Capitalism and free enterprise may seem like synonyms, but Americans don’t see them the same way. According to Galluponly about 60 percent of Americans have a positive image of “capitalism,” while 84 percent view “free enterprise” positively.
That distinction makes sense to Clifford Winston, a senior member at the Brookings Institution. “’Free markets’ is an unambiguous term, implying a lack of inappropriate government intervention, as consumers and businesses pursue their own interests in a competitive environment,” he wrote to me in an email on Friday. “So I certainly support free markets.” To the contrary, he continued, “‘capitalism’ does not necessarily exclude what is known as crony capitalism, in which corporations take advantage of the government to gain an unfair advantage.”
I’ve been exchanging emails with Winston about his advocacy for free markets and deregulation for several months and decided it was time to write a newsletter about his ideas, because while I don’t agree with everything he says, he does have some strong ideas. points that I think readers would benefit from hearing.
Winston, who has a Ph.D. in economics from the University of California, Berkeley, and has been at Brookings since 1984, has written, co-authored, or co-edited 16 books and has published scholarly articles in major journals such as The American Economic Review. His latest book, “Gaining Ground: Markets Helping Government,” was published last year.
Winston cites the rapid development of Covid vaccines as an example of how markets can compensate for governance failures. Much of the federal government, including the White House and the Centers for Disease Control and Prevention, failed to react to Covid, Winston writes in “Gaining Ground.” After initially underestimating the risk of Covid, the Trump administration tried to push domestic manufacturing of drugs, pharmaceutical ingredients and masks that were readily available abroad at lower prices, he writes.
The private sector came to the rescue as drugmakers quickly developed effective vaccines, Winston writes. He gives some of the credit for the vaccines to the Trump administration’s Operation Warp Speed effort, but blames the administration for botching the rollout, in part by failing to adequately oppose anti-vaccine messaging.
The toilet paper shortage of 2020 was another pandemic that seemed like a market failure at the time, but was actually solved by market forces, Winston argues. The shortages occurred because the pandemic disrupted supply chains and fearful consumers hoarded supplies, but profit-seeking companies quickly found ways to ramp up production and fix distribution to meet unmet needs, he says.
Market forces might also have helped in December when thousands of domestic flights were cancelled during the outbreak of the Omicron variant, he argues. He says the government should end regulations that bar foreign airlines from flying domestic routes in the United States. Deregulation, he says, would increase competition and lower fees.
in a 2020 book, “Autonomous Vehicles,” Winston and a co-author argued that regulators should not stand in the way of developing autonomous cars and trucks, which they said could revolutionize transportation. (At the same time, he’s not entirely independent when it comes to autonomous vehicles. In an essay this year for Barron’s, he and Joan Winston, his wife, a tech policy analyst, wrote that Tesla CEO Elon Musk had damaged the reputation of autonomous vehicles by “establishing their own testing procedures and adoption standards”).
Winston’s faith in the markets even extends to political conflict. After billionaire investor Ray Dalio said in February that the United States appeared to be headed for “some kind of civil war,” Winston wrote an essay for Barron arguing that market forces have the ability to mitigate civil conflict if leaders businesses step forward. .
Winston would also dismantle a host of occupational licenses, which he says unnecessarily inflate prices for services and benefit only holders such as barbers and lawyers. Lawyers shouldn’t need to graduate from accredited law schools to practice, and bar exams should be optional, he argues. He points Abraham Lincoln and Clarence Darrow as good lawyers who never graduated from law school.
Winston also told me he’s frustrated by recent arguments blaming markets for problems like trucker burnout and last year’s Texas blackout. He says those arguments pick and choose facts to falsely imply causality and ignore the overall benefits that deregulation brings.
“Both markets and governments make mistakes,” Winston wrote last year in a blog post for the School of Public Policy at the London School of Economics. “The big difference is that inefficient government policies persist indefinitely, while markets have incentives to correct their inefficiencies given enough time, often through the development of technological and product innovations.”
Regarding your March 18 Newsletter oppose gas tax cuts: Fifty years ago, a colleague and I wrote a paper with a Harvard professor, Hendrik Houthakker, proposing a very high gas tax, which we would have offset by cutting Social Security tax on employees. We show that the proposal would lead to a substantial reduction in gasoline consumption while boosting economic activity. Those with lower incomes would have benefited more because the Social Security tax was and is regressive. Unfortunately, the idea failed. Now, in the midst of a crisis, several nations in Europe, as well as California and New Jersey, are putting the idea into practice. Bravo.
quote of the day
“I still don’t like the word ‘destiny’ very much. It’s just a target that people draw after the fact, where the arrow landed.”
— Victor Miesel, a character in Hervé Le Tellier’s novel “The Anomaly”, translated from French by Adriana Hunter (2021)
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