In his new book, The Economist’s Hour: False Prophets, Free Markets, and the Fracture of Society, New York Times editorial writer, Binyamin Applebaum, tells the story of the rise of unfettered free market policies and the damage those policies caused in America over the last fifty years. Applebaum dubs that rise, roughly from 1969-2008, “the economist’s hour,” as economists gained the ears of politicians from both parties and enjoyed unprecedented influence.

To be sure, America hasn’t always put blind trust in markets and the economists who advocate for them. The “economist’s hour” wasn’t an inevitability nor was the slavish devotion to free markets they preached. As Applebaum tells it, at mid-century there was a deep political mistrust of economists. For example, Fed chairman William McChesney Martin’s was known to keep the economists he employed in the basement, because “they [didn’t] know their limitations.”

But within two decades economists had climbed out of the basement and “persuaded political leaders to reduce government’s role in the economy—to trust that markets would deliver better results than bureaucrats.”

The charge was led by the renowned Milton Friedman from his perch at the University of Chicago, but as Applebaum makes clear, Friedman was hardly the only economist to proclaim the gospel of free markets during the economist’s hour. Applebaum’s cast of characters includes less well-known economists too, both in government and academic circles, who evangelized policy makers and presidents with their memos, papers, and speeches.

And while Applebaum admits in passing that the “single-minded embrace of markets” has yielded much fruit—lifting billions out of poverty, increasing availability of organs for transplant, and even reducing infant mortality rates the world over—his book is more concerned with the costs of those achievements, namely economic equality and the health of liberal democracy.

Each of the book’s ten chapters tells the history of politicians adopting free market thinking in regards to different areas of the economy in the U.S. and throughout the world. One chapter explains how the cost-benefit mindset invaded government and led to the valuation of human life—in the 70’s it was $200,700, today it’s $10 million. Another explains how tax policy went free market—the top bracket was taxed at 90% in the 1950s—and the inequality produced by the continuous reduction of taxes.

While in some chapters the devastation left behind by a blind faith in markets is evident, in others it is much less so. In the first chapter of the book, Applebaum highlights how economist Walter Oi’s work was pivotal in Nixon’s decision to end the draft and move to an all volunteer army. Applebaum attributes increased militaristic intervention, an “era of permanent, low-grade conflict,” to the end of conscription.

While the point that conflict is more prevalent today than it was in the 1940s-60s is debatable, the idea that politicians shouldn’t have ended conscription isn’t. America with a draft today isn’t merely unimaginable, it’s undesirable. Recounting how economists like Oi utilized free market reasoning to convince Nixon to end the draft in 1971 is hardly a fitting Exhibit A in the case against free markets.

In his chapter on the deregulation of corporations, Applebaum spends a great deal of the chapter detailing the history of airline fare regulation. After federal regulators realized intrastate ticket prices were markedly lower than interstate ticket prices, the decision to deregulate soon followed. As soon as the federal government took their hands off the airline industry, ticket prices dropped 45% even as airline safety increased. The good achieved by deregulation in this case seems to outshine the cost. Lower airline tickets has given more people from more income brackets access to the sky. The idea that deregulating airlines was a mistake is a hard sell.

But, what was undoubtedly good for consumers, produced challenging consequences for flight attendants and gate agents. Indeed, the prioritization of consumer rights and benefits over the well-being of workers is perhaps the strongest and most convincing theme in the book. According to Applebaum, America has gone from being a nation of farmers to a nation of factory workers to a nation of consumers. Writes Applebaum, “And as consumption replaced work as the quintessence of American identity, one consequence was growing intolerance for public policies that aimed to preserve the welfare of producers.”

The implications of this transformation in America’s conceptualization of itself are immense, affecting everything from the purpose of antitrust litigation to the hollowing out of work in middle America. For example, according to Applebaum, the Sherman Antitrust Act of 1890 was originally “intended to preserve the autonomy of small business owners.” But as time went on, economists convinced the judiciary to focus on a company’s ability to provide goods and services at low prices when considering antitrust litigation. The result of the ensuing consolidation is a country with four major airlines, three car rental companies, two beer makers, and Walmart.

Americans might have access to cheap electronics, but is that the only metric that matters? Applebaum quotes the economist and scholar Alfred Kahn who wrote in his 1954 book, Fair Competition, “One cannot simply equate the ‘public interest’ in a democracy with the ‘consumer interest.’” Indeed, Kahn argued that “government should protect small businesses at the expense of consumers.”

To illustrate the devastating effects a consumer-first, free-market philosophy can have on economies, Applebaum submits Galesburg, Illinois for consideration. The small factory town in the midwest boomed in the first half of the 20th century and even up through the sixties. “But around 1970, Galesburg began to fade,” explains Applebaum. “Companies went out of business, mechanized, or moved to new cities.” By 2016, nearly 50% of men 16-65 in Galesburg were unemployed.

The American countryside is dotted with Galesburgs and the men and women who have been left behind economically in pursuit of consumer friendly economic policies. To survive, some take jobs in other towns, requiring long commutes. Others work two or three jobs to make ends meet, adding a side-hustle here, and a gig there, in order to put food on the table.

The hollowing out of work as Applebaum describes it has not gone unnoticed. Recently Senator Marco Rubio, while arguing it is time to move past abstract economic labels like “capitalism” and “socialism,” proposed an economic philosophy that places primacy on promoting meaningful employment, noting that “[w]hen dignified work is lost or unattainable, it corrodes the human spirit.” Rubio went on to quote the words of John Paul II who said, “A society in which…economic policies do not allow workers to reach satisfactory levels of employment, cannot be justified.”

Indeed, many conservatives, once wed to free market ideology, have begun to question if the cost of unfettered free market capitalism is too high. Some have subscribed to economic protectionism, tariffs, and trade wars. Others advocate for a Catholic or Christian brand of socialism. And many believe paid parental leave would do much to ease the burden families bear in economic times such as these.

To be fair, Applebaum admits that there is no alternative U.S. history that would have left thousands of Americans assembling refrigerators in factories in Galesburg, Illinois or producing steel in Pittsburgh. However, he opines that our transition from shoe makers to bond traders could have gone more smoothly if policy makers had distributed the costs and benefits of that transition more evenly. Earlier in the book he quotes philosopher John Rawls’ book,Theory of Justice, in which Rawls stated that justice “does not allow that the sacrifices imposed on a few are outweighed by the larger sum of advantages enjoyed by the many.”

To the idea that over the last half-century America hasn’t done enough to aid those who have had to sacrifice their work for our cheap electronic goods, Applebaum’s lesson is that government does have a role to play in distributing the costs and benefits of economic gains. He notes that in Europe, even in countries where levels of trade are higher than in America, opposition to that trade is lower—due to sturdier social safety nets. In other words, people will be more open to free trade—a typically conservative position to take—if governments employ some of the welfare policies often advocated by those on the left.

But Applebaum is not silent on the left’s part in the economist’s hour. Though a fondness for free markets is often solely attributed to the right, Applebaum points out that it was Kennedy who started the tax cut spree, Carter who deregulated the airline and trucking industries, and Clinton who “continued the economic policies of [his] conservative predecessors.” According to Applebaum, when it comes to the economic policies of the economist’s hour, the differences between Democrats and Republicans was, and largely still is, miniscule.

Applebaum stops short of presenting a blueprint for how government should approach economics going forward, though he does posit several principles that could serve society—all strata of society—well. For example, Applebaum advises that “[p]olicy makers should consider…that the pain of losing one dollar generally exceeds the pleasure of gaining one dollar,” and “that slowing the pace of change can reduce the pain.”

And instead of considering efficiency the highest good, as is often the case with economists, Applebaum reclaims the category of justice as an outcome the government should have an interest in. Furthermore, instead of government taking a hands-off approach to economic involvement, he references Taiwan as a case study on how a country, by approaching the economy from an engineer’s perspective—as a machine to be calibrated and adjusted—can produce equitable outcomes.

Appleabaum states plainly that the economist’s hour has ended. The Great Recession made sure of that. Less clear is what guiding economic philosophy will take its place for the long term. For now, dueling factions from the left and right have presented economic visions ad hoc, devoid of underlying doctrine or dogma. While that might suffice for a time, those on both sides of the political aisle would do well to adopt more comprehensive plans for economic engagement sooner rather than later. When they do, Applebaum, and undoubtedly others, hope they will keep in mind the words of Frank Knight, an economist from the University of Chicago the generation before Friedman, who said, perhaps prophetically, that markets “must be sometimes seasoned with mercy.”

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Posted by John Thomas

John Thomas is a freelance writer. His writing has appeared at Christianity Today, The American Conservative, and The Federalist. He writes regularly at medium.com/soli-deo-gloria.

  • Physiocrat

    Free Markets do not exist. The government’s has a huge hand in manipulating the current system. Large scale businesses have huge direct and indirect subsidies: the free highway system decreases the costs of long distance delivery, government underwiritng of shipping insurance contracts, third party limited liability laws (this is massive with large firms), implicit bailouts of financial institutions, licencing laws (this is also a problem in the legal sphere which reduces the power of small firms and individuals to bring tort cases), hugely complex tax systems which make it viable for large firms to dedicate an entire department to circumvent it, intellectual property laws, fiat currency, subsidised immigration etc.

    The problem is not Free Markets but rather that they simply do not exist.