The Progressive Critique of Free Markets: A Response | Part 1

The American economy today is mixed: It is partly free, vibrant, prosperous, and entrepreneurial—and partly unfree, obstructed, and lethargic. The free part is governed by the principles of our Founding and the U.S. Constitution, which safeguard private property and contract rights that permit us to gain, hold, use, and dispose of property. This legal structure has produced the most prosperous and innovative economy in human history. The unfree part of our economy, by contrast, is caused by changes—many of which are still in place today—brought about by Progressive thinkers and activists beginning in the late 19th century. To grasp what has happened, what may come, and how to revive our economic health, we must grasp the significant moral differences between the free-market political economy of the Founders and the interventionist political economy of the Progressives.

For free-market proponents, including America’s Founders, morality demands a respect for private property and contract rights. The economic system must therefore be subordinated to and consistent with property and contract rights. Men must be free to use their talents and improve their material circumstances in voluntary agreements with other men, provided they do not directly violate the right to life, liberty, and property of other people. The goals of such economic activity are individual and national prosperity. Though leery of government intervention, America’s Founders were not opposed to economic regulations. Their political economy is compatible with and requires a degree of regulation with a view to health, safety, and morals so as to prevent uses of property harmful to the rights of others and to maintain the conditions of freedom. In consequence, free-market political economy permits and even requires economic regulations to restrain commercial activity that is harmful to our moral health, such as drug trafficking and prostitution.

This approach is distinct from and should not be confused with laissez-faire economics. While laissez-faire economics is also based on private property and contract rights, it often prohibits salutary government regulations. For example, natural rights free-market economics allows state and local governments to regulate food safety and prohibit the sale of unsafe drugs, whereas many laissez-faire advocates improperly see such regulations as unjust intrusions on an individual right to voluntary exchange. Laissez-faire advocates typically argue for the complete or near-complete separation of state and economics.

The progressive reaction against free-market economics originated during the Progressive Era, a period that lasted from about 1880 to 1920. At that time, reform-minded political economists rejected the free market and the limited government bequeathed to us by the Founding Fathers. Progressive Era political economists such as Richard T. Ely, John R. Commons, and Simon Patten believed that limited government was based on a false theory of natural rights, and that private property and contract rights were therefore purely a creation of the government and not ours by nature. While they rejected natural rights and limited government on theoretical grounds, they also thought that the Founders’ political economy led to a damaging selfishness that harmed ordinary citizens. They thought the free market immoral because it harmed workers by underpaying and overworking them and, in general, by permitting the economically powerful to dictate harsh terms of employment to the economically weak. They subordinated the discipline of economics to a moral ideal of redistributive social obligation and cooperation, with the goals of more widely distributed economic benefits, the maximum flourishing of each individual, and a workplace that does not compel men to choose between being unemployed and submitting to harsh terms of employment. Like the free-market proponents they sought to replace, Progressives wanted individual and national prosperity, but believed that the free market could secure neither.

The progressive rejection of natural rights permitted them to propose a massive increase in the scope, size, and power of the federal government. They wanted intrusive and elaborate economic regulations aimed at reducing the power of businessmen, managing the economy, and improving the wages and working conditions of ordinary workers. They wanted much greater assistance for and relief from conditions harmful to the poor. They wanted government staffed by a permanent administrative bureaucracy of supposedly impartial, scientific experts. They wanted social and economic problems analyzed and resolved by elites professionally trained in the new discipline of social science. Above all, progressives wanted a broad moral reorientation away from competition and self-interest and toward cooperation and central planning.

These Progressive Era political economists were joined by progressive academics, politicians, journalists, and social justice activists. They called their movement “Progressivism” because they believed that Americans were on the cusp of a new era of progress whose goals and methods would make obsolete the political and economic thought of the past and propel us toward transformative and redemptive social, economic, and political reforms. Over time, they gradually altered America’s legal system and politics to make it more tolerant of interventionism and less accepting of natural rights and economic liberty. Their gradualism permitted them to present themselves as prudent—and thereby deflect charges of radicalism. They were careful not to devastate the economy by totally repudiating private property and contract rights. They favored a mixed economy and not a thoroughgoing socialism. In the many decades since the Progressive Era, one generation after another has been inspired by progressive visionary idealism to take up and advance the cause of progressive reform. In our day, self-described liberals and progressives in academia, think tanks, the media, and government are the heirs of these early Progressives.

Today’s interventionists are opposed by defenders of economic liberty, largely professional economists and economics professors, who regularly deploy very technical, pro-free-market economic theories to argue against intervention—often to little or no effect. Progressives have placed their economic views in the service of moral concerns and are unimpressed by pro-free-market technical refutations. If we are to recover our economic liberty, we must return to and confront the original moral arguments for progressivism made during the Progressive Era, and in particular, the belief that ordinary people cannot properly secure their interests by means of the free market. The critique of free markets as impractical and immoral was not as sound as the early Progressives imagined. As the heir to that early progressive critique, today’s progressive economics is no sounder in its rejection of free markets.

About the Author

Luigi Bradizza, PhD, is Associate Professor of Political Science at Salve Regina University and the author of Richard T. Ely’s Critique of Capitalism.