Happy New Year! We’ll try to be happy even though bad ideas remain. Ever since the Trump era began, we’ve continued to fight over what is conservatism. I believe in the central tenets of limited government, strong foreign policy, free markets, and pro-family, pro-life social policies.* All of these principles allow people to flourish, and deviation from these principles leads to less freedom and less flourishing. Yet there are numerous proponents whom I’ve called “conservative leftists”, who specifically target parts of this agenda. One of the key areas of debate is in the area of industrial policy, which I’ve asserted is simply small “s” socialism, where the government makes decisions about the allocation of capital. This is reflected in the Trump administration’s taking capital positions in industries, as well as trying to restructure the economy according to their favored mix (e.g., more manufacturing, less services). One of the key thinkers propagating this intellectually is Oren Cass, the chief economist at American Compass, who is intellectually aligned with J.D. Vance. Cass has explained his mission at American Compass:

….the think tank has clashed with the old-school, libertarian economic philosophy that has dominated the GOP since Ronald Reagan’s presidency. American Compass instead emphasizes worker-focused policy and rejects “blind faith in free markets.”  “We have a very explicit mission to change the way people think about economics,” Cass said. “There is this very entrenched orthodoxy — still like the 1980 Ronald Reagan playbook — that ossified and then started to crumble,” Cass explained. “One piece of what we’re doing [at American Compass] is giving that a really good, hard kick to make sure it crumbles completely.”

An article over at the WSJ last fall gives us an opportunity to dissect some of this thinking in detail (just the first sentence, but happy to engage in the rest in the comments). I’ll include the whole portion from Cass below, since he was just one of seven thinkers commenting on the future of capitalism.

I often tell my students that a key part of understanding any argument is understanding the baseline assumptions each side is making. If you concede the assumptions, you are generally going to have to concede the argument, as most talented people can argue consistently within their framework. So consider Cass’s first statement,

American capitalism’s decay in recent decades is the result of the most profitable activities diverging ever further from the most socially valuable ones.

What does Cass offer as proof of capitalism’s decay? America has the most dynamic economy in the world, our workers are the most highly remunerated, and real per capita income has been rising decade after decade. To be sure not equally for all people, but for the vast majority. In his arguments for industrial policy, Cass looks favorably to countries such as Japan and Germany as models, yet America has outperformed both of these for decades. 2025 saw the poorest state in America, Mississippi, overtake UK, Italy, France and even Germany in per capita GDP! Let’s be very clear–industrial policy makes a country poorer, not richer. That’s ok with conservative leftists, since they’re very much concerned with distribution of income (as the old school leftists were and are as well). Cass explicitly cites his concern for American workers left behind. Yet unemployment for the last decade has been at decades low rates, and virtually all able-bodied, able-minded people can get a job if they want one. We recently saw the head of Ford say he can’t get 5000 auto mechanics at jobs paying $140k per year! As always, politics is about picking winners and losers; favored groups benefit only at the expense of the losing group. To help one area of manufacturing, for example, you are going to hurt other areas of manufacturing, such as Mr. Trump’s initial steel/aluminum tariffs costing seven jobs in steel-using industries for every steel/aluminum job created/saved.

But this critique is not the most important; notice the second part of his first sentence, that the most profitable activities are diverging “from the most socially valuable ones.” This is key–who determines what is most socially valuable? By definition, the market (which includes everyone of us) provides a social imputation as to value of goods/services produced, and that happens every day. What Cass and other conservative leftists are demanding, however, is that we restrict individual freedom to buy, sell, and produce what they see as in their self-interest so that we may allow political processes to decide what is most socially valuable. Here is the reality–when the state has more power over your economic life, you have less. Clear and simple. Conservative leftists have no concern over government power over your life, they only see the problem as who is pulling the levers of power. But in a fallen world, we understand that there are not any good people people that we should trust with that level of power. As Hayek said about Adam Smith

[Adam] Smith’s chief concern was not so much with what man might occasionally achieve when he was at his best but that he should have as little opportunity as possible to do harm when he was at his worst. It would scarcely be too much to claim that the main merit of the individualism which he and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they are now, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid.

—F. A. Hayek

I choose to reject both conservative and progressive leftists. I look forward to your discussion in the comments below.

* If any readers want to know why I believe any of these are an outflow of a biblical worldview, just ask about it in the comments and I’ll gladly explain.

Oren Cass: Restore U.S. capitalism—or else

American capitalism’s decay in recent decades is the result of the most profitable activities diverging ever further from the most socially valuable ones.

If the highest returns on investment come from offshoring, financial engineering and the development of addictive social-media applications and monopoly platforms, that is where capital will flow. If the highest salaries are paid to high-frequency traders, the talent will follow. Real investment declines, growth slows, industry atrophies, wages stagnate and economic power shifts elsewhere. On this trajectory, capitalism won’t last another 50 years, which would be a terrible tragedy.

If the U.S. succeeds in rebuilding a well-functioning capitalism, it will be an economic system in which constraints channel capital toward productive pursuits. The unfettered globalization and practically open borders of the early 21st century will be a rueful memory, replaced by a bounded domestic market that tilts the playing field toward domestic production and accepts international trade only so long as it is balanced.

Tariffs and capital controls will both play important roles in making domestic investment more attractive than offshoring. Within the domestic market, industrial policy will subsidize investment in high-risk, capital-intensive sectors while financial regulation will discourage unproductive speculation. Much stronger antitrust enforcement and consumer protection will eliminate the extraordinary rents otherwise available to monopolists and purveyors of addictive slop.

Underlying these policy changes will be a more-fundamental shift in political economy that rejects denuded consumerism in favor of a richer conception of human flourishing. Rather than optimize solely for efficiency and cheap stuff, citizens will demand that markets foster broad-based prosperity built upon family-supporting jobs, strong communities and a robust industrial base. Capitalism can deliver on those goals if it is reoriented toward them, and that is the task now awaiting American policymakers.

Oren Cass is the chief economist at American Compass and writes the Understanding America newsletter for Commonplace.