By Samuel Gregg

Since 2015, American politics has been riven by deep splits over economic policy. The tilt toward free markets that began in the mid-1970s and lasted roughly until the election of Barack Obama is a thing of the past. Virtually every laissez-faire position on topics ranging from trade to regulation has been challenged by an assortment of conservative economic nationalists, progressive populists and so-called neomercantilists. This last crowd includes close advisers to the current U.S. president.

The debate isn't exclusively about ideas and theory. It's also, perhaps mainly, about history. When making their case for protectionism, for example, today's economic nationalists insist that tariffs were central to the U.S. economy's takeoff in the late 19th century. Critics of that position (Douglas A. Irwin of Dartmouth, among others) contend, with better evidence, that America's explosive growth in those decades had little to do with tariffs. If anything, tariffs retarded growth in the sectors in which they were highest.

Today's tariff proponents, however, seem largely uninhibited by facts. The reason is simple. They've worked out that if you control the historical narrative surrounding economic questions, you are more than halfway toward winning the policy battles. This is the insight Phil Gramm and Donald J. Boudreaux bring to "The Triumph of Economic Freedom." In their words, "he who writes history determines the future." The writing of American economic history, they argue, has long been dominated by skeptics of capitalism peddling myths that nonetheless retain potency and, predictably, populate high school and college textbooks.

In eight chapters, Messrs. Gramm and Boudreaux tackle seven longstanding historical myths about American capitalism that still influence economic discussion today. In each case, they are careful not to caricature the conventional wisdom they challenge.

But having given their opponents' positions more than a fair shake, Messrs. Gramm and Boudreaux turn to extensive rebuttals. These are supported by detailed attention to data sets. The authors also outline alternative explanations for the path taken by American manufacturing since the 1970s, and for the state of poverty in America today.

A common theme throughout the book is the extent to which government intervention has either made situations worse during crises or impeded economic progress in other periods. Policymakers, meanwhile, have repeatedly exacerbated matters by misdiagnosing the problems confronting them or by doubling down on failed policies.

Nowhere is this more apparent than in Messrs. Gramm and Boudreaux's exploration of the mythologies surrounding the Great Depression. Far from being the laissez-faire dogmatist portrayed by historians such as Arthur Schlesinger Jr. and economists such as John Kenneth Galbraith and Paul Samuelson, President Herbert Hoover was, the authors contend, effectively a proto-New Dealer who tried to beat the Depression with the heavy hand of government. Hoover's attempts to keep prices and wages from falling, and his willingness to sign the Smoot-Hawley Tariff Act in 1930 -- which taxed some 20,000 imported goods -- did nothing to promote growth and much to impede it. These measures also created precedents for Franklin Roosevelt to embark on even more systematic interventions from 1933 onward.

The 1933 National Industrial Recovery Act, for example -- a major part of which was unanimously declared unconstitutional by the Supreme Court in 1935 -- allowed the federal government effectively to cartelize American industry with, Messrs. Gramm and Boudreaux state, "the objective of preventing prices and wages from falling." Combined with Roosevelt's empowerment of unions and his demonization of business, the U.S. government compromised the economy's capacity to adjust and recover. Contrary to popular wisdom -- and what our children read in U.S. history classes -- aggressive interventions turned what would have been a recession into a decadelong economic cataclysm.

Several bogeymen make repeat appearances in the book. Foremost among these is "greed," as personified by robber barons, grasping bankers and diabolical manufacturing bosses. According to the myths, similarly, anyone who favors more government intervention is a hero.

The myths are premised on a fundamental suspicion of economic freedom. And that suspicion is generally accompanied by the conviction that the federal government can and should do more in the economy, and not only during crises. The possibility that governmental intervention on the state's part might be characterized by what Amity Shlaes calls "arbitrariness" -- inconsistent, whimsical, and unpredictable decision-making by politicians and bureaucrats -- is, Messrs. Gramm and Boudreaux show, largely ignored in the stories that shape understanding of American economic history.

Given that most of Messrs. Gramm and Boudreaux's analysis is devoted to debunking powerful legends that incline many people to favor interventionist policies, readers may wonder why the book's title refers to economic freedom's "triumph." One reason is that each chapter underscores, often indirectly, the power of economic liberty, grounded on property rights and the rule of law, to transform people's lives for the better. The policy and ideological impediments to economic liberty, perpetuated by historical legends, are formidable, but free markets find ways to overcome them and limit their damage.

Even when confidence in markets has plummeted, Americans still innovate, refuse to embrace a zero-sum mentality and understand that the way to become wealthy is to provide other people with goods and services they value. Give them economic liberty, Messrs. Gramm and Boudreaux stress, and there is little Americans can't achieve.

They may be right, but their optimism requires that enough Americans maintain their faith in economic freedom. That faith has been under assault in our historical texts since at least Charles A. Beard's "An Economic Interpretation of the Constitution of the United States" (1913). History, it turns out, is as important an arena for winning the endless battle for the American economy as the realm of theory and ideas. Supporters of free markets ignore that truth at their peril.

--Mr. Gregg is the president of the American Institute for Economic Research and author of "The Next American Economy."

(END) Dow Jones Newswires

June 16, 2025 12:39 ET (16:39 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.