A Rousing Defense of Capitalism

You’d be forgiven if you thought the tide of public opinion had turned against capitalism. As the news media eagerly report on polls showing that millennials increasingly reject capitalism, progressives energetically push the Democratic Party to the left. A forceful rebuttal has arrived in the form of a new book by Andy Puzder, the one-time nominee to be U.S. secretary of labor. Puzder, the former chief operating officer of CKE Restaurants, uses history to make a rousing defense of capitalism in “The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It.” He also details the never-ending war to defeat it.

“In all of human history, capitalism is the only economic system that has ever [produced] the expansive growth that lifts people out of poverty, raises their standard of living, and reduces income inequality,” he writes. He also shows how capitalism always dovetailed with the Founding Fathers’ commitment to limited government and individual freedom.

Despite capitalism’s successes, Puzder acknowledges its challenges. He argues that unrestricted free trade and loose immigration policies, which have been free-market Republican mantras, have had devastating consequences for low-skilled workers, particularly those in the industrial Midwest.  “Free trade might sound good on paper, but when a town loses its economic engine thanks to a factory moving to Mexico or China, the residents might have a difficult time understanding the benefits,” he writes.

He notes that in 2016 this wasn’t a theoretical conversation – it was the economic argument that propelled so many working-class Americans to vote for Donald Trump, who promised to bulldoze the country’s existing trade and immigration policies. “But even with improved policies on trade and immigration,” Puzder concedes, “we will still need economic growth to create good-paying jobs that lift people from one economic class to another.”

Puzder’s book offers a sweeping historical view of capitalism – and of the opposition to it, ranging from the left’s “war on profit” following the Gilded Age and the rise of labor unions to modern progressives’ vilification of business and their rejection of the views of moderate Democratic Party leaders such a John F. Kennedy and Bill Clinton.

Puzder describes the election of Barack Obama as progressives’ version of “Mission Accomplished” in this regard. The left believed that President Obama’s commitment to expanding government through a trillion-dollar stimulus package, administrative regulatory expansion, and a health-care coverage mandate on every American would usher in a lasting Progressive Era. Instead, Puzder contends, it had a deleterious impact on the American economy and its workers. “The regulatory state expanded, taxes increased, and investment declined, hobbling growth,” he writes. “Growth averaged a meager 2.1 percent following the end of the recession, when it should have surged,” he added. “For Obama’s final year in office, GDP growth slowed to an anemic 1.5 percent.”

Puzder sees the election of Donald Trump, a businessman with no political experience, as Middle America’s clear rejection of progressivism. “Hillary Clinton assured voters she would continue Obama’s failed progressive legacy as president,” he writes. The author also notes that the day after working-class voters defeated Clinton, America’s free market erupted with optimism. “The [stock market] surged up 250 points. It hit record highs more than seventy times in President Trump’s first year,” he writes. “Much of the initial enthusiasm was based on the anticipation that President Trump would reverse President Obama’s antibusiness policies by aggressively reducing government regulations and cutting taxes.” After delivering on some of his promises, the Dow is up 35 percent since the 2016 election and capital investment has soared.

In today’s information-driven economy, business and scientific talent constrains growth. High-skilled workers increasingly choose lucrative jobs that don’t serve or supervise low-skilled workers. Low-skilled productivity and wage growth has lagged as a result. Low-skilled workers are increasingly dependent on management technologies, like Uber and CKE, to increase low-skilled productivity with a minimum of high-skilled supervision. At a time when so many low-skilled workers have dropped out of the workforce, Puzder saw the effects of the safety net on the motivation of low-skilled workers where his “restaurant crew members were declining promotions to shift leader positions because the increase in income would disqualify them for food, housing, medical, or other government benefits.” Instead of rocketry, perhaps philanthropists should focus their efforts here.

“The Capitalist Comeback” provides a valuable historical defense of capitalism. While Puzder acknowledges the progressive forces on the left aren’t giving up on defeating capitalism, he is optimistic that Trump will succeed and his policies will lead to sustained economic prosperity that keeps capitalism’s adversaries at bay. While it’s a shame that more businessmen like Andy Puzder aren’t helping to form America’s economic policy, at least he’s still on the field fighting the good fight.

Edward Conard is an American Enterprise Institute visiting scholar, a former Bain Capital partner, and author of “The Upside of Inequality: How Good Intentions Undermine the Middle Class.”