Tag Archives: markets

Fascism Versus Market Capitalism

Thomas Edsall’s columns in the New York Times share a consistent pattern: Edsall poses a question or initiates an inquiry, then contacts several experts, posing the relevant questions, and sharing their responses. Most recently, he explored the mechanisms that have characterized the Trumpian replacement of market capitalism with a “bend the knee in order to earn government’s blessing” approach that–like so much of Trump’s administration–is reminiscent of bygone fascist regimes.

It has become common to label Trump’s administration fascist, but usually that accusation arises in the context of ICE thuggery, the attacks on minorities and the evisceration of constitutional rights–actions echoing the Fascist regimes that focused on whitewashed pasts, and claimed traditional class structures and gender roles were essential to the “social order.”

These comparisons are accurate but incomplete; fascism also–and importantly–engaged in a thoroughgoing and intentional subversion of market economics.

Fascism is sometimes called “national Socialism,” but its approach to the economy differs significantly from socialism. The most striking aspect of fascist systems, of course, is the elevation of the nation—a fervent nationalism is central to fascist philosophy. That nationalism accompanies a union between business and the state; although there is nominally private property, fascist governments control business decisions.

In one of his recent columns, Edsall explored the current echoes of that approach, and how dramatically it differs from former Republican agendas and beliefs. As he notes, Trump and his administration regularly apply a “financial and regulatory chokehold” on businesses, corporations and nonprofits that he believes are antagonistic to him, from electric cars and wind energy projects to service-providing nonprofits and television networks.

“The administration has terminated, to use one of Trump’s favorite words, wind energy projects and ended tax and other incentives for electric-powered vehicles, two industries he believes are the creation of Democratic policies.”

As Edsall notes, the Trump administration’s extensive intrusions into the private sector are in direct conflict with traditional Republican and conservative beliefs, which held that government interference with the free market should be limited. Trump, of course, is  neither conservative nor Republican–for that matter, he appears incapable of developing anything remotely like a coherent agenda, economic or otherwise. For him, government regulation is not ideologically an anathema; it is a tool to exercise power and control in his constant pursuit of self-aggrandizement.

Trump is often referred to as “transactional,” but a more accurate description of his corrupt dealings would be “quid pro quo.” Private sector businesses needing government approvals (or needing government authorities to ignore improper activities)  “bend the knee” in exchange for those desired outcomes. In effect, they have acquiesced to the government’s control of business decisions–the sort of control that characterized fascist regimes.

The administration’s growing chokehold on the private sector are also tools allowing Trump and MAGA to pursue their culture-war aspirations. According to an email to Edsall from a political historian at George Washington University,

The president’s use of the government’s power to approve corporate mergers, the fear — and the actuality — of lost research funding and government contracts have enabled Trump to shift the culture in his ideological direction. Social media companies have lifted bans on far-right hatemongers and made X and Facebook more hospitable to pro-MAGA content. Universities such as Columbia; law firms like Skadden, Arps, Slate, Meagher and Flom; and media institutions like ABC News have reached settlements with the Trump administration to stave off existential threats, including canceled licenses, loss of research funding and revoked security clearances.

CBS, once a key source of critical reporting on the Trump administration, has, for example, been taken over by Larry and David Ellison, Trump allies, who put Bari Weiss, the anti-woke publisher of The Free Press (and a former writer and editor for Times Opinion), in charge of the news division.

The takeover of information sources may be Trump’s most politically consequential victory. As Edsall reports, “key platforms and hubs in the social media complex — TikTok, Meta, X — have been taken over by Trump allies or have shifted right to accommodate Trump,” shielding low-information voters from vital information, and spreading bigotry and propaganda.

These incursions haven’t been limited to the private sector; as noted sociologist Kim Lane Scheppele wrote:

The entire nongovernment community (or — as we might say in tax parlance — the 501(c)(3) sector) has been threatened with a combination of loss of tax exemptions, cuts to federal funding and potential investigations.

Some statistics indicate that fully one-third of NGOS incorporated in the U.S. lost funding in the first half of 2025.

As a professor of public policy noted in his email, every part of Trump’s government is intent upon bringing private institutions to heel.

The old GOP is long gone.

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Markets And The Rule Of Law

I talk a lot about the rule of law–mostly in the context of ensuring fair play and civil peace. But as a recent essay by Catherine Rampell reminds us, the rule of law is also essential to the operation of a market economy.

A country that protects property rights; that has free capital markets; that has a stable and predictable regulatory regime; where all citizens are equal before the law; where individuals don’t fear being expropriated by the state without cause; and where private contracts can be enforced regardless of political connections is generally a better place to do business. All these features are among the reasons the United States has long been the richest country on earth. It’s also why we have attracted so much foreign capital.

When property rights aren’t protected and the justice system operates to reward friends and punish enemies, doing business is harder. People don’t have the certainty they need to invest here, or study here, or start businesses here.

Rampell is absolutely correct. Economic experts have long emphasized the importance of the rule of law to market performance. Predictability is particularly significant–it allows businesses to plan, invest and price goods with reasonable certainty that everything won’t go south without warning.

Even more important is the enforcement function. A reliable and impartial legal structure allows confidence that contracts will be enforced in accordance with their terms. When a business owner cannot rely on the courts to enforce agreements and laws mandating fair economic play, like anti-trust, companies end up depending on personal relationships– family networks, political influence, or bribery-based “arrangements”– which are both far less predictable and far less fair. (Can we spell Russia?)

Then there’s the protection that rule of law regimes provide for property rights. Critics of capitalism tend to dismiss the importance of that protection, but it is critical to the operation of the economy. Investment only occurs when ownership is secure–when clear legal title allows business-people to buy, sell, collateralize and insure property. When any property can be arbitrarily seized (either by the state or by powerful actors), capital investment gives way to defensive hoarding.

Numerous economists will also point out that the ability to rely on a fair and impartial legal system lowers transaction costs and makes markets more efficient. Rule of law systems with standardized rules reduce the need for expensive private enforcement, constant renegotiation, or the excessive premiums necessitated by increased risk. As an economist friend once told me, the rule of law obviates the need for private militias, political patrons, or corrupt intermediaries. 

 Bottom line: the rule of law makes markets cheaper to operate, and it should go without saying that lower transaction costs benefit consumers–a lesson we’re re-learning as Trump’s tariffs increase those transaction costs.

One of the most worrisome aspects of the kakistocracy we increasingly inhabit is the steady erosion of genuine market capitalism and its replacement by what is sometimes called corporatism, or crony capitalism. When power replaces the rule of law, markets devolve into corruption, uncertainty, capital flight, and monopoly power.

What defenders of capitalism often misunderstand is that markets can’t operate properly in the absence of regulation. Antitrust law, bankruptcy law, and anti-corruption laws prevent powerful folks and insiders from rigging the marketplace. Sound laws and regulations ensure that investments will flow to firms that are seen as productive, rather than to firms that are politically connected. Crony capitalism suppresses productivity and innovation.

A market economy is not self-sustaining without an adequate rule of law.

I consider myself a capitalist. I’m a fan of market economics, and accordingly, I recognize the importance of the rule of law to the proper operation of those markets. But I also understand that there are functions that markets cannot perform. Economists talk about “market failures” that require government intervention, but the simpler explanation is that, in any society, there are functions that require collective rather than competitive action. 

Government is our mechanism for those collective activities, for providing the physical and social infrastructure within which markets can operate and people can pursue their individual life goals. The rule of law is an essential part of that infrastructure.

The thorny issue that underlies our most important policy debates is identifying which goods should be provided collectively by government and which should be left to the market. (If we’ve learned anything from the failures of “privatization ideology,” it is that things like education and health care are not consumer goods.)

Tomorrow, I’ll consider that fundamental question…

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It Depends And It’s More Complicated Than That

As I like to tell my students, I consider my Law and Policy class effective if, after taking it, they use two phrases more frequently than they did before they enrolled: “it depends” and “it’s more complicated than that.”

That measure of effectiveness would undoubtedly be incomprehensible to the voters who  installed as President of the United States a man who had neither experience with nor even a rudimentary understanding of government. Evidently, people who would agree that doctors need to attend medical school and serve a residency in order to treat the complexities of the human body think managing an organizational behemoth responsible for the common lives of over 350 million people can be handled by anyone able to fog a mirror and regurgitate talking points.

Brink Lindsey and Steven Teles disabuse readers of that idiocy in the book they recently co-authored: “The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality.” In it, they deconstruct the mindless mantra of “deregulation.”

When Republicans look at what they’ve gotten out of their current moment of unified government, they can point to cutting corporate taxes, some judicial appointments and … not much else. Beyond that, they claim that they’ve teed up the economy for explosive growth through the magic of “deregulation.” But deregulation is a term that should be banned from the nation’s policy lexicon, mixing as it does equal parts wholesome and foul — in this administration, almost exclusively foul.

As they proceed to explain, whether rolling back a given regulation will be helpful or damaging depends on the nature  and purpose of the regulation. It’s more complicated–much more complicated– than the one-size-fits-all “get government out of the way” zealotry that has increasingly characterized the GOP.

The wholesome justification for deregulation arises when government uses its power in ways that gum up the dynamic power of markets. In the long run, our nation’s wealth and the opportunity it provides for improving quality of life depend on the forces of creative destruction. In competitive, open markets, incumbent actors cannot prevent challenges from more nimble competitors, armed with new products or more efficient ways of organizing the production process.

The authors identify a number of regulations that do “gum up” markets, and agree that eliminating or relaxing them would be healthy for the economy and likely to reduce the growing gap between the rich and the rest.

They also note that those aren’t the regulations being eviscerated.

Unfortunately, this is not the kind of regulation that the Trump administration has been attacking. Instead, it has been sharpening its knives for precisely the kinds of regulation that, far from distorting markets, help to improve them. In particular, regulation is often necessary to a properly functioning market when, in its absence, businesses can make a profit by pushing costs onto others, in effect forcing others to subsidize their bottom line. In two areas, the environment and finance, these are exactly the sorts of market-improving regulation that the administration has put in its cross hairs, with the effect of increasing profits via freeloading.

In an article in the New York Times, Lindsey and Teles make the point that there is a critical difference between regulations that operate to protect dominant business interests and regulations that legitimately, if often imperfectly, address real problems of market failure.

Effective deregulation requires knowing the difference.

For that matter, effective government requires public managers who respect evidence, are committed to the common good, and understand how our complicated government works. The looters who are currently in control of all the levers of the state don’t come close to meeting those criteria.

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Yep….

In the wake of November’s election, my biggest concern was the prospect of Donald Trump in charge of a unified government: with a Republican House and Senate, I was sure we would see legislation canceling progress on the environment, reversing rights for women, gay citizens and immigrants, and eviscerating public education, among other nightmares.

Jennifer Rubin, a conservative columnist for the Washington Post, recently explained why we have yet to see that legislation. Her column was titled “Here’s why, even with control of everything, the GOP can’t govern.” She began with a quote from the Wall Street Journal:

Many popular postelection wagers took a hit last month after Republicans failed to repeal and replace the Affordable Care Act, which highlighted the difficulties they could face advancing new legislation even while holding the White House and both houses of Congress.

She went on to describe the current situation.

If one had any doubt, this week’s events — a half-baked tax proposal that would not pass one let alone two houses, another failed effort at Trumpcare, White House bluffs and retreats on the budget — should have disabused observers of the notion that Trump’s agenda would sail through Congress…

Trump cannot manage to devise attractive legislation or get down in the weeds of negotiation, while House Speaker Paul Ryan (R-Wis.) seems willing to accommodate whatever group is currently rocking the boat, regardless of the likelihood of success. Neither Ryan nor Trump can lead a successful legislative effort. As a result, members of Congress figure there is little reason to stick their necks out for either one. “Members of Congress have watched with horror as Trump thrashed about in Washington with little predictability, guided by top aides with little experience in the trenches of government,” Time reports. “Staffers with decades of Hill experience find themselves sidelined by political neophytes who think barking orders can get Congress to act. More than once, White House officials have told Paul Ryan that his role as Speaker may be in jeopardy if he does not do more to help Trump.”

Rubin notes that –given his priorities–Trump’s inability to get things done is a gift; gridlock looks pretty good when balanced against this administration’s goals.

This is not to say we don’t have substantial problems or need competent leadership. However, this president and this Congress have not a clue how to proceed. They would potentially do much more harm than good. They are prisoners of extreme ideology, unrealistic expectations and their own incompetence.

Wonkblog recently came to a similar conclusion. In a column tracing the reasons that  financial markets aren’t betting on a big Trump stimulus anymore,  Matt O’Brian wrote

But a funny thing happened on the way to Trump’s making great deals. It turns out that everything is more complicated than anyone named Donald Trump knew. It isn’t easy to get Republicans to agree on a health-care plan when some of them think the problem with Obamacare is everything, and others think it’s just the name. Or to get the whole party to agree on which tax loopholes to close to pay for all their tax cuts. The result, according to Trump, is that health-care reform is always a week away, and tax reform, always two weeks.

In the meantime, though, the economy is still chugging along at the same 2 percent pace it has been the whole recovery. So when you add it all up — a government that’s doing nothing today, that looks as if it will be doing nothing tomorrow, and an economy that’s doing nothing different from what it has been the last decade — there’s no reason to expect the dollar to go up anymore. And it hasn’t. It has given back most of its post-election gains to now only be up 1 percent over that time.

I don’t know about you, but I’m gratified that these clowns seem unable to learn.

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The Problem Isn’t Capitalism

‘Tis the season to bemoan crass capitalism. But we should think before joining that chorus.

Markets are wonderful things; as Adam Smith explained many years ago, the “invisible hand” channels self-interest toward socially desirable ends. Market competition has given us better goods at lower prices, and has demonstrably been a “rising tide” lifting many boats.

Why, then, is America’s capitalist economy generating so much criticism? What is the cause of the country’s growing and very worrisome inequality?

Two reasons are pretty apparent.

First, the system we currently have in the U.S. is not market capitalism. It is corporatism. Corporatism has been defined as the organization of society by major interest groups, specifically corporations. It isn’t exactly a secret that the last thing many of our captains of industry want is genuine competition. The legions of lobbyists sent to Washington and state capitals are not arguing for open markets; they are vying for competitive advantages and taxpayer subsidies.

The second reason is less obvious, but no less consequential. Markets don’t work for everything.

In the areas of the economy where market competition is appropriate—in the production of consumer goods and services, most obviously—markets operate as Smith’s theory suggests. But as every student of economics learns, there are areas where competition is unworkable.

Historically, for example, America has regulated utilities, and (at least since Teddy Roosevelt) tried to prevent domination of a market through monopolistic practices. (As technologies and markets change over time, these categories may shift, and it isn’t always clear that our governing institutions keep pace, but that is a subject for another day.)

What doesn’t change, however, is a foundational premise: In order for a market to function, there must be a willing buyer and a willing seller, both of whom are in possession of the necessary relevant information. When there is a significant and unavoidable asymmetry of knowledge or information, a true market cannot exist.

Health care is the poster child for that asymmetry. Not only does the consumer lack the information and expertise necessary to “shop” for a seller/provider, the realities of illness make it likely that she will lack the time needed to evaluate her options. Add to that the way in which the health insurance industry has developed, with “in network” and “out of network” providers, and you don’t have to be an economist to recognize that market principles are simply inapplicable.

Most Western nations came to that conclusion many years ago, and most have national health care systems. Here in the U.S., even the modest movement toward government-insured access to health insurance has met with hysterical resistance—and lots of rhetoric about creeping socialism and the superiority of markets.

The immorality of this refusal to make important distinctions was most recently highlighted by the actions of one Martin Shkreli, who bought the rights to a drug and raised its price 5500%. As several commentators noted, America is the only developed nation that lets drug-makers set their own prices — maximizing profits the same way that sellers of chairs, mugs, shoes, or any other seller of manufactured goods would.

Shkreli’s behavior underscores the irrationality—and yes, the immorality—of America’s healthcare system, where corporations set our public policies and insist upon market principles in an area where, by definition, genuine markets cannot function.

The moral of this story: don’t blame capitalism. This isn’t it.

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