Free Market Fantasies

Anyone who has listened to right wing radio, Republican rhetoric, or to Rush Limbaugh ”dittohead” true believers should be familiar with the “free market can solve all America’s problems” rhetoric that keeps returning to the forefront of American political debate.  I thought this rhetoric was so discredited following the economic collapse that it would be a while before it resurfaced, but that turned out to be a poor assumption.  Being a conservative with a megaphone, it turns out, means never having to say you’re sorry or consider alternative evidence and points of view.


For those who doubt this last statement, you should listen to right wing radio sometime.  The non-conservative “guests” on these programs exist largely as whipping boys for the egos of the rightwing authoritarian pundits of the day, including the likes of Bill O’Reilly, Sean Hannity, Rush Limbaugh, and others.  Seldom are these guests allowed serious space to disagree with their hosts, as the slightest sign of disagreement is met with an immediate interruption, talking over, and caustic attacks of those with whom the Hannitys and Limbaughs of the world disagree.


What makes the smug contempt and arrogance of the right-wing punditry all the more obnoxious is their complete refusal to engage in any sort of empirical evidence that challenges their neoliberal worldview in the “magic” of “free markets.”  Their dominance of television and talk radio, as a result, is truly shameful in light of their status as “useful idiots.” 


Tune into their programs, and you’ll hear Hannity and Limbaugh lambaste Democrats for ill advised spending and taxation that stifle the economy and run up “unsustainable, crippling debt” for future generations.  The only way to stimulate the economy, these pundits warn, is not to pass aid packages to keep masses of teachers and other public workers from being fired, but rather to pass tax cuts for the rich and watch the benefits “trickle down” to the masses. 


Forget about extending unemployment for the masses.  Another stimulus? No way.  That would be “reckless,” since we all know that the “free market” requires massive deficit spending only for corporate welfare and warmongering.  What’s saddest about all these promises from the right is their complete disconnection from reality. 


Consider some basic economic indicators uncovered by social scientists who are serious about the study of poverty and economic growth.  Larry Bartels finds in his recent book, Unequal Democracy, that the vast majority of Americans (save the wealthiest one to five percent) actually saw their incomes (pre and post tax) grow far more rapidly under Democratic than Republican presidents over the last seven decades.  Furthermore, the growth seen in the masses’ incomes – greatly advanced by the expansion of social welfare programs for the masses and truly needy - were accomplished with no serious inflation when Democrats were in power. 


This contradicts Republican and conservative/big business warnings that progressive taxation on the rich, and initiatives like the minimum wage and greater unionization cause inflation.  As the conservative argument goes, if workers “artificially” succeed in raising their wages, all that businesses will do is simply raise prices on goods to compensate for the new costs.  In response, workers will try to negotiate higher wages again, resulting in another raise in prices of goods, causing an endless cycle of inflation and devaluation of the dollar.  What’s important about Bartel’s statistical analysis is that such predictions don’t appear to come true when consulting the post-World War II economic record.  In short, icreased subsidies for workers aren’t inevitably followed by runaway inflation.


What about the dogma that only tax cuts for the rich promote growth?  That myth has been demolished by the Economic Policy Institute, which in a recent study found that the post Bush tax cuts era was actually marked by far weaker economic growth than previous economic cycles that didn’t see massive tax cuts for the rich. 


What of the claim that the economy performs better without all the regulations on business imposed (albeit tragically less so in recent years) by the Democratic Party?  What of the claims that increased taxation on the rich and increased social welfare spending stifles economic growth, since it takes money away from the rich (which is allegedly needed for investment purposes) and gives it to the lazy, undeserving poor?  It turns out that these claims are also without merit. 


My own analysis of post-World War II economic data finds that economic growth is typically higher when Democrats control government, when compared to periods of split government and Republican government. Lagging growth rates for one year (as is standard in econometric studies of economic growth in relation to partisan public policy effects), I find that the national economic rate growth averaged 8.2 percent per year over the last 65 years when Democrats controlled Congress and the presidency.  In contrast, growth rates during Republican control of government averaged 5.5 percent per year.  Growth during times of split control of Congress and the presidency stood at 6.2 percent per year.  Supplementing my findings are Bartel’s, which also show that the economic growth that does actually take place during Republican control of government typically benefits the richest one to five percent, at the expense of the rest of the population, who see their incomes stagnate to decline.  In other words, economic inequality greatly increases between the rich and everyone else when Republicans are in office, despite the growth that one sees during these periods and the promises of mass affluence emanating from the talking heads on the reactionary right.


One might wonder why Republicans and business (and a growing number of Democrats today) promote neoliberal “free market” reforms if they are not even as effective as welfare state capitalism in promoting economic growth.  Republicans and business elites don’t need to worry about relatively higher rates of growth (compared to growth under Democrats) if current levels of profits are acceptable.  If one looks at recent economic conditions, corporate America has returned to pre recession levels of profitability, despite the fact that unemployment is rising, the housing market is contracting, and overall economic growth is extremely weak.  Instead of promoting strong growth, Republicans and business leaders have been happy simply to help companies relieve themselves of older product stocks, while saving dramatically on operating costs by engaging in mass layoffs and getting remaining workers to pick up the slack (these workers, by the way, won’t be getting raises, but will be working longer hours for less money, as their wages deteriorate due to inflation).  This new “leaner and meaner” business model may be good for corporate America, but it’s toxic for everyone else.


I make distinctions between the Democratic and Republican Parties not to idealize Democrats and demonize Republicans.  The Democratic Party today is a shell of what it once was during the times of FDR and LBJ, when major expansions of the social welfare state were a high priority (think establishment of Social Security, the minimum wage, Medicare, and Medicaid).  Obama is certainly no FDR or LBJ, as his corporate friendly health care reform demonstrated.  The reforms were celebrated by the New York Times as “boons” for the pharmaceutical industry, for private hospital care, and for private medical practices, although they also were accompanied by some modest benefits for the poor (prohibitions on health care denials based on pre-existing conditions and the expansion of Medicaid for the poor).


These admittedly significant gains for the less fortunate, however, are a far cry from the dramatic steps forward in increasing the size and strength of the social welfare state that were seen among Democratic presidents prior to the neoliberal era.  In other words, a significant expansion of Medicaid, accompanied by a curbing of the worst excess of the private health care system (pre-existing conditions denial) is not the modern day equivalent that establishing Medicare, Medicaid, or Social Security was in the past.


My own economic analysis of differential national growth rates under Democrats and Republicans doesn’t celebrate Democratic actions in the neoliberal era (usually traced back to the early 1980s onward).  The vast majority of years counted in my study of growth under unified Democratic control of government took place before the neoliberal Reagan era, not after.  If the Democratic Party wants to remain relevant today, its members should understand that the “Blue Dog” Republican lite route will not help them achieve success.  That approach has already been monopolized by the other pro-corporate party.  To succeed in winning back public support over the long term, the party needs to return to what made it successful in the past: a renewed commitment to social welfare spending and subsidies for the masses.  It is only through this approach that the party will succeed in returning to Americans a form of economic growth that benefits the masses.  It is only through the mass public forcing the Democrats to adopt real progressive stances, however, that we can expect to see any real change in national economic policy for the betterment of all.




Anthony DiMaggio is the editor of media-ocracy (www.media-ocracy.com), a daily online magazine devoted to the study of media, public opinion, and current events.  He has taught U.S. and Global Politics at Illinois State University and North Central College, and is the author of When Media Goes to War (2010) and Mass Media, Mass Propaganda (2008). He can be reached at: [email protected]

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