Opinion
Free-market conservatives are now an endangered species in America
Summary
- Under the leadership of Donald Trump, the US Republican Party has more or less turned its back on free-market economics. This divide is reflected among its supporters too. But a grand reckoning at some point is inevitable.
Once upon a time, the conservative position on economics was easy to describe: It was in favour of free markets. In terms of public policy, this meant support for lower taxes, less regulation, smaller government and fiscal prudence. Republicans did not always adhere to those principles, but at least they aspired to them. Call them free-marketish.
But there has been a political and economic vibe shift, and now a large part of the conservative movement is turning against free markets. This shift may well be bigger and last longer than the presidency of Donald Trump. All of which raises an uncomfortable question for free-marketers like me: Is there still a market-friendly party in America?
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Consider the 2024 Republican Party Platform, which does not mince words: “For decades, our politicians sold our jobs and livelihoods to the highest bidders overseas with unfair Trade Deals and a blind faith in the siren song of globalism." Never mind Ronald Reagan—this is not even the party of Mitt Romney.
For his part, Trump has his own free-market contradictions. His first-term economic policies were mostly pro-market. The tariff hikes were small and his signature policies included tax cuts and deregulation. True, he ran up US public debt, but that was one way he was similar to previous Republican presidents.
This time around, his administration also has some free-market tendencies, but the anti-market elements are more apparent. On one hand, there are pledges to cut regulations, the size of government and taxes. On the other, there are even bigger tariffs on even more countries, a focus on narrow tax cuts instead of broader based reform, a fetish for manufacturing, talk of a ‘DOGE dividend’ and—despite the lip service to fiscal responsibility—a strong commitment to not cutting entitlements.
Even the personnel is divided. Elon Musk could be described as pro-market, or at least pro-efficiency. Treasury Secretary Scott Bessent, Interior Secretary Doug Burgum and economic advisers Kevin Hassett and Stephen Miran are all pro-market too. Labor Secretary nominee Lori Chavez-DeRemer and Federal Trade Commission Chairman Andrew Ferguson, with their enthusiasm for labour and antitrust enforcement, are more anti-market.
Then there is the probable future of the party, Vice-President J.D. Vance, who is a graduate of the market-sceptical Yale Law School of Economics. So are other young and influential Republicans, an example being Senator Josh Hawley of Missouri.
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The divide within the party leadership is reflected among its supporters. The party is becoming more working-class. Such voters may favour less market-friendly policies. Polls suggest a growing support for unions and tariffs to boost manufacturing among Republican voters. But Republicans also count on support from big business, which is generally hostile to tariffs and pro-labour policies. A talented politician might be able to placate both groups for a while—but a reckoning is inventible.
In that sense, Trump’s promise not to touch entitlements may prove to be his most significant deviation from free-market principles. The DOGE effort to cut waste and fraud in Medicare and Social Security, while useful, doesn’t count—there simply isn’t enough money there. Unfunded entitlement spending is the biggest threat to America’s fiscal health.
Trump’s promise may be popular with both Republicans and Democrats. But it does away with any pretence of caring about debt and is unrealistic besides. In the next decade, both parties will need to take a stand on entitlements and say whether they favour raising taxes, cutting benefits or some combination thereof—or just plan to add more to the national debt.
Within the Republican Party, actually, the answer may come sooner than that. If Trump’s deregulation and tax cuts produce growth and his tariffs don’t cause too many problems, then the ‘Make America Great Again’ ideology would appear to have worked.
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A Vance administration would undoubtedly turn even harder against markets. But if inflation returns, growth falters, or there is a bad economic shock, then Trump’s approach will be seen as less successful. In that case, more traditional Republicans may return to more market-oriented rhetoric.
Republicans are still more pro-market than Democrats. But conservativism itself is losing its enthusiasm for free markets. What is it for? As far as I can tell, conservatives favour a smaller, less intrusive government that makes big transfer payments, restricts international trade, keeps taxes low and runs up a lot of debt.
As a governing philosophy, I am not sure what to call that. But I do have a word for it: unsustainable. ©Bloomberg
