The Economic Populists Have a Point

"Many issues divide voters heading into the November election, but the economy may be the most crucial. 

Sound economic policy can foster prosperity and high living standards and affect income and opportunities. Economic resources can also enable society to fund defense or address social and environmental concerns.

Conservative economic policy traditionally has emphasized the openness of markets and growth. By contrast, the populist conservative ideas under discussion at the Republican National Convention focus on people and places hard hit by the disruption that accompanies openness and growth. While many commentators emphasize the differences between the two approaches, a modern conservative economic agenda should build on elements of both.

To begin, a conservative economic agenda should include policies that advance economic growth and living standards. That means supporting research and development, maintaining pro-investment business tax provisions in the Tax Cuts and Jobs Act of 2017, and making regulations that benefit everyone. Such an economy lets businesses and individuals get the most out of the opportunities they seize.

Populist conservatives argue that this traditional approach to policy misses an important objective: a disruptive, rough-and-tumble economy, guided by technological advances and globalization, one that brings everyone along. Populist conservatives want more emphasis on protecting jobs and communities.

There's more to the populist conservatives' skepticism than traditional conservatives acknowledge. But backward-looking protectionist measures such as inflationary tariffs or industrial policy aren't the answer.

However, there is a conservative economic agenda that can unite these groups. The shortcomings of Bidenomics give conservatives an opening to push beyond both market-only neoliberalism and the statist tendencies of industrial policy and protectionism, with their attendant economic inefficiencies. To do so, conservative economic policy needs three ingredients.

The first is agreeing with populist conservatives that markets don't always work perfectly and that a hands-off approach isn't always the solution. The state can play a useful role in the market economy. 

Supply-chain restrictions and export controls can be tools to deny national-security-sensitive technologies to adversaries such as China. But an economic agenda requires more than a sound bite to avoid overreach -- such as using "national security" as a pretext for slapping steel tariffs on Canada.

The second essential is competition -- the linchpin of economic possibilities for classical economic thinkers from Adam Smith onward. While competition at home and abroad expands the economic pie, it says little about the relative sizes of the slices, a point noted by populist conservatives. A modern conservative economic approach would not only promote competition but also prepare more individuals to compete in a changing economy. One avenue could be supporting community colleges that understand local job needs rather than establishing more government training programs.

Third and most important, a conservative economic platform should recall why conservatives have stressed the benefits of markets. The goal, as my Columbia colleague and Nobel laureate Edmund Phelps puts it, is "mass flourishing." That is why we want markets to work -- to advance innovation and productivity and allow communities to make that flourishing possible.

As far as government's role, a contemporary economic agenda should recognize a limited measure of successful industrial policy. Two roads should be on offer. The first is to provide more general support for basic and applied research, while letting market forces determine winners and losers. The second is to assign specific goals to particular interventions. The Apollo program's goal was to put a man on the moon in a decade. The Trump administration's Operation Warp Speed sought vaccines against Covid.

Populist conservatives are right that there is a role in a conservative economic agenda for helping areas hard hit by disruption. But that role isn't a mercantilist blunderbuss of protectionism and industrial policy to turn back the economic clock. Rather, place-based aid could support business services for firms trying to create local jobs.

The economic ideas under discussion at the Republican National Convention have populist features that haven't figured in earlier conservative economic agendas. Populists have some reasonable skepticism about excessive deference to markets. 

But avoiding excessive meddling from tempting protectionism and the mushy mercantilism of Bidenomics is important, too. 

Under a conservative economic agenda, growth can flourish.

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Mr. Hubbard is a professor of economics and finance at Columbia University and was chairman of the Council of Economic Advisers under President George W. Bush." [1]

1. The Economic Populists Have a Point. Hubbard, Glenn.  Wall Street Journal, Eastern edition; New York, N.Y.. 19 July 2024: A.15.