Don’t blame free markets for populist failures
The Hill · C · trust 16/100
Comments: by Norbert J. Michel, opinion contributor - 09/02/26 12:30 PM ET Comments: Link copied by Norbert J. Michel, opinion contributor - 09/02/26 12:30 PM ET Comments: Link copied An American flag is seen behind a coil of steel wire inside the Marlin Steel Wire manufacturing plant in Baltimore, Thursday, April 17, 2025. (AP Photo/Stephanie Scarbrough) American households are feeling real economic pain. Mortgage rates remain elevated , filling a gas tank can easily cost $100, and grocery bills continue to strain family budgets. But the diagnosis dominating today’s political discourse is fundamentally flawed.
When Fox News host Laura Ingraham recently pressed Vice President JD Vance on how to fix these high living costs, Vance pointed to a familiar target, claiming, “ the past 40 years of bipartisan economic policy has failed .” This rhetoric has become the default position for politicians across the spectrum. On the right, national conservatives blame free trade and global competition; on the left, progressive populists scapegoat corporate greed, capitalist markets and deregulated financial systems.
Both sides are selling a dangerous myth. The assertion that four decades of free-market consensus destroyed American prosperity ignores basic economic reality and misidentifies the true source of our current financial strains.
In fact, the last 40 years did not represent a failure of market capitalism; they produced an explosion in American living standards. When adjusted for total compensation, technological advancement and the rising quality of goods, real incomes and middle-class wealth grew significantly over this period. Global integration and open financial markets allowed capital to flow more efficiently, driving innovation and giving American families unprecedented increases in their living standards.
They would have done even better without heavy-handed government intervention.
Consider higher education, where populists argue a whole generation was scammed into taking on ruinous debt for degrees that failed to pay off. What actually inflated college tuition was not market pricing, but decades of federal involvement that allowed universities to raise prices without accountability.
Similarly, the populist narrative that free trade sent manufacturing jobs overseas and “hollowed out” the Midwest is dangerously mistaken. U.S. manufacturing output reached near-record levels prior to recent trade wars, even as manufacturing employment fell. Just as technology transformed agriculture a century ago, automation and massive productivity gains — not trade deals — shifted the manufacturing labor landscape. Imposing protective tariffs and industrial policies cannot not bring back those jobs; it merely taxes domestic consumers and forces American companies to pay higher costs for critical inputs.
The true drivers of today’s price spikes are not the free market, but fiscal profligacy and government overreach. Trillions of dollars in federal deficit spending have injected persistent inflationary pressures into the economy. Rather than stepping back, central bankers at the Federal Reserve have relied on discretionary fine-tuning and credit allocation, distorting market signals and inflating asset prices.
When politicians respond to these distortions by offering more government intervention – whether through right-wing trade barriers or left-wing price controls – they exacerbate the very problems they promise to solve.
As America continues to celebrate its 250th anniversary, we should remember what actually created two centuries of economic opportunity: individual freedom, competitive markets and the rule of law. Today’s cost-of-living problems will not be solved by doubling down on populist economic planning. Restoring rising living standards requires fiscal restraint in Congress, an end to harmful trade and immigration policy, and a return to predictable, rule-based monetary policy. Returning to these foundational principles is the only proven path to lasting prosperity.
Norbert J. Michel is vice president and director of the Center for Monetary and Financial Alternatives at the Cato Institute and author of “Crushing Capitalism: How Populist Policies are Threatening the American Dream .”
Read the original at The Hill →
Open in TruthVane →