This essay is a part of The Right Way Forward, Restoring America’s new think tank debate series in which leading conservative institutions argue the defining questions of the post-Trump era. Read about the series here.
Reagan Republicans seek to foster the growth attributed to free markets by adhering to principles such as free trade and limited government. For decades, a pro-market perspective dominated policy, bringing prosperity. But freedom also brought change. Some Americans — often blue-collar workers, religious conservatives, young men — were alienated by these changes. Some conservatives refocused on loyalty to these alienated people rather than to their starting principles — and conservatism rebranded itself as economic nationalism.
Recommended Stories
Economic nationalism is not just an alternative to free-market conservatism. It is its opposite. Saving the nation from change requires a more active role for government — tariffs, deportations, and more. In that sense, economic nationalism mirrors the big-government Left and is harming the Americans its leaders hoped to help.
The shift in conservatism began with a worthwhile impulse: giving overlooked grassroots elements a voice. Under free trade, America was thriving. The net worth of American households has risen 40% since the North American Free Trade Agreement came into effect in 1994, and has risen 70% since 2001, when China joined the World Trade Organization. But prosperity is not distributed evenly — how could it be, given the differences between people and places? In some communities, unemployment persists. Traditionalists were perplexed by the academy’s ideas about families, race, and gender. COVID-19 bred distrust of authority.
And some politicians listened: alienation is opportunity. The disaffected disagreed with progressives on key issues and tended to nostalgia. Thus, their views were, at least nominally, “conservative.”
But what these conservatives sought to conserve had changed. The free-market conservative backs rules and institutions that support dynamic growth — that is, liberty. Firms would be free to hire the best candidates, to choose the best inputs, and to serve customers worldwide. These firms then grow, ultimately hiring, buying from, and selling more to Americans down the road. The pie of prosperity grew. One person might take a piece, but plenty remained for others.
By contrast, the economic nationalists are loyal to favored inhabitants of America, not to liberty. And the favored inhabitants are seen to need material resources: steel mills, airlines, rare minerals, and streams of wealth like good jobs. The economic nationalist’s vision of the economy is static. When a firm hires an immigrant, an American loses a job; when a customer buys overseas, an American seller loses out — and that’s the end of the story. The pie stays the same size, so if one person takes a piece, another must go without, a zero-sum game.
Many on the Left share this fixed-pie outlook and a fascination with the distribution — or redistribution — of existing wealth and material resources. The economic nationalist, as do many on the left, seeks direct control of wealth. The state is an enticing instrument of direct control. Thus, the economic nationalist embraces antitrust, regulation of speech, and price controls.
The economic nationalist venerates business, but in a way that divides them further from free-market conservatives. Under economic nationalism, everything has a corporate flavor: The president is the CEO, relishing the art of the deal. The government is a player, not a referee. Even basic ground rules are subject to renegotiation. This is conservatism without certainty, featuring abrupt changes of direction on regulation, trade, and foreign policy.
Pro-business is not pro-market, though. Markets are founded on stable rules that delineate clear rights — a rule of law, not of men.
Over time, the economic nationalist’s choice of favored groups reinforced anti-market drift. The immigrants scorned by the nationalist often cherish economic freedom, free speech, and democracy. Instead of people who fell in love with liberty from Cuba, France, or China, economic nationalism draws xenophobes.
Furthermore, the exclusion of conservatives from the universities now bears a bitter fruit. Reciprocating the ivory tower’s disdain, the economic nationalist rejects not only destructive progressive ideas like the theory that speech is violence, but also scholars’ defenses of toleration and free trade. Scorning those who have dealt firsthand with the grim realities of authoritarian states or who dig up real data, economic nationalism threatens to become an intellectual ant mill.
Steve Davies describes the rise of economic nationalism as a realignment: The focus of political discourse has shifted from capitalism versus socialism to nationalism versus globalism. But this is not a neutral shift from one considered perspective to another.
Not all ideas are equal. The prosperity generated by trade is real. Interfering with trade slows growth and is causing harm now. Farmers and small businesses are struggling. Consumers face rising prices. Many Americans despise the cruelty now associated with the anti-immigration agenda. Authorities cutting deals like entrepreneurs looks like corruption. Unsurprisingly, economic nationalism is in trouble with voters.
THE RIGHT WAY FORWARD: THE ROLE OF THE STATE IN THE ECONOMY
A few slender threads might draw economic nationalists back to free-market conservatism. Most conservatives support deregulation and tax reform. Deregulation, especially labor market deregulation, would strengthen our comparative advantage in trade by reducing the cost of doing business in the United States. Deregulation would preserve job opportunities, as minimum wage laws and other regulations make it cheaper to use machines than humans. Tax reform would help, too. Deregulation has strong Republican grassroots support and potential for wider support. But deregulation under economic nationalism has been sporadic.
Listening to the grassroots was not an error. The economic nationalist’s error was to adopt the tools of the Left — managed trade, choosing winners, a stronger state — to benefit a different constituency. The truth of markets and the rule of law will endure, and they will be waiting for conservatives’ return.
Solveig Singleton is a policy analyst focusing on consumer finance issues at the Cato Institute’s Center for Monetary and Financial Alternatives.
