itself a different story of where value resided, it might also be able to reorient its economy toward serving the common good.

PublicAffairs, 2018. 384 pages.

Excerpt: “Yes, Government Creates Wealth,” Democracy, Fall 2018. 6000 words.

Oren Cass, “Putting Dynamism in Its Place.” Cass challenges the standard narrative that celebrates “disruption” and “creative destruction” as the drivers of prosperity. They are necessary, to be sure, but not sufficient—for dynamism to be healthy, these forces must be accompanied by equally strong ones creating new and better opportunities for workers. No law of economics guarantees that the market will deliver this, and the evidence from recent decades suggests that it has not.

National Affairs, Spring 2019. 5000 words.

Marco Rubio, American Investment in the 21st Century. This report from the Small Business Committee’s clunkily named Project for Strong Labor Markets and National Development is the seminal study on the bizarre inversion of American capitalism, in which the private sector has become a net lender rather than borrower and investor. In the course of documenting the trend, teasing out its causes, and describing its implications, Rubio and his team provide a tour of the twentieth century’s forgotten wisdom about the necessary prerequisites for successful market capitalism.

U.S. Senate Small Business Committee, May 2019. 42 pages.

The Fraying Fabric

A healthy democratic polity requires a degree of cross-class partnership that has notably vanished from American life as the elite reshaped society’s institutions for its own purposes—a trend identified and extrapolated with remarkable prescience by Christopher Lasch in the 1990s. Recent years have scene a variety of writers expand importantly on dimensions of this problem: Patrick Deneen on the abandonment of reciprocal obligations, J.D. Vance on the narrative of “economic opportunity” that renounces collective responsibility, Senator Josh Hawley on a self-serving meritocratic and individualist culture, and Sam Long on the myth that doing well must surely mean doing good.

Christopher Lasch, The Revolt of the Elites. Lasch provides a wide-ranging sociological account of the elite’s simultaneous withdrawal from common life and assertion of political, economic, and cultural dominance. “To an alarming extent the privileged classes have made themselves independent not only of crumbling industrial cities but of public services in general,” he writes. “Many of them have ceased to think of themselves as Americans in any important sense, implicated in America’s destiny for better or worse.”

W. W. Norton & Co., 1995. 276 pages.

Patrick Deneen, “The Ignoble Lie.” Deneen uses Plato’s “noble lie” as the starting point for a discussion of the reciprocal obligations between classes in a just and well-functioning society. The elite’s unilateral abandonment of the arrangement, he argues, has rent asunder America’s social fabric and placed the nation on an unsustainable course.

First Things, April 2018. 4000 words.

J.D. Vance, “Towards a Pro-Worker, Pro-Family Conservatism.” Vance grapples with the question of how to reconcile the emphasis on personal responsibility that came to dominate the American right-of-center’s rhetoric with the equally important and conservative insight that people are products of their families and communities, which in turn are influenced by culture and politics.

Remarks at The American Conservative annual gala, May 2019. 4000 words.

Josh Hawley, “The Age of Pelagius.” Hawley takes aim at contemporary society’s obsession with individual autonomy and a definition of liberty that concerns itself only with self-determination. That formula, he argues, “has made American society more hierarchical, and it has made it more elitist,” and “at the end of the day, this hierarchy and this elitism threaten our common liberty.”

Christianity Today (June 2019). 2000 words.

Sam Long, “The Financialization of the American Elite.” A Harvard Business School graduate working in finance, Long filets his alma mater and industry’s hypocrisy and self-deception in claiming to advance the common good as they pursue profit and reshape the economy in ways that benefit only themselves. He shows how the “Church of Market Primacy” has indoctrinated a generation of leaders who now strive to ensure that “democracy” respects the church’s prerogatives and insulates it from any meddling by the democratic state.

American Affairs, Fall 2019. 7000 words.

The Human Cost

Why now? In retrospect, and as the most perceptive writers of prior decades make clear, the globalization-plus-redistribution consensus was failing for a long time. The Great Recession exposed problems that the financial system’s pre-crisis excesses had obscured, but seminal research also emerged that challenged the consensus directly and on its own terms: for many people, quality of life clearly was declining; despite incredible health breakthroughs, life expectancy was falling; the losers from trade were not being compensated or otherwise recovering. And the problems weren’t cyclical—the trends were continuing and compounding across “booms” and busts.

Charles Murray, Coming Apart. The fictional towns of “Belmont” and “Fishtown” serve as statistical proxies for America’s white upper class and white working class, diverging dramatically over the half-century from 1960 to 2010 across measures of work, family, faith, and community. By 2000, in Fishtown, “the percentage of children living with both biological parents when the mother was 40 was sinking below the 30 percent level, compared to 90 percent of Belmont children who were still living with both biological parents. The divergence is so large that it puts the women of Belmont and Fishtown into different family cultures. The absolute level in Fishtown is so low that it calls into question the viability of white working-class communities as a place for socializing the next generation.” Murray then shows these trends apply across races.

Crown Forum, 2012. 416 pages.

Anne Case and Angus Deaton, “Rising Morbidity and Mortality in Midlife Among White Non-Hispanic Americans in the 21st Century.” Case and Deaton’s research highlight “deaths of despair”—an epidemic of substance abuse and suicide among less educated, middle-aged white Americans that reduced life expectancy and produced hundreds of thousands of excess deaths nationwide, a trend observed nowhere else in the developed world.

Proceedings of the National Academy of Sciences, December 2015. 6 pages.

David Autor et al., “The China Shock.” The economic narrative of trade has always acknowledged both winners and losers, but the latter tended to receive less attention and standard assumptions held that a dynamic labor market would provide new opportunities for those dislocated. Autor and his colleagues demonstrate the limits of this model, especially in the face of the unprecedented flood of cheap imports unleashed by China’s entry into the World Trade Organization. In fact, millions of jobs were lost, and hard-hit regions were not rebounding.

Annual Review of Economics, August 2016. 38 pages.

Nicholas Eberstadt, “Our Miserable 21st Century.” Eberstadt weaves together the many threads of evidence that together depict a nation in dire straits, with outcomes stagnating or regressing for large swathes of the population. While most analysts focused on the Great Recession’s aftermath, Eberstadt shows that these trends had in fact begun much earlier—at the turn of the millennium—and that America was now well into its second decade of struggle.

Commentary, March 2017. 5000 words.


The American Tradition

An unfortunate recency bias pervades economic debates, with many participants unaware that the assumptions and frameworks they take for granted are of recent vintage, lack empirical support, and seem in fact to be reversing the extraordinary progress of prior generations. It can be helpful, then, to step outside the present frame, appreciate the American tradition of economic policy that amassed such an extraordinary track record, and observe the many ways in which it differs from modern defaults.

Hamilton’s Republic: Readings in the American Democratic Nationalist Tradition, ed. Michael Lind. As George Will famously wrote, “if you seek Hamilton’s monument, look around. You are living in it. We honor Jefferson, but live in Hamilton’s country, a mighty industrial nation with a strong central government.” Lind curates writings from statesmen and political economists in the Hamiltonian tradition – from Hamilton through Henry Clay and Abraham Lincoln to Theodore Roosevelt and George C. Marshall to James Fallows and Walter Russell Mead.

Free Press, 1997. 345 pages.

Wells King, Julius Krein, and Oren Cass, “Rebooting the American System.” The inaugural essay series from American Compass, with forewords by Senators Marco Rubio and Tom Cotton, makes the comprehensive, conservative case for a robust national economic policy. From the perspective of tradition, Wells King describes how the “American System” brought the nation from a scattered collection of colonies to a continent-spanning industrial colossus. Through the lens of theory, Julius Krein critiques the American Right’s turn toward Hayekian fundamentalism and explains the vital role that public policy must place in a well-functioning market economy. With an eye toward practice, Oren Cass describes the goals that policymakers must set and the tools at their disposal.

American Compass, May 2020. 10,000 words.

—Part 2: The Realignment—

A Point of Departure

The rise of China, the success of its mercantilist development strategy, and the failure of the Western strategy to co-opt and assimilate it into the liberal democratic system, has proved a uniquely powerful touchstone for economic debates because it tests assumptions so directly and forces choices between values that might otherwise be compatible. Both “free trade” and “free markets” may be appealing in theory, but what should be done when “free trade” means incorporating an authoritarian regime that dominates its economy into the “free market”? Even before the debates sparked by Trump, Sanders, and Brexit over free trade and national sovereignty, conservatives were already grappling with these questions in the pages of National Review, foreshadowing the dynamics of a wider schism in right-of-center of policy thinking.

  • Oren Cass, “Fight the Dragon,” National Review (June 2014).
  • Ramesh Ponnuru and Michael Strain, “Fight Not the Dragon,” National Review (July 2014).

Oren Cass, “Fight the Dragon.” Cass begins: “The standard economic model treats free trade as obviously positive, creating prosperity for all participants. Conservatives, and most neoliberals, have embraced that view and consistently press for further liberalization while condemning as backward and reactionary ‘protectionism’ any proposed obstacles to the free flow of goods and services. But the model is incomplete, and blind allegiance to it only weakens the U.S. economy and the health of the international trading system as a whole.”

National Review, June 2014. 5000 words.

Ramesh Ponnuru and Michael Strain, “Fight Not the Dragon.” Ponnuru and Strain respond: “He does not understand the model he is criticizing. That model does not ignore the possibility of a prisoner’s dilemma but rather denies that it exists. After all, the classical case for free trade was developed in a mercantilist world, and it argued that free trade almost always benefits the country adopting it, regardless of the trade policies of other nations.”

National Review, July 2014. 2000 words.

A New Coalition

Real-world conditions produce alignments of interests that form political coalitions and accompanying policy agendas. When conditions change, interests once aligned come into conflict, different alliances become more plausible, and new agendas emerge. That may be happening to the right-of-center’s “fusionism” of economic libertarians, social conservatives, and Cold War hawks as well as the left-of-center’s partnership between liberal elites and working-class labor. But what comes next?

Ross Douthat and Reihan Salam, Grand New Party. As the George W. Bush presidency limped to its conclusion, the once-dominant Reagan coalition and agenda appeared to be reaching their expiration dates. Douthat and Salam—then junior editors at The Atlantic—describe the transformation of the GOP from the “party of the country club” to the “party of Sam’s Club” and imagine a conservative “agenda for a working-class majority.”

Doubleday, 2008. 256 pages.

Gladden Pappin, “The Anxieties of Conservatism.” In the inaugural issue of American Affairs, Pappin analyzes the collapse of “fusionism”—“the linking of market liberals with traditional conservatives”—in an age when “the basic integrity of the American polity has been put under stress by economic policies justified in the name of global markets but unjustifiable in their effects on many local communities.” The “mainstream conservative platform,” he writes, “has devolved into a checklist of incongruent planks now that the underlying conditions which afforded it some coherence as a political strategy no longer apply.”

American Affairs, Spring 2017. 7000 words.

Julius Krein, “The Three Fusions.” Krein argues that “America suffers under three false fusions: the imagined convergence of globalism and nationalism, the fusion of free market economics and cultural conservatism, and the fusion of expansive individual rights and economic socialism. All three have conspired to make any effective government, along with any sense of collective interest or responsibility, seem further and further out of reach.” The compromises required to maintain these coalitions leave the parties drifting further from their ideals and ever more frustrated. “Everyone would probably be better served,” he writes, “by a general realignment around one party favoring economic and political solidarity, and an opposing party dedicated to all forms of individual rights.”

American Affairs, Fall 2018. 6000 words.

Michael Lind, The New Class War. The classes exist in perpetual conflict, argues Lind, and it is through the negotiated peace between them that a nation can flourish. The problem facing contemporary America is not class war but the overwhelming victory of the new managerial overclass, which has accumulated such economic, political, and cultural power that it no longer needs to negotiate. Only by restoring power to the working class in all three realms can the nation return to a healthy equilibrium.

Portfolio, 2020. 224 pages.

Excerpt: “The New Class War,” American Affairs (Summer 2017). 10,000 words.

A New Agenda

America has barely begun rebuilding from its political earthquake—arguably, we are still surveying damage and clearing rubble. But the intellectual tradition reflected here offers a possible path forward, and initial efforts have been made to translate it into at least some of the foundational blocks upon which American political economy, and the nation, might be renewed.

Yuval Levin, “Putting Parents First.” Perhaps inaugurating the “reformocon” movement, Levin observes that while “the family and the market … are mutually reinforcing to an extent,” they “are also in tension with one another. The market values risk-taking and creative destruction that can be very bad for family life, and rewards the lowest common cultural denominator in ways that can undermine traditional morality.” This tension “is a source of unease for American families, and has often been a source of friction in the conservative movement,” he writes. “But the present moment offers an opportunity to turn that tension into a font of energy for conservatives, and to turn the conservative movement into the long-term home of the parenting class.”

The Weekly Standard, December 2006. 3000 words.

Josh Hawley, “Rediscovering Justice.” While teaching law at the University of Missouri, six years before his election to the U.S. Senate, Hawley writes that “conservatives must do more than promise to downsize government and let each individual go his own way. They must offer a better vision of a better society, a vision of political justice, with an agenda to match.” He argues for reclaiming the concept of “justice” from the Left and, in the realm of economic justice, aiming “not merely to cut spending, but to reform the American economy to include more citizens in meaningful work. Getting to that more inclusive economy will require conservatives to think beyond austerity, and also to think beyond mere economic growth.”

National Affairs, Winter 2012. 5000 words.

Oren Cass, The Once and Future Worker. Cass introduces what he calls “the working hypothesis: that a labor market in which workers can support strong families and communities is the central determinant of long-term prosperity and should be the central focus of public policy.” While economic policy and analysis has conventionally focused only on consumer welfare, he argues, it is people’s role as productive contributors that is most important to their own well-being and that of the broader society. A change of emphasis from consumption to production casts tradeoffs in a new light and opens the door to a new agenda.

Encounter Books, 2018. 272 pages.

Excerpt: “The Working Hypothesis,” The American Interest, October 2018. 8000 words.

Marco Rubio, “Common-Good Capitalism.” Rubio links the “the right of businesses to make a profit” to “the rights of workers to share in the benefits they create for their employer” and “the obligation people have to work” to “the obligation of businesses to act in the best interest of the workers and the country that have made their success possible.” The abandonment of these reciprocal relationships, he argues, has yielded “an economic order that is bad for America: bad economically because it is leaving too many people behind; and bad because it is inflicting tremendous damage on our families, our communities, and our society. Agreeing on the problem is something we should be able to achieve across the political spectrum. Deciding what government should do about it must be the core question of our national politics.”

Remarks at Catholic University, November 2019. 4000 words.

Does the neoliberal orthodoxy of globalization, agglomeration, and redistribution weaken a nation and, if so, what is the alternative? Recent political developments, from the election of Donald Trump and the rise of Democratic Socialism in America to Brexit in the United Kingdom, have represented stark rejections of what once seemed an inevitable “End of History” trajectory for Western democracies. The rejections, however, are only earthquakes leveling unsound structures. They do not themselves offer coherent plans for alternatives, much less the tools with which to build them.

Fortunately, a long-standing intellectual tradition offers not only a comprehensive critique of market fundamentalism and consumerism, but also a constructive path forward. Stretching back over a century, and vibrant as ever today, this work returns repeatedly to several key themes: the unavoidable tension between market dynamism and social stability; the necessity of production for national and individual well-being; the importance of an economy’s diversified productive capacity; and the need for national solidarity, which depends upon a common culture that reinforces reciprocal obligations.

While these ideas do not themselves constitute a particular political agenda, they provide the foundation, the tools, and the materials. They also suggest the potential for a realignment of political interests and a new, working political majority. And they are the impetus for the American Compass mission: to restore an economic consensus that emphasizes the importance of family, community, and industry to the nation’s liberty and prosperity. The readings below have been selected through input from American Compass’s membership; together they trace the evolution of this school of thought and can hopefully help to clarify contemporary political debates and trends.