In the first presidential debate, we heard in Donald Trump’s proposals what Cornel West has called “free market fundamentalism.” Trump believes that tax cuts for the wealthy and new trade deals are enough to bring traditional jobs like manufacturing back to the United States. He and others have lost sight of the fact that virtue, in economics and in politics, is a mean between extremes, as Aristotle instructed.
There are at least four big mistakes in the extremism of free market fundamentalism.
▪ The first tragic mistake is to think that tax cuts for the wealthy will necessarily translate into returns on investment in the United States.
So much investment today is concentrated on the parts of the world rapidly growing, like China, India and South Korea. If a wealthy person had $1 million more, he or she might buy shares in China Mobile, for example.
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If you give a mother food stamps in Lexington, by contrast, we know that she will spend in them in the United States.
▪ The second terrible mistake of free market fundamentalism is the foolish effort to compete for the bottom, in taxes or in regulations.
West was right to call believers like Trump “fundamentalist.” They believe despite countless counterexamples that prove them wrong.
If lower taxes and fewer regulations were a recipe for economic growth, Mississippi and Alabama would be among the wealthiest states in the country. The reverse is true.
Taxes are certainly one of many factors in a business’s decision to locate here or there, but countless others matter at least as much, if not more. A business that needs to hire people considers their skill level. The defining feature at issue is education. And, in a place with radically low taxes, little money is invested in education. Lowering taxes, therefore, can undermine more important business considerations.
▪ The third absurdity of free market fundamentalism suggests that the wealthiest Americans need to pay less in taxes.
While there are plenty of wealthy people who pay a great deal in taxes, Trump thinks they are dumb. Paying no taxes “makes me smart,” he volunteered.
Trump is not alone in evading taxes, of course. In 2011, GE ended up paying no taxes on its $14 billion in profits.
▪ The fourth grave mistake of free market fundamentalism is the belief that only private industry creates jobs.
False beliefs about tax cuts rest on the idea that it’s the wealthy who create jobs.
Beyond the fact that most people are employed in small businesses, it is also well known that infrastructural investment creates jobs. No one company or private group has an interest or the power to fund massive investments like a new power grid or the newest and best high-speed internet infrastructure. That’s why public investment, yes, from tax dollars, but also from bonds and other sources, is so important.
It doesn’t take a communist to see the power of public investment. When the public invests in itself, we hire countless private businesses to do the work that we want done. And, while some jobs may only be short-term in infrastructural growth, many will be long-term in connection with the maintenance of high-tech infrastructure and the expansion of industry on its foundation.
The latest attacks from free market fundamentalists have targeted higher education, even though our major public colleges and universities are some of the greatest points of pride in states like Kentucky. Students know that if there were no University of Kentucky, far fewer people would be able to pursue higher education. The free market does not fill all the needs we have for college.
Free markets are enormously valuable, though they should not be so free as to be unwatched. Recall that during the economic crisis of 2007 and 2008, then-Federal Reserve chairman Alan Greenspan admitted his own shocked disbelief that industry could undermine its own interests so terribly.
Blind faith in industry or in the value of cutting taxes is folly. It is one side of an extremism that today has reached an unparalleled height. Like a stick, our economy will either bend back from the pull of extremism or it will break.
Eric Thomas Weber is executive director of the Society of Philosophers in America and a visiting associate professor of philosophy at the University of Kentucky. He is the author of “Uniting Mississippi”and “Democracy and Leadership.”