Mad About Markets

On the disconnect between American economic realities and American politics

Meet the future of the party…same as the past of the party…

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Various commentators have noticed that the Democrats, despite having been presented with an abundant crop of low-hanging fruit, are struggling to exploit President Donald J. Trump’s colossal tariff blunder. Why is that? Three words explain it: Occupy Wall Street.

You may recall how elected Democrats rhapsodized over the wisdom, virtue, and idealism of the scurvy mob that descended on New York in 2011 to decry “predatory capitalism.” But for all the accolades that came the way of Occupy Wall Street, for all the glowing media coverage it received, after fifty-seven days of adolescent street theater Wall Street still bestrode the economic world like a colossus.

But the spirit of Occupy Wall Street lives on in the ranks of the Democratic Party, and therein lies the party’s problem.

The Democrats’ current Resistance road show is headlined by Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez—a pair of progressive “social democrats” not known for their admiration of market economics. Seeing them together is a reminder that as far as economic policy is concerned, the party’s future looks a lot like its present and its recent past.

Most Democrats, of course, would deny that they’re against capitalism and markets. They seek merely to reform them, replacing “predatory capitalism” or “unfettered capitalism” with “well-regulated capitalism.” This sounds fine, but what it means depends on the definitions of those terms. “Predatory capitalism” is of course pejorative, and “unfettered capitalism” refers to an imaginary state of affairs. For in reality, a rules-based society is the sine qua non of capitalism. For examples of “predatory” or “unfettered” capitalism, we must look, for instance, to the illicit underground economy of a prison, which is nothing more than a form of gangsterism. Or we could study the underground economy of the late, unlamented USSR, which operated outside the framework of “socialist legality.”

It is—or should be—obvious that the American economy, so often the target of leftist criticism, is anything but unfettered. On the contrary, the economy of the country is hedged round with thickets of laws and regulations, of which perhaps half are unambiguously beneficial. After all, someone has to establish the economic parameters of a rules-based society. But laws and regulations designed to prevent abuses is not the goal of the progressive Left. To the comrades, “well-regulated capitalism” is an economy subservient to government, subject to the control and supervision of the administrative state. Though not exactly centralized economic planning on the old, discredited Soviet model, in many instances it comes close.

Consider climate-change activism. Its stated goal is to “save the planet”—but from what? Why, from capitalism of course, which allegedly generates wealth and prosperity at the expense of planetary health. Here is a scholarly article, “Climate Justice, Capitalism, and the Political Role of the Psychological Professions” that was published in the Review of General Psychology in March 2024. The authors open with this summary declaration:

The term Anthropocene (Age of Human) implies that the reduction of carbon emissions is a matter of changing human behaviour. This risks depoliticising the climate emergency. Everyone is not equally responsible for climate change, and the consequences of climate change are not distributed equally. Climate change is overwhelmingly the result of extractive and exploitative capitalist production. It is thus more useful to understand the climate crisis in terms of the Capitalocene (Age of Capital), with climate justice being a terrain of anti-capitalist struggle.

This jargon-laden passage can be boiled down to ten words: In order to save the planet, we must smash capitalism. It’s the age-old goal of the Left, brought up to date by conscripting environmentalism. And it’s the mainstream position of the “climate justice” movement. True, most Democrats and progressives realize that a campaign to smash capitalism is hardly feasible. But the belief that the market is responsible for climate change remains a key component of their worldview.

“Well-regulated capitalism,” therefore, is code for capitalism under the iron heel of the administrative state. For instance, the automotive industry is to be “well regulated” by the implementation of electric vehicle (EV) mandates that scorn consumer choice. For instance, sharp curbs are to be placed on the coal, oil, natural gas, and nuclear power industries, while subsidies are showered on “green energy” initiatives. For instance, the entire national economy is to be decarbonized by administrative fiat. Further afield, government subsidies come trailing strings such as those attached to the Biden Administration’s maddingly complex CHIPS and Science Act.

And then there are tariffs. Properly understood, Trump’s tariff offensive is an attempt to clap fetters on “unfettered capitalism,” substituting his judgement for the market’s invisible hand, promoting autarky over prosperity and economic growth. In a manner curiously similar to the postmodern progressive approach to economics, Trumpian autarky prioritizes political, social and cultural issues over economic ones. And though the President may indeed believe it when he says that dismantling free trade will bring a golden age of prosperity to America; I suspect that J.D. Vance knows better.

For in fact the narrative of the tariff warriors—that America has been ripped off and impoverished by foreign countries taking unfair advantage of free trade—is a myth. For today, the United States of America is the richest country in the world. The Economist set forth the facts last year in an article by Simon Rabinovitch and Henry Curr:

[O]ne thing has been consistent since the early 1990s: America has grown faster than other big rich countries, and it has rebounded more strongly from bumps along the way…. America’s growth since then has been best-in-class, and its strengths today give grounds for optimism about the country’s economic power and potential. That America’s share of global GDP in PPP terms has decreased is less a comment on its own trajectory than on the growth spurts of the two most populous countries, China and India. China’s output per person remains less than a third of America’s; India’s is smaller still.

Even more striking is how America has outperformed its peers among the mature economies. In 1990 America accounted for about two-fifths of the overall GDP of the G7 group of advanced countries; today it is up to about half. On a per-person basis, American economic output is now about 40% higher than in western Europe and Canada, and 60% higher than in Japan—roughly twice as large as the gaps between them in 1990. Average wages in America’s poorest state, Mississippi, are higher than the averages in Britain, Canada and Germany.

The reality of American wealth is also inconvenient for the Democratic Party, which has developed a bad habit of touting other countries’ “economic models”—Japan, Germany, the Scandinavian nations—which as Rabinovitch and Curr note, lag far behind America in terms of economic output and wealth creation.

With its history of hostility to markets and free trade, the Democratic Party is ill-positioned to lambaste President Trump on the issue of trade protectionism. When the North American Free Trade Agreement was signed into law by President Clinton in 1993, nearly sixty percent of Democrats opposed it. (Today, however, nearly seventy percent of Democrats say that they oppose tariffs—a position surely owing to the fact that it’s Donald Trump who’s now warring on free trade.)

Elected Democrats are sharply divided on President Trump’s tariffs. The closest thing to a party consensus on the issue may be summarized as follows: Though tariffs and related policies designed to protect American workers and American industry are fine in principle, Trump’s tariff offensive is reckless. During a recent CNN town hall, Representative Derek Tran tried to thread the needle by putting it this way: “I believe that tariffs can be a good thing that we can use to balance trade but when we’re seeing tariffs used haphazardly, recklessly, and causing our market to free fall, that’s an issue for me.”

Michigan Governor Gretchen Whitmer took the same tack in a recent speech, noting that she understands “the motivation behind the [Trump] tariffs” and that she supports tariffs in principle. But, she added, “You can’t just bust out the tariff hammer to swing at every problem without a clearly defined end goal.” Despite this caveat, Whitmer caught flak from those in the party who oppose tariffs, for instance Colorado Gov. Jared Polis. “Tariffs are bad outright because they lead to higher prices and destroy American manufacturing,” he said.

And meanwhile, among more progressive Democrats free trade remains none too popular. Senator Bernie Sanders (nominally an independent but influential in the party) is only the most prominent critic of this manifestation of “unfettered capitalism.”

The Democrats might be expected to profit politically if, as some economists are predicting, Trump’s tariff policy sends the economy into a recession. But even then, the party would have trouble answering the question: If Trump’s tariffs are so bad, what’s your alternative, and how would it be better? That is indeed the question. Some elected Democrats may declare themselves to be in favor of markets and free trade, but within the party there’s no such consensus.

There is, however, a troubling disconnect between American economic realities and American politics. Over there in the Oval Office is President Trump, transfixed by the fantasy of tariffs as the key to an economic golden age. And up there on the platform are Comrade Senator Sanders and Comrade Representative AOC, fulminating over the imaginary evils of unfettered, oligarchical capitalism.

None of them have the slightest idea what they’re talking about. In the immortal words of Casey Stengel, “Does anyone here know how to play this game?”