Democrats are better on economic issues, but the myths of market fundamentalism still dominate the public debate. We have to recognize and expose these myths, but we can’t just talk about why they are wrong. We have to give the American people a better explanation of the role our economic system plays in our society and why it can’t function without government.

Photo by Anthony Quintano, Creative Commons 2.0

Replacing the Foundation

Why do so many people still believe that Republicans are “better at handling the economy” than Democrats? There is a surprisingly simple answer: our public debate defaults to conservative assumptions about how the economic world works.

For decades, American economic narratives were built on the foundation of so-called “free-market” beliefs. They were so dominant that most people just accepted them as facts. Looked at from their perspective, Democrats’ positions do not appear to align with the “reality” of how the economy works. They might appear politically motivated, naïve or even overly optimistic.

The truth is that our beliefs about economic behavior have proven to be better at representing and predicting reality than their beliefs. Many free-market ideas have been widely discredited, making space for creative new ideas from the Left. Still, in our public debate and in voters’ minds, the old assumptions persist.

If we want the American people to be receptive to new ways of thinking, we have to replace the entire foundation on which our economic dialogue takes place. We have to expose and challenge conservative myths and replace them with our own set of beliefs: our understanding of the true relationships between our economic system, our society and our government.

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New Economic Realities

Some conservative myths are already crumbling under the weight of contradictory evidence.

Markets sometimes fail. Government can make them work better.

MYTH: The market is perfect, impersonal and fair. Everything always works out the way it should due to the “invisible hand.” Markets are infallible and self-correcting.

Yes, people actually believed this.

REALITY: Markets often fail. They act irrationally and screw up, sometimes taking the whole economy with them.

The housing market and finance industry crashed in 2008 due to irrational, reckless and sometimes unethical behavior. Federal Reserve Chair Alan Greenspan was shocked. In House Oversight Committee hearings:

Greenspan, 82, acknowledged under questioning that he had made a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that “a flaw in the model ... that defines how the world works.”

It turns out that there are a lot of flaws in their models that define how the world works.

When Texas deregulated its power market, companies had no incentive to maintain the power grid. When it crashed in 2021, it did $50 billion worth of damage and people’s homes and lives were destroyed.

Markets are complicated machinery that needs constant supervision and maintenance. We need to use government to set and enforce rules and make regular adjustments so they don’t break down.

The economy grows from the bottom up.

MYTH: Money “trickles down.” If you want to grow the economy, give money to the people at the top and they will create jobs for everyone.

REALITY: Demand drives economic growth. Put money in people’s pockets and increased consumer demand will create jobs.

Between the crash of 2008 and the entirely ineffective Trump tax cuts, the idea of trusting the wealthiest among us to grow the economy has been largely debunked. Taxing the rich is one issue both Republican and Democratic voters can agree on.

President Biden has done a great deal to change the” trickle down” narrative. He speaks regularly about building our economy from the “bottom up and the middle out.” Between the pandemic stimulus payments, unemployment supplements and child tax credits, poverty went down and employment and wages went up.

Replacing Persistent Assumptions

Other free-market conservative myths persist. We have to expose and challenge them and consistently provide better explanations for what people observe and experience.

There’s no such thing as a free market. The private sector as we know it could not exist without government.

MYTH: The economy existed in nature before government, and it would function best if government just stayed out of its way.

REALITY: As soon as people went from bartering to actually using money, they needed a governing authority to make sure that everyone agreed on what the money was worth and that everyone kept up their ends of the deal.

Cryptocurrency was created on the idea that money could work without the aid of intermediaries or guarantors, but quickly became dependent on exchanges. According to Paul Krugman in the New York Times:

These exchanges are — wait for it — financial institutions, whose ability to attract investors depends on — wait for it again — those investors’ trust. In other words, the crypto ecosystem has basically evolved into exactly what it was supposed to replace: a system of financial intermediaries whose ability to operate depends on their perceived trustworthiness.
Furthermore, trust in conventional financial institutions rests in part on validation by Uncle Sam: The government supervises banks, regulates the risks they can take and guarantees many deposits, while crypto operates largely without oversight. So investors must rely on the honesty and competence of entrepreneurs ... How has that been working out?

In addition to a stable monetary system, businesses need a justice system to enforce contracts and protect people’s right to own physical or intellectual property. People wouldn’t start or invest in companies without the rights and protections we grant to corporations and their investors.

The private sector also depends on public resources like electricity and water, transportation systems, an educated workforce, basic science, medical research, technological innovation, and the Internet, which the American people funded and our government created.

The private sector is completely dependent on government and public services – but that’s okay. We’re glad to provide those services because businesses play a valuable role in our society.

We live in a society. It has an economic system to serve the needs of people.

MYTH: We live in an economy. What’s important is how the economy itself is doing. How people are doing in that economy should be left up to the “invisible hand” of the market.

REALITY: Our economic system is the means to an end: the well-being of people. When it fails to serve our needs, we have every right to change it.

We desperately need to transition away from fossil fuels and convert to renewable energy. Why do we have to justify this by saying that it will be good for the economy? It will be, but why is the preservation of our only viable human habitat insufficient justification? What if it was going to hurt the economy? Would it not be a moral imperative to do it anyway? Or would we just say, “Never mind then. So much for Miami!”

We all want open and competitive markets, but we have every right to make sure that our economic system is healthy and fair, that it serves the needs of our society as a whole and of everyone in it.

Government often beats the private sector when it comes to serving the needs of the American people.

MYTH: If something needs to be done for people, the private sector always does it better than government. The private sector is so much more efficient that it can provide services with a better result at a lower price.

REALITY: Government does a lot of things better and more efficiently than the private sector. When it comes to delivering public services, adding a middle-man is unnecessary and inefficient.

Private interests have been trying to privatize public schools and Medicare to get access to their massive public budgets. For-profit schools offer no better performance than public schools and often pay teachers less. A government program to test different methods of delivering Medicare found that, despite fifty different attempts, no-one was able to deliver better service at a better price than original government-run Medicare.

MYTH: When the government spends money, it goes to “special interests” but the private sector operates for the good of the public because it exists to serve the consumers’ needs.

REALITY: The private sector serves private interests. It puts the needs of investors over the needs of workers and consumers. It is the mission of government, the public sector, to put the public interest first.

MYTH: If there is a need for something in our society, someone will show up and meet that need because they can make a profit.

REALITY: The concept of supply and demand breaks down when you consider the fact that societal need without purchasing power doesn’t generate economic demand. For example, we have massive unmet needs for child and elder care, mental health services and affordable housing. When that happens, we need government to intervene and either meet our needs or create market incentives.

Everybody needs resources to get ahead.

MYTH: Providing help to people who actually need it is a disincentive for them to work hard, while offering money to people who already have money is an incentive for them to make more.

REALITY: Incentive is not the problem. People are already working incredibly hard. What they need are resources. They will use better pay and/or financial assistance to get things like the shelter, health care, transportation, childcare, education and technology they need to better their lives.

We always offer money to middle- and upper-income individuals and businesses so they can use it to make more money. Through tax breaks, our government hands out huge subsidies to home buyers, agriculture conglomerates, oil companies and businesses of all kinds. We consider this a worthwhile investment in people and in our economy.

The people whose lives would be most transformed by modest debt relief or financial assistance seem to be the only people our society deems “morally unfit” for the American people to invest in. We have to stop judging people by two completely different sets of rules. Everybody needs money to make money.

People do better in the economy when Democrats are in charge.

MYTH: If you care about the economy, vote for Republicans.

REALITY: You will do better economically under Democratic leadership.

Rather than showing people charts and graphs about historic employment and deficits, we have to tell people why Democrats contribute to people’s economic success.

We invest in people, so you have healthy, educated workers and consumers with money to spend. We invest in the economy. We drive innovation and provide the infrastructure and other public resources businesses need to thrive.

When the American people invest in each other, we all get a good return on our investment. Democratic government makes our economic system work better for everybody.

The Bottom Line

We have a different story to tell about how our economy works, and it makes a lot more sense than what market fundamentalists have been telling us since the Reagan Era.

We live in a society. What matters is the well-being of people. Our society has an economic system to serve our needs. When it fails to do so, we have the right to change it.
The private sector is completely dependent on government and the public services we provide. In exchange for those benefits, businesses should make a positive contribution to society.
The reality is that markets often fail. They need supervision and maintenance. Government involvement is critical to keeping markets stable and healthy.
Government does a lot of things better and more efficiently than the private sector. The private sector serves private interests. The public sector serves the public interest.
Economies grow from the bottom up. Put money in people’s pockets and increased consumer demand will create jobs.
Our economy thrives when we invest in the American people. From new industries to working class families, everybody needs resources to improve their lives.
You can trust Democrats to grow and manage a healthy and stable economy.

There are more conservative myths to debunk and better stories to tell about how our economy really works. I encourage you to think about them and share your ideas with us.

Thanks, as always, for reading and subscribing. I hope you are able to use this in your work and your activism.

Happy Holidays to all of you!

Antonia

Thank you for reading Reframing America! This is a reader-supported publication. To receive new posts by email please consider becoming a subscriber. All content is free, but some people choose to become paying subscribers to support this important mission!

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NOTES:

If you haven’t already, I recommend reading these related issues of my newsletter:

October 11, 2022:
The Prosperity Gospel: The moral code that binds corporate and Christian America
This is about the moral narrative that drives market fundamentalist thinking. It is this narrative that we need to replace.
October 31, 2022:
What Democrats are FOR: Our Values
This is about the core values that we have and how they contrast with core conservative values.

November 17, 2022
Is This the End Game for Crypto?
Paul Krugman, The New York Times

October 3, 2008
Greenspan admits ‘mistake’ that helped crisis
NBCNews.com

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