The Promise of Commercial Society
And why advocates of free markets are losing ground to cultural Marxists
Welcome to another edition of the Mueller Report!
I am traveling to Michigan next week to give a couple talks at Acton University. This is a week long series of lectures and talks for people from around the world who are interested in markets, free society, Christianity, and human flourishing. They usually have attendees from dozens of countries.
I’ve spoken there before about Adam Smith and the idea of virtuous capitalists before. It’s a talk about the Scottish Enlightenment and how Smith and his contemporaries thought about virtue and morality under commercial arrangements (rather than feudal, collectivist, or tribal arrangements).
This year I am giving a new talk titled “The Promise of Commercial Society.” I am sharing a slightly abridged transcript of that talk below, particularly about the rise of cultural Marxism, its connection to many different current social phenomena, and why capitalist society is superior morally and culturally, not just economically, to collectivist societies.
Slightly abridged “The Promise of Commercial Society”
Free markets decentralize power and control of resources. This means that we have options for where we work, shop & live. Milton Friedman puts it this way:
The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity.
Free markets, of the kind envisioned by Adam Smith, were the original anti-trust mechanism. Freedom to compete always restrains monopolistic tendencies. Furthermore, markets can separate identity from transactions. Marx thought this was alienating, and occasionally anonymous market transactions may give that sense. But there are tremendous advantages to such a system.
Friedman also talks about how:
No one who buys bread knows whether the wheat from which it is made was grown by a Communist or a Republican, by a constitutionalist or a Fascist, or, for that matter, by a Negro or a white. This illustrates how an impersonal market separates economic activities from political views and protects men from being discriminated against in their economic activities for reasons that are irrelevant to their productivity - whether these reasons are associated with their views or their color.
As this example suggests, the groups in our society that have the most at stake in the preservation and strengthening of competitive capitalism are those minority groups which can most easily become the object of the distrust and enmity of the majority - the Negroes, the Jews, the foreign-born, to mention only the most obvious. Yet, paradoxically enough, the enemies of the free market - the Socialists and Communists - have been recruited in disproportionate measure from these groups. Instead of recognizing that the existence of the market as protected them from the attitudes of their fellow countrymen, they mistakenly attribute the residual discrimination to the market.
And Ronald Coase points out in a beautiful passage:
The great advantage of the market is that it is able to use the strength of self-interest to offset the weakness and partiality of benevolence, so that those who are unknown, unattractive, or unimportant, will have their wants served
These benefits have been increasingly threatened over the past couple decades given certain technological advancements that have amplified the voice of angry, bitter, and vindictive customers as well as Marxist social trends that try to bring various forms of personal identity into very facet of our lives.
Now, commercial society has always had its detractors, but today it suffers increasingly from friendly fire on the right of the political spectrum. With the rise of Trump, a new wing of conservatism has developed, often called the “new right” or the nationalist right.
Conservatives, especially, should be champions of commercial society because if we aren’t, its enemies from without and within will undermine and dismantle it. And in doing so, they will dismantle the free society.
An important part our crisis is the seeming inability to invoke moral and spiritual confidence or authority when advocating for economic and political freedom. I think this largely stems from market advocates’ over-reliance on the material prosperity brought about by free market capitalism.
Let me relate an experience I had years ago that really crystalized this problem for me. I was participating in a training program for young conservatives and libertarians who wanted to work in policy and in academia. During one exercise, we were split into groups. Some groups were supposed to create an advertisement for capitalism while other groups were supposed to create advertisements for socialism. The best advertisement for capitalism was a nice drawing of an iPhone with all kinds of neat apps on its screen. The best advertisement for socialism was a sad looking man in a wheelchair by a park bench with newspapers wrapped around his feet.
These advertisements are not even playing the same game. In a material vs. moral appeal, when it comes to Pathos, the advocates of socialism hold most of the cards. They find cases and stories of the downtrodden and the suffering – and in a fallen world there are always many of these cases, even under the best social arrangements – a point, by the way, that many advocates of collectivism don’t accept. They suffer from what Thomas Sowell calls an “unconstrained vision” of the world…But I digress.
Holding up an iPhone, high GDP or per capita growth, or improvements in technology or the standards of living for millions of people fails to have the traction of an unarmed man being shot by police, or of camps of homeless people, or the struggles of a single mother working minimum wage jobs. And at some level, this is right. The welfare of human beings ultimately matters most. And “welfare” extends far beyond the quality of one’s phone, car, house, or retirement account.
Yet human welfare includes material things. And defenders of markets have been quick to point out the great amount of suffering created by successful collectivist policies – and very rightfully so! The horrors of life under true collectivism is hard for people in commercial societies to wrap their minds around. What does it mean for grocery stores, not to run out of your favorite brand of bread or cereal, but to run out of all bread and cereal?
The critical point missed by most advocates of collectivism is that the culmination of their political aspirations is not a little less economic growth, a little less overall wealth, for the sake of greater equity, inclusion, and welfare of the worst off, but rather massive and destructive reworking of the social order in ways that create widespread and often extreme physical deprivation.
Still, many on the left refuse to accept this criticism – I think in large part because they find the alternative status quo so distasteful. And here is where the promise of commercial society, in its moral, theological, and human dimensions must be explained and championed. And here is where many advocates of free markets fall short. And you can tell they are falling short, not only because of the spread of “woke” ideology among the young, but also because of the rise and widespread support of “new right” thinking.
Some conservative philosophers like Patrick Daneen argue that the Enlightenment enthroned reason and usurped the role of tradition and religion in human affairs. Initially the world continued on its course of growth, greater liberty, better protected rights, and expansions of human choice and ingenuity. But the Western world was living on borrowed time, using up the accumulated capital of thousands of years of Christianity and tradition. Now, they argue, the vehicle of civilization is running on fumes. Once the last vestiges of religion and tradition are expunged from the public square, it will grind to a halt altogether, and who knows what will happen next. Capitalism, free markets, and free trade are part of the corrosive liberalism Daneen decries.
Similarly, an increasing number of politically right of center folks have become skeptical of free trade. One of the more prominent advocates, Oren Cass, argues that free trade has caused significant social problems and distress in many communities across the U. S. Some of these folks argue, as Trump did, that America will be better off with less free trade. That argument doesn’t have a leg to stand on. Economists argue, with an impressive amount of agreement, that free trade is more productive and efficient than protectionism. Only the economically illiterate argue that tariffs and quotas and other trade restrictions make a country or society wealthier.
The more important objection to free trade, is not purely economic in nature. It has to do with equity and the social impact or disruption of trade. This concern has grown, particularly with the rise of Trump, as deep-seated anger and suspicion of the free market and its free trade corollary has made itself known in large parts of the country. The “new right” recognizes that cooler apps and slicker iPhones can’t answer appeals for the man in the wheel chair, or the single mother working a minimum wage job. Nor does economic efficiency by itself really address serious problems of social decline, community disintegration, and economic stagnation in many places in the country. Yet there are still good reasons to reject many of the policy conclusions offered by the New Right.
For one thing, it is far from obvious that you can put the toothpaste back in the tube. Implementing trade restrictions are not going to magically reverse economic stagnation in the rust belt or in Appalachia. They are blunt tools whose specific effects are impossible to predict. Except we can predict with a high degree of confidence that the economy will be less dynamic and productive. And we know that things will cost more. But there is more to worry about than that. Protectionism undermines and corrupts the free market system itself. Success becomes based on who you know in D. C., not whether you produce valuable products at low cost. In my view, corruption is the biggest reason not to engage in trade restrictions.
But there is another moral dimension to be considered. Trade restrictions tacitly admit that we cannot be competitive on the global stage, that our workers are not able to offer value equal to their wages. We admit that our institutions and our society cannot adapt to new technology and to new opportunities as well as other societies can.
The less polite version of the American Compass folks is the Alt-right crowd - the Steve Bannon types who play anger as a virtue and suffering and difficulty as injustice. They only respect power and they advocate taking what we want and what we think we are entitled to have. Many of these folks think that the only way not to be taken advantage of is to bully others. They relish conflict and “owning the libs.” Whatever you think of their tactics or of the merits of their cause, let’s not kid ourselves into thinking that these folks are advocates of the free society.
These are critics on the right, but I would be remiss to leave out the biggest and most dangerous enemy of the free society: collectivist Progressives. The social justice warriors in search of whatever cause makes them feel righteous: environmentalism, transgenderism, critical race theory, wokeness, cancel culture, etc. We are all too familiar with the rapid rise of the intolerant left. From safe spaces and trigger warnings to attempted rewriting of our nation’s history, the enemies of freedom have multiplied - especially in universities. These progressives want to remake society into their idealized self-image, bringing together the worst elements of the totalitarianism Orwell imagined in 1984 with the moral and spiritual corruption envisioned by Huxley in A Brave New World.
Their vision is grim. There is no place for free enterprise, risk-taking, and competition in their utopia. Competitive markets, free exchange, market discipline; all these things promote human flourishing and can enliven and ennoble their participants while serving as bulwarks of the free society. Therefore, they must be steamrolled in the Progressive agenda. And this has led to some fascinating social dynamics. Consider how high profile and influential figures like Elon Musk and Joe Rogan are being exiled by Progressives, even though these men have voted for Democrats for years and are very sympathetic to socially liberal ideas. They’ve been labeled “Alt-right” or “White nationalists” or extreme conservatives because they refuse to kowtow to every Progressive talking point.
Another example can be seen in an extremely popular and influential podcast (the All-In Podcast) of Silicon Valley venture capitalists. These folks often sound conservative because they believe in markets, capitalism, customer focus, entrepreneurship, and wealth creation and they see how so many Progressive priorities would tear those things down. They reject widespread socialism and redistribution of wealth. They criticize “woke” lobbying within corporations. Perhaps unwittingly, they advocate Friedman’s idea that companies have valuable products and services to create for society and that is what they should focus on – not pandering to particular pet political causes of their employees.
And this is leading to another broader seismic shift in capital markets – rethinking of ESG guidelines. Again, I imagine many of you are familiar with ESG but for those who are not, ESG stands for Environment, Social, and Governance. The idea was to create ratings around how well companies treated the environment, how much they benefited society (apart from creating valuable products and services for consumers), and how well a company is “governed.” These ESG ratings have been pushed by many of the largest money managers in the well as well as many large financial institutions. These ratings have always been championed by Progressive SJWs for more nefarious reasons.
How does one measure the environmental impact of a company? Of course we have regulations about emissions and waste disposal on the books – but ESG advocates go further. They want to evaluate where companies get their energy, where they get their raw materials, whether they support or fund certain environmental and renewable energy products. The E is used as a cudgel to reward companies that devote resources to the goals of environmentalists and to punish those companies that don’t.
What about the Social part of ESG? Again, there is not clear metric here. Often it has to do with how much philanthropic activity a company participates in. How much do they give to charity? But often it is not just any charity – giving money to religious organizations certainly wouldn’t count! Often the people writing or assessing ESG value some nonprofit activity over others. So the S in ESG is also used as a cudgel to reward companies for giving money to favored social activist groups (Black Lives Matter would be a very prominent one), and punish companies that don’t.
Finally the Governance piece. What do ESG advocates have in mind here? Often it is nothing more than the DEI (not to be confused with DUI) initiatives that are popping up all over the place. DEI stands for Diversity, Equity, and Inclusion – and is deeply entwined with both the LGBTQ agenda and the Critical Race Theory agenda. The goal of DEI is to favor minorities, whether sexual or ethnic, over non-minorities. Favoring women over men, trans over hetero, minorities over majorities, etc. DEI officers tend to create required education for employees and insert themselves in the hiring process to create favoritism for “underrepresented” groups.
And so the G is used as a carrot for companies heavily engaged in DEI activity and as a cudgel for companies that are not. And so you see, ESG has very little to do with productivity or value creation and everything to do with advancing Progressive social and political objectives. This bald-faced corruption and social lobbying has been revealed in recent weeks as government agencies have begun investigating claims of corrupt use of ESG ratings by large financial institutions and by Elon Musk’s company, Tesla, being removed from an important ESG index because the evaluators of that index don’t like his political or social positions – a clear exercise in personal preference being used to punish those one disagrees with.
This rise of Progressive ideals should not be surprising. There has been a concerted effort for decades to undermine people’s belief in capitalist institutions to pave the way for the rise of collectivism. Cultural Marxists stemming from the Frankfurt School in Germany around WWII are behind much of the social agenda we see among Progressives today. In fact, although I refer to these ideas as Progressive, because that is how they label themselves today, these ideas are really Marxist ideas. Members of the Frankfurt school realized that Marx’s vision of Communism’s rise had not occurred. In looking for an answer as to why, they landed on culture. They concluded that overthrow of the Bourgeoisie by the Proletariat did not occur because the Proletariat were so thoroughly embedded in capitalist institutions and social norms. So the way to bring about a Marxist society was to “march through the institutions” and subvert capitalist ideas and values. This is something they have been remarkably successful at doing over the past half century – to the point where cultural Marxism has come to dominate higher education and, because the social and political elite overwhelming come through the higher education system, cultural Marxism has come to dominate the thinking of most of the elites in the U. S and around the world.
Why cultural Marxism has had such success could warrant a whole talk by itself. Let me just suggest a couple ideas as to why that are related to what I am talking about here: the moral authority and overall promise of commercial society. One reason cultural Marxism has been so successful is that it offers a compelling replacement for Christianity. As secularism has increased, especially in academia, alternative sources of purpose have become important. Few people are willing to jump in the abyss of the existentialism of Sartre or the nihilism of Nietzsche (at least explicitly jump in the abyss), and so Cultural Marxism offers an alternative narrative to Christianity – full with original sin, heaven, penance, righteousness and evil, etc.
A second reason cultural Marxism has been successful has to do with the institutional structure of higher education. Few institutions are more insulated from free market competition than academia. It receives most of its funding through political processes, it has relatively little competition, and professors are not awarded based on customer service, satisfaction, or value creation. Instead, they are promoted and rewarded for pleasing their peers, jumping through various academic hoops, and seniority. Furthermore, the hiring of faculty is done by existing faculty, based primarily upon their social, political, and philosophical preferences. It’s not surprising that an institution so insulated from competition, profit, and loss, would be one of the breeding grounds for hostility to market society.
A third reason for its success is related to the lack of moral vision behind wealth creation and ownership. There is a great degree of guilt felt by many children of the wealthy and well to do (and perhaps among the wealthy and well to do themselves). Why do they get to live in nice houses when others don’t? Why are their families wealthy, successful, connected – along with their friends and peers? The guilt they feel for what they have tends to lead them in search of salvation or some kind of penance. And here you find cultural Marxism offering the means of expatiating that guilt over their wealth and status without actually requiring them to sacrifice the wealth. They can become SJWs, advocating for the downtrodden and oppressed, whether that be through LGBTQ agendas or Black Lives Matter agendas.
But commercial society is not only about wealth. It is about flourishing, about happiness and virtue and community. The cultural Marxists and other detractors have set the narrative for far too long. Let’s talk about the promise of commercial society.
Free market commercial societies treat people with more dignity than any other social arrangement. People bear responsibility for their actions. They bear responsibility for their families and for their communities. They benefit from wise choices and suffer from foolish ones. Collectivists intentionally seek to subvert this, and that is morally reprehensible. They want to hold back or punish those who make wise decisions with their resources and reward those who don’t. You can see this with federal loan programs (the FAFSA). You get more federal aid, not based on your income, but based upon your wealth.
So a family that has earned millions of dollars over the years and spent it all, having few savings or assets, will get more aid than the frugal family who may have only earned a million dollars over the years but wisely saved and invested a good portion of it.
Besides the dignity of treating people as responsible moral agents, free societies create much greater scope for collaboration and charity than other types of society. People can easily band together to solve problems and to improve their communities under free market capitalism. They can’t under full-blown socialism or communism.
And in a free enterprise system with the rule of law, people have more security. We can manage our own affairs without permission from government officials. Where and when we work, where we live, what we buy, how we save, how we invest - these are all choices we make, not choices government officials make for us. Relying on governments to provide pensions or healthcare or insurance is a bad strategy. Their interests and incentives are all wrong.
Not only are these programs usually run badly, we are discovering what Milton Friedman used to say: “There Ain’t No Such Thing As A Free Lunch” (TANSTAAFL). Government social spending is only possible because of robust private commercial activity filling the government coffers and underwriting government borrowing. As the economy grows increasingly sclerotic, however, and as government spending and borrowing explode, we have cause for deep concern. And if one looks at the size and scope of promises made by federal retirement, insurance, and healthcare programs, full scale panic is not unreasonable.
You all are probably following the same things I am and much of the country is. Inflation has reached a 40 year high and is turning out not to be “transitory.” Don’t even get me started on the massive misdirection and blame-shifting behind that claim last summer. The Federal Reserve failed to take meaningful action late last year and now is being forced to adjust policy rapidly, sending asset markets into a tailspin and creating whiplash in the broader economy as interest rates rise, making it more expensive for companies to roll over or refinance debt and more expensive for people to take out mortgages to buy houses.
Crypto markets have been crushed, with even the major currencies, Bitcoin and Ethereum, down over 50% from their peaks. Stock markets are down over 20% and solidly in bear market territory with no sign of reaching their bottom. And the economy isn’t even officially in a recession yet!
I could talk about current market dynamics for a while, but let me make two more brief points. First, everyone is learning the hard lessons of the risks of investing speculatively. I feel for folks, especially younger folks, who plowed huge amounts of their net worth into crypto or NFTs at or near their peak inflated values. I also feel for the retail investors on Robinhood who sunk their savings into option trading and, even worse, may have borrowed money to take on speculative positions, and who have gotten crushed this year. As an amateur retail options trader myself, I feel their pain. Still, it’s worse for so many because they don’t have other assets and income like I do, and they have sunk so much more of their net worth in these endeavors only to see huge amounts of it disappear.
And why? Because of reckless and distortive Federal Reserve policy during the pandemic and unrestrained federal spending – making everyone feel wealthier and smarter while asset prices rapidly appreciated in 2021. Just wait until the next two shoes of declining housing prices and rising unemployment drop.
My last observation about our current economic situation, especially about the insufficiency of using government social spending as a way to alleviate poverty or provide financial security to their citizens, is the following: With U. S. national debt over $20 trillion dollars, every 1% increase in interest rates creates over $200 billion dollars in additional interest costs for the federal government every year. So last week, the Federal Reserve basically added $150 billion to the annual federal budget with its .75% interest rate hike. And there are almost certainly more interest rate hikes to come…
So, we cannot assume material standards of living or quality of life can be assured to a majority of citizens through government programs. But they can be delivered through a market economy and robust civil society.
Similarly, commercial society creates massive opportunities. One can go to school, switch occupations, start companies, sell goods and services. The U. S. was long known as the land of opportunity because people could do these things with little restriction. Many of our most stubborn social problems stem from such opportunity dwindling.
But beyond security and opportunity, a free commercial society promotes hope over despair and joy over bitterness. Within our economy, we create. We invent and design and produce value. The cultural mandate in Genesis is not about bureaucratically redistributing money or creating red tape. It is about ordering and reordering creation through creativity, innovation, and effort. Commercial society invites everyone to participate in production and in serving their fellow men and women.
Do opportunity, security, hope, dignity, and creativity ensure that people will be happy? No, but they are necessary for flourishing. Does wealth in and of itself make people happy? Obviously not, yet it supplies us with greater means and access to happiness. This is enshrined in the Declaration of Liberty: everyone has a right to “life, liberty, and the pursuit of happiness”.
As we depart from free association and free exchange, we risk increasing political corruption and increasing moral corruption. On the political front, we cede increasing power to officials who are often not very accountable for their behavior. As one political observer noted: “a government powerful enough to give us everything we want is powerful enough to take away everything we have.”
Adam Smith was suspicious of political power - and he suspected the motives of those who wielded it. He talks about the “pretended” concern of public officials for the common good that really serves a mask for them gaining greater influence, power, or wealth. He has a famous passage about “the man of system” who believes he can arrange society the way a hand arranges pieces on the chessboard. But unlike chess pieces, people in society have motives, goals, and sources of motion in themselves. If the man of system directs people to act in ways they do not want to act, the game goes on badly or even comes to an end.
The appropriate approach to politics, which Smith talks about as the man of public spirit, respects the desires of the people, even their prejudices, and does not force them to follow his own elevated plans and desires. The man of public spirit gently attempts to correct and persuade the worst deficiencies of the people, but he mostly leaves them free to do as they will and devotes his focus to matters of justice, the rule of law, and fair administration of justice.
Political corruption has become a larger problem in U. S. politics over the last century. But equally bad is the moral corruption evident in anti-market sentiments. It is not a coincidence that those who criticize and revile free exchange, free association, and free trade tend to advocate repression and violence. Nor is the general public unaffected by seemingly narrow and arcane philosophical debates in the academy. Why do people feel more entitled to subsidies, bailouts, and lack of responsibility or lack of moral censure than ever before? Because we live in a world that increasingly undermines personal responsibility and initiative in the name of security.
Increasing reliance on government employment and programs increases hostility to independence, risk-taking, innovation, and dare I say excellence. The socialist mindset, applied uncritically across the board, corrupts our moral judgment. What replaces persuasion and voluntary association are denunciations, pogroms, diktat, and force. As the Austrian economists Hayek and Mises noted a century ago when debating the merits of centralized socialist planning of the economy, when society must operate according to one person’s or group’s plan, there is no room for dissent or disagreement. If you disagree, it’s not merely a difference of opinion, it is a threat to the state and to the community. You all know where such reasoning has taken us in so many of our universities….
We shouldn’t advocate capitalism without also advocating virtue. Smith said: “What can be added to the happiness of the man who is in health, who is out of debt, and has a clear conscience?” Capitalism has helped a lot in the health category - no doubt about that. What about being out of debt? It is certainly more possible to live without debt in a wealthy society, but it is ultimately the responsibility of the person to choose to do so - and most people in our society do not choose to do so, some for good reasons and others for bad reasons. And what about a clear conscience? Is capitalism going to give us cleaner consciences?
And as I mentioned at the beginning of the talk, the moral authority of commercial society is often neglected in favor of its material benefits. But the commercial system is morally superior to a collective one. It represents the best route to human flourishing. It is not a silver bullet to solve all problems and prevent all suffering, but it is the foundation on which so much philanthropy, entrepreneurship, and social collaboration can be built. So free markets are not simply the only option for creating material prosperity, they are the best way to advance a moral flourishing society.
Final Thoughts
Here are few articles I read this week that you may find of interest.
Apparently the $10,000 transactions being flagged for government oversight comes from a 1970 law. With fifty years of inflation, the equivalent of that rule today should be transactions of $75,000 or more - but of course the law has not been updated and so larger and larger numbers of legitimate transactions are being flagged and scrutinized by various bureaucrats and law enforcement agencies.
Here is a nice article on the abuses of ESG.
For some interesting micro-school organizations, you might be interested in looking at Acton Academy or Nevada Action.
Talk to you next week!