The past two years have not been easy ones for capitalism. First, a crisis that seemed “almost designed to confirm the worst” about free enterprise shook the global economy. Then Washington’s efforts to prop up banks erased long-standing boundaries between the public and private sectors. By last summer, the federal government essentially owned the nation’s largest bank, insurance company, and automaker, and was creating winners and losers in massive business deals on a seemingly ad hoc basis. Capitalism is under attack, “not by socialist ideologues but by misguided technocrats,” the ruling class of experts who think they can outsmart the collective wisdom of the market, argues Yuval Levin, editor of National Affairs.
The technocrats are the architects of two rising threats to capitalism: the decades-old cozy relationship between Washington and big finance and a welfare state expanded far beyond its core purpose of helping the needy, Levin writes. A case in point: Social Security benefits, once meant only to prevent poverty in old age, now flow in vast quantities to relatively affluent Americans. The debts racked up by the welfare state today mean that citizens tomorrow will have less freedom to use their own earnings as they see fit.
Government encroachments upon the free market are “expressions of a long-standing technocratic distaste on the left for the market economy, and especially for the democratic character of capitalism.” To understand this “democratic character,” Levin turns to capitalism’s foremost explicator, Adam Smith (1723–90). Smith understood the free market as a system shaped by consumers pursuing their individual interests to the benefit of all—the opposite of the old mercantile economies, which served the needs of a few producers. In this sense, Smith’s free-market ideal is inherently democratic, and has a profound moral purpose. Prosperity, in Smith’s philosophy, isn’t just an incidental convenience, but a “precondition for a decent society,” Levin writes. A free market could put a comfortable life within the reach of most, thus fostering more generous behavior and “sympathy” among neighbors. “If our own misery pinches us very severely,” Smith wrote, “we have no leisure to attend to that of our neighbor.”
Capitalism is often criticized for being unjust to the poor, pushing inequality to an intolerable level. Levin allows that markets inevitably produce inequality, but unless you believe that “an equality of conditions is the essence of justice,” it just doesn’t make sense to dismantle an economic system that has provided more material progress for the poor (and the rich too, of course) than any other in human history.
A more serious criticism, according to Levin, is that capitalism “empties social life of any higher meaning.” Our society is not one characterized by restraint but rather by excess. Smith believed that a free market could instill certain virtues—prudence, restraint, industry, and frugality—by making those virtues profitable. But Levin says that Smith “understated—and perhaps underestimated—the challenges of sustaining moral norms amid economic dynamism.” Capitalism cannot provide sufficient moral authority on its own. Instead, we must rely on “deeper wells”: family, religion, and tradition.
Levin’s prescription: The government must take an aggressively pro-market approach, not to be confused with its current pro-business disposition, in which technocrats aid favored firms and sectors. Ultimately, the fight over capitalism is a struggle over democracy. Technocrats claiming authority based on science and expertise are bent on overturning the democracy of the marketplace. If they have their way, they’ll undo our prosperity and the society built upon it.