Dear friends of Istituto Acton,
Populism and free markets have a strained relationship. On the one hand, free markets have raised the living standards of ordinary people beyond belief and given them opportunities their ancestors couldn’t possibly imagine. So one would think any leader who wants the people on his side would promote market economics. On the other hand, actual populists around the world demagogue against capitalism any chance they get and the people often approve, even though soaking the rich rarely helps the non-rich and usually makes everyone worse off.
Populism also makes for strange bedfellows. Take Pope Francis and Donald Trump, for instance. They are certainly populists of very different sorts, but there is one issue that unites them – both are harsh critics of economic globalization. Francis does explicitly and by name what Trump does implicitly and in practice. In fact, they seem to derive much of their popularity precisely because they attack free markets as an enemy of the people. Their worlds will collide later this month when Pope Francis visits America’s centers of political and financial power – K Street and Wall Street will not be treated nicely, we can be sure.
But really, how can the pope and the Donald see eye-to-eye on anything? Isn’t Francis the compassionate voice of concern for the world’s marginalized and excluded, while Trump is the aggressive, often insulting face of strident nationalism? Trump’s answer to America’s illegal immigration problem (i.e., building a wall across the border with Mexico, deporting illegals and denying those born in the US birthright citizenship) couldn’t be more opposed to Francis’s. Trump would strengthen the US military and has said that he doesn’t ask God for forgiveness. There couldn’t be a starker contrast between Christian humility and American bravado.
Trump may seem to be the poster child of capitalism, but it turns out that he is actually against free trade. Like Ross Perot, another businessman-turned-populist who ran for president in 1992, he promises to bring back manufacturing jobs from Mexico. He promises to start a trade war with China. He even manages to be for both lower and higher taxes on the rich. Trump thinks that mastering the art of negotiation is how individuals and nations become wealthy, often at the expense of their neighbors, and for too long Americans have been outwitted by their competitors. Trump the president-negotiator will make America “great” again. His way of thinking is closer to mercantilism than capitalism.
How does Pope Francis disagree with “Trumponomics”? He certainly takes a more lenient approach to immigration, as he will surely urge Americans to be more, rather than less, welcoming of immigrants regardless of their legal status, just as he has urged Europeans to do so. He criticizes economic globalization for creating vast disparities in wealth, thereby causing immigrants to leave home for opportunities abroad and often risking their lives in the process. This is the “economy that kills.” Francis blames the rich for marginalizing the poor; Trump blames the poor for taking advantage of the rich. But Francis and Trump both see economics as a zero-sum game where wealth and jobs are won or lost, not created.
As a result, they both see economies as something to be “managed,” either by national (Trump) or international (Francis) authorities. Trump makes no secret of his ability to haggle deals with politicians to allow his business to succeed, and he boasts about doing the same on behalf of the nation as president. Like all capitalists, self-interest is his guiding principle but he does not say whether the interests of politicians and businessmen always align. They may or may not; it all depends on which side of the table Trump is sitting. The point is that Trump is a winner and he alone can snap America’s losing streak.
Francis, on the other hand, takes a low view of self-interest and speaks of the common good rather than winning and losing. International authorities who have no particular national or personal interests (if such people indeed exist) should oversee the world’s economy. Wealth should be redistributed and competition limited in the name of fairness and equality. If economic planning hasn’t worked in the past, it’s only because the planning wasn’t broad or coordinated enough. A global economy requires global planning at the service of humanity at large.
As populists, Francis and Trump trust the wisdom of the people against the elites, even though some elites (such as themselves) must still protect the people against other elites (especially bankers). They both have inspiring messages, but radically opposed understandings of the good life. Trump’s idea of a decent standard of living would dwarf Francis’s, for example. (Francis’s good life probably can’t even be measured.) They do, however, share a common assumption about economic activity: there are certain, definite winners and losers, and governments have a large role in determining them. Neither trust markets because markets are always rigged by someone; both would like markets to be rigged differently by different elites.
The free-market answer to both Trump and Francis is that no one, no matter how wise or powerful, can successfully “manage” an economy because, as Friedrich Hayek put it, no one has the requisite knowledge of the innumerable transactions that take place in a local, let alone a global, economy. Public choice economists such as James Buchanan extended self-interest and rent-seeking behavior to supposedly disinterested public officials, describing “politics without romance”. Laws and regulations are absolutely necessary in a functioning market economy but they can’t be used to “perfect” a system that never claimed to be so. Open and fair competition is what should replace rigged markets, not rigging of a different sort.
Capitalism is an integral part of the liberal democratic order that has shaped North America and Western Europe for the last 300 years and has had its share of friends and enemies (among the intellectuals and moralists, certainly more enemies than friends, as Trump would say). At the heart of this political arrangement, capitalism is necessarily subject to political pressures, which is why it depends on limited government and the distinction of public and private spheres of life. Populist leaders are always tempted to erase such limits and distinctions when they benefit politically from doing so, even if it doesn’t make economic sense. Populism attacks markets on economic grounds but for non-economic purposes; its aim is beyond economic growth.
Despite being a successful businessman, Trump has captured the rhetoric and importance of non-economic goods such as leadership, national pride and social cohesion. He follows Vladimir Putin and Silvio Berlusconi in their hypocritical appeals to the people who suffer from the red tape and cronyism of their own making. Can such a “strong man” get elected in today’s America? We should remember that Ronald Reagan’s favorite president was “silent” Calvin Coolidge. Americans typically expect less from their politicians and understand that fiery rhetoric and political skill are no substitutes for sound economic policies. In the end, Americans are still not ashamed to be bourgeois capitalists.
As Jeb Bush has reminded us, Francis is a spiritual leader and shouldn’t be expected to have a remedy for our economic ills. His concerns are of a naturally higher order, so the coherency of his economic remarks is not of primary importance. But, contra Bush, he still has the right and the duty to address our moral situation, even if it seems to involve “merely” material concerns. Man does not live by bread alone, but he still needs bread, and nothing produces bread like a properly-functioning market economy. (There is, of course, another kind of bread that market does not produce, about which the pope has much to say.)
It is not surprising that Pope Francis and Donald Trump are popular at a time of economic stagnation and uncertainty. They approach the problem from vastly different perspectives, yet they both think that our current economic system is broken and corrupt, and many people quite clearly agree with them. Unfortunately, their solutions would also make the same populist mistake in aggravating the perceived wrongs of the system by locking out competition and not allowing the rest of us the opportunity to advance. That’s all we can ask for, because we will always have the elites among us.