Postliberals’ Economic Dreaming – Samuel Gregg

Across the Western world, right-leaning postliberal groups are proliferating. Postliberals do not agree about everything, and their criticisms of what they call liberalism vary. But if there is anything they share, it is deep skepticism about free markets.

Throughout their writings, postliberals insist that the state needs to orient the economy towards the realization of specific goals. The ends that they have in mind range from the broad and vague (“more localism,” “greater community,” etc.) to specific objectives like forcing a sectoral adjustment away from services and towards manufacturing. Depending on which postliberal you talk to, the means might include increased welfare spending, bigger unions, higher tariffs, more regulation and industrial policy, subsidies to incentivize demographic growth, and the government taking stakes in publicly traded companies, to name just a few.

Unfortunately for postliberals, all these measures come with well-established problems. Tariffs, for instance, undermine the competitiveness of businesses and economies and raise prices for everyone. Industrial policy breeds cronyism and assumes knowledge about the future that humans do not possess. Big welfare states produce dependency and enormous public debt. Big unions severely compromise labor market flexibility.

Whenever these points are made, few postliberals express much willingness to rethink their position. For postliberalism is characterized by a disinterest in understanding economic truths and, to that extent, is marked by a freely chosen economic obliviousness.

Factually Blind

This conscious blindness becomes obvious when one examines postliberal portraits of our present economic circumstances. Listening to contemporary postliberals, one would think that, until recently, economic policy throughout the West has been dominated by market liberals since the 1980s.

It’s difficult to understate how inaccurate such claims are. Take, for instance, government spending. In 2024, the Organization for Economic Cooperation and Development’s average for general government spending as a percentage of GDP was a shocking 43 percent. No one will be surprised that France had the highest number, clocking in at just under 60 percent. But America’s latest recorded number (2023) of 39 percent should cause some people to pause before labelling the United States as the land of unfettered markets. The question for postliberals is this: in what universe do such figures show that Western nations were overrun by a capitalisme sauvage from 1980 onwards?

The proliferation of regulation and welfare supplies further evidence of just how thoroughly government is immersed in everyday Western economic life. In the United States, for example, the Code of Federal Regulations grew from under 10,000 pages in 1950 to an astronomical 190,260 pages in 2023. Incidentally, that growth continued unabated in the heyday of “neoliberalism” during the Reagan, Bush I, Clinton, and Bush II administrations. As for welfare, across the Atlantic, approximately 23 percent of Britain’s working-age population receives some form of government benefits. So much for the triumph of Thatcherism.

These and many other details illustrate that we do not live in laissez-faire economies. They also underscore that, in many respects, market liberals have been spectacularly unsuccessful at rolling back the state’s steady encroachment into Western economies that began over a century ago. 

Whenever I have made these points to postliberals, the answers have been revealing. They include statements of polite indifference (“that’s interesting”) or non-sequiturs such as the ubiquitous “you don’t know what time it is.” Most revealingly, however, many responses have reflected a general skepticism about economics per se. One prominent postliberal once described economics to me as a “great mystery.” Another dismissed it as “glorified materialism.”

Therein lies a basic problem with postliberal commentaries on economic topics. Much of it is unconcerned about the insights that economics offers us into reality, not least because such knowledge raises awkward questions about the wisdom of many postliberal economic schemes. At best, this amounts to imprudence on postliberals’ part. At worst, it constitutes arrogance and a determination to stigmatize any idea that might obstruct implementation of some demonstrably flawed policies.

Willed Ignorance

If good economic policy is to be politically viable, you have to consider many factors, including how much you are willing to make compromises. But anyone serious about developing sound economic policies must first grasp some basic and empirically verified economic truths about the relevant subject matter, be it taxation, trade, wages, or interest rates.

To be sure, economists disagree about many policy questions. These often reflect different normative priorities or technical disagreements. But whether they are a neo-Keynesian or a committed Friedmanite, few economists will claim that “incentives don’t matter,” or “market prices should be ignored,” or “there are no unintended consequences,” or “we can disregard the relationship between supply and demand,” or “comparative advantage isn’t real,” or “we can live in a trade-off free world.”

Yet postliberals—and their progressive equivalents like modern monetary theory (MMT) proponents—do regularly propose policies that seem either unaware or deliberately heedless of such things. Take, for example, one postliberal’s recent proposition, “We’ve got to solve the home affordability crisis in America. The market can’t do that, but the state can. We need a 3 percent fixed-rate 30-year mortgage for American citizens who are married filing jointly under 30. Call it the New American Homestead Act.”

One problem with this proposal concerns its diagnosis. The supply of housing is tight in many parts of America (especially major urban areas) because of the underbuilding, which flows from zoning restrictions and other forms of regulatory restraints. In other words, government intervention—not the market—is a major contributor to housing shortages and growing unaffordability. That should make anyone wary of imagining that more government intervention can fix America’s housing challenges.

Anyone, postliberal or otherwise, who disdains the realities to which economics insistently directs us should refrain from commenting on topics like interest rates, trade policy, or finance.

A more general problem with this postliberal scheme is that (like any state-mandated price) a state-mandated interest rate (price) for mortgages for one category of people would distort the housing market’s ability to reflect what’s really going on in this economic sector. When prices are allowed to adjust naturally, they transmit vital information about consumer preferences (demand in the form of borrowers seeking mortgages) and resource availability (supply in the form of available homes or loanable funds). High mortgage rates signal scarcity. This encourages suppliers to produce more, and consumers to reduce their consumption of other goods so that they can save for down-payments. Low mortgage rates signify an abundance of supply and weak demand, prompting the opposite reaction.

By contrast, a state-mandated 3 percent mortgage rate that is significantly below market rates (6-7 percent in recent years) would artificially lower the cost of borrowing for eligible buyers. But this garbles price signals by making borrowing appear cheaper than the market’s assessment of consumer preferences and the available housing supply. The increased demand that would flow from what would effectively be subsidized mortgages would likely outstrip supply, thereby driving housing prices higher, especially if no zoning deregulation occurs.

The Price of Disinterest

That the United States has an affordable housing problem is not in dispute. But the above case illustrates how insufficient attention on postliberals’ part to something as elemental as basic price theory shows up in policy proposals that, if enacted, would exacerbate the problems they want to solve.

Underlying all this is a deeper intellectual problem that afflicts postliberal economic commentary. In his famous Essay on the Nature and Significance of Economic Science (1932), the British economist Lionel Robbins emphasized how critics of economics “inspect with supererogatory zeal the external façade, but they shrink from the intellectual labor of examining the inner structure.” In other words, they are unwilling to do the demanding work of acquainting themselves with the specific form of logic that underpins economics as a social science.

The German economist Wilhelm Röpke—who was deeply interested in many of the questions that absorb postliberals—was fond of stressing economics’ attention to what he called in his 1937 book, Economics of the Free Society, “the logic of relationships.” Economics’ focus on these interdependencies was, Röpke believed, one of the most important things for non-economists to understand.

It was “second nature,” Röpke maintained, for the economist to think in terms of empirically verifiable relationships; to know, for example, that wages and employment levels are reciprocally related, or that certain economic choices have identifiable side-effects (e.g., minimum-wage laws tend to price low-skilled workers out of labor markets). Consistent study over time of these relationships and the achievement of a high degree of predictability about the side-effects of specific decisions was, Röpke stated, economics’ great gift to the growth of human knowledge. As the legal philosopher John Finnis observes, much of economics’ explanatory power is derived from the way that it “systematically calls attention to the side-effects of individual choices and actions and behavior.”

Once you grasp that point, the difficulties with many postliberal economic proposals soon become evident. You recognize, for example, that a well-intended proposal to help young couples buy a house via a state-mandated mortgage interest rate has unintended but foreseeable consequences that make matters worse for the very people you want to assist. The logical next step would be for postliberals to disown such ideas. The fact that many won’t do so suggests that they are driven more by ideology than reason.

Dark Postliberalism

Indifference to basic economic concepts has manifested itself in past expressions of postliberalism—including the darkest variety. In the 1930s, Röpke found himself confronting specific expressions of postliberal economics, specifically the economic policies pursued by fascist regimes in Italy and Germany. The results of his reflections were published in a 1935 Economia article titled “Fascist Economics.” Many of his observations are as applicable to the postliberal economics of the present as they were to those of the past.

Having read through fascist intellectuals’ economic writings, Röpke was struck by the sheer nebulousness of their ideas. Röpke was as fiercely anti-communist as he was anti-fascist, but he considered the “anti-capitalistic program of Communism” to be “at least clear and unequivocal.” Conversely, Röpke wrote, the economic commentary of Italian fascists and German national socialists was characterized by a “loquacious vagueness which irritates the admirer of lucidity in style and thought as much as it seems to attract the masses.” He found himself “bewildered by an atmosphere of lyrical unreality and of terminological futility” that permeated these texts. But, Röpke added, “What else can we expect from a combination with so many and largely elusive variables, where the leading ideas are of a nebulous character, easily changeable and interwoven?”

There was little concern, Röpke noted, in books like Werner Sombart’s Deutscher Sozialismus (1934) for economic theory or even the presentation of “a fixed and clear-cut program.” Instead, there was rampant romanticism and nostalgia about the past, combined with “philosophizing about the alleged superiority of so-called political considerations over economic ones—‘der Primat der Politik uber die Wirtschaft’ in the terminology of German literature.” That went together with a “haughty attitude” towards the “bread-and-butter questions” with which economists typically concerned themselves, and that no amount of talk about national greatness could disguise.

By no means am I suggesting that today’s postliberals are proto-fascists. But the parallels between their attitudes toward economics and those described by Röpke are unmistakable. This suggests a strong connection between rejecting liberalism and a refusal to take economics seriously. And that in turn points to a postliberal disinclination to accept certain realities concerning the human condition, whether it is the workings of self-interest, the function of prices and incentives, or the melancholy fact that good intentions are not enough.

Not everyone needs to be an economist, and the economist F. A. Hayek’s admonition that “an economist who is nothing but an economist cannot be a good economist” cannot be repeated enough. But anyone, postliberal or otherwise, who disdains the realities to which economics insistently directs us should refrain from commenting on topics like interest rates, trade policy, or finance. Our knowledge may be limited, but ignorance is not always bliss. And economic ignorance is downright destructive.