19. Values-Based Progressive Economics

Conservative philosophy is wrapped up in the language of free market economics. To right wingers, freedom means laissez-faire policies, opportunity means unregulated markets, and security means defending the rich and their wealth.

The fundamental challenge for progressives is that typical American voters believe in free markets. Why shouldn’t they? They hear no real arguments to the contrary. But the truth is, there’s no such thing as letting the market decide. It’s a myth, a fantasy, a fairy tale about a place that does not exist.

American markets are not, and never were, free of government influence. Just open up the business page of any major newspaper and look for yourself. One company seeks to change a law or regulation to its benefit. Another receives a tax abatement from local government. A manufacturer threatens to move overseas unless government provides a subsidy. The Fed increases or decreases the prime rate, affecting everyone’s ability to borrow.

We’re all familiar with some of the laws and regulations that police markets in order to protect employees, consumers, stockholders, and competing businesses. The government inspects food and drugs, keeps unsafe consumer products off the market, regulates air and water pollution, requires minimum safety and health standards for employees, prevents monopolies, protects consumer privacy, insures bank deposits, and so on.

Voters are less familiar with the many ways that governments warp markets on behalf of the rich and powerful. To name just a few: governments pay direct subsidies (like farm subsidies), indirect subsidies (like loan guarantees), tax abatements (for construction), tax credits (for everything conceivable), and tax loopholes (which allow many big corporations to pay no taxes at all); governments may overpay favored firms or industries for construction, products or service contracts, or allow unconscionable cost overruns; governments set up markets with only a few privileged owners (like the gambling industry); our federal government is one of the most protectionist in the world; and our federal labor laws tilt strongly anti-union (in labor-organizing elections, for example).

In sum, the government is always involved in business, always biasing market results, always nudging and twisting and bumping around the so-called invisible hand. In fact, markets would be more accurately visualized as a multiplicity of hands all engaged in a vast wrist-wrestling contest…with many of them controlled by governments.

If conservative economists actually believed in free markets, wouldn’t they be railing against all the pro-corporate market distortions caused by government preferences? But they aren’t. That’s because they don’t really want government to keep its nose out of economic decisions; they want the government to step in and prejudice the market in their favor. They use the term free market not as a philosophy to follow but as a rhetorical device—albeit a hugely effective one—to skew public opinion toward conservative economic policy.

So, Americans are stuck in the wrong debate and it’s your job to change that. The question is not whether government should be involved in the marketplace. It is. The question is, what principles should guide government’s involvement?

Fair markets

Progressives lack an easily explained, competing economic theory. We need a convincing progressive vision of what makes our economy work, and what would make it work better. What’s the first step?

Don’t say free markets when you’re talking about the economy, say fair markets.

Don’t say . . . Say . . .
Free markets Fair markets

Why . . .

Progressives are for fair markets. By fair, we mean markets that are balanced—with government as a counterweight when necessary—so that weaker individuals and organizations compete on a reasonably equal basis against more powerful ones. In many cases, balancing markets doesn’t require more government involvement, it requires less: taking away the subsidies and other unfair advantages that some individuals and businesses enjoy over others.

It is balanced markets that do the most to lower prices, spur innovations, and encourage the kind of hard work that benefits all of society. In contrast, society does not benefit—instead, everyone loses—when people get rich by gaming the system, by exploiting tax or regulatory loopholes, by dismantling viable companies, or by creating scams that aren’t technically illegal but should be.

Unbalanced markets weaken competition by giving special advantages to certain companies or specific industries. When a company makes its money through unfair competition, it has little incentive to build a better mousetrap. And when a company sells faulty mousetraps to the military at inflated prices, there’s even less incentive to change. In fact, the dominant free market ideology gives corporate leaders and their right-wing cheerleaders a strong incentive to corrupt the system. So that’s what they’ve done.

Because Americans accept unfair markets—and in fact, take the unfairness for granted—we don’t consider the enormity of the special interest game-playing in Washington. In the current Administration, nearly every economic effort is designed to make markets more unfair. Whether it’s tax policy, health care, the federal budget, financial regulation, education policy—or anything else—the proposed policies are designed to tilt the economic playing field even farther toward the rich.

Progressive economist Dean Baker summarizes the situation better than we can:

The market is just a tool, and in fact a very useful one. It makes no more sense to lash out against markets than to lash out against the wheel. The reality is that conservatives have been quite actively using the power of the government to shape market outcomes in ways that redistribute income upward. However, conservatives have been clever enough to not own up to their role in this process, pretending all along that everything is just the natural working of the market. And, progressives have been foolish enough to go along with this view.

Let us muster a little cleverness of our own. Let’s reject the language of free markets and embrace the progressive principle of fair markets.