Book Review: The Big Myth — How American Business Taught Us to Loathe Government and Love the Free Market
The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market (Oreskes & Conway, 2023), written by Naomi Oreskes and Erik Conway, is a vital resource for those trying to navigate a world where the government is demonized by many and corporations receive the rights of citizens from our courts. The blame, the authors contend, is the seemingly wrong-headed ideology of economic freedom which seeks to prevent governmental efforts to regulate corporate behaviors at odds with the wellbeing of society as a whole. This ideology also forms the foundation of actions seeking to overturn established public policies that have been addressing these excesses for decades if not longer. The authors previously collaborated on the bestselling book Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming (Oreskes & Conway, 2010), a treatise on how corporations conspired to subvert proven science to continue to be able to sell their products despite evidence of the harmful nature of their products. As the authors state in their acknowledgements, Merchants of Doubt is in essence a “what they did” while The Big Myth is a “why they did it.”
The ideation of the concept of free markets as a core tenet worthy of constitutional reverence, is shown by the authors to be essentially a 20th century construct even if some supporting arguments rely on questionable interpretations of 18th century philosophy. The foundation documents of Western democracy — The Magna Carta, The Declaration of Independence, The U.S. Constitution and its Bill of Rights and Amendments — make no mention of “Economic Market Freedom” or of “Capitalism” for that matter. The deification of free markets is the inspiration of actions or inactions which deny the enactment of sensible policies to deal with the existential threat of anthropogenic climate change, gun regulation, banking regulation, implementation of health policies to contain pandemics, and attempts to roll back the social safety nets of Social Security, Medicare, and Medicaid.
The Big Myth is written essentially in chronological fashion, broken into three sections:
the first addressing how market fundamentalism, or freedom, first evolved as an ideology in the early 20th century;
the second featuring the marketing and integration of the concepts of market freedom into political and academic discourse; and
the third the mainstreaming of market freedom into society, public policies or the lack thereof, and the judiciary.
Oreskes and Conway, both historians of science at their respective universities — Harvard University and California Institute of Technology — investigate the economic, political, and philosophical theories which inspired a two-term President Ronald Reagan to claim that the nine scariest words in the English language are “I’m from the government and I’m here to help.” So what changed over a century which started out enacting laws restricting child labor, establishing a federal income tax, implementing work-place safety laws, and busting trusts and monopolies, to one today where we are living amid a hyper-polarized political system which equates government interventions to socialism?
Market Fundamentalism is the “Big Myth” in the spotlight in this book. The authors first discuss the foundational doctrines used by market fundamentalists such as Adam Smith’s Wealth of Nations (Smith, 1776). The authors problems are not with Smith but with the reading of Smith, specifically a widely distributed edition of Wealth of Nations that excludes almost 1,000 pages. This version, edited by George Stigler, could leave a reader believing that Smith had no time for any regulation of markets; that supply and demand reign supreme. Stigler ignores Smith’s acknowledgements that markets sometimes need to be constrained, that taxation is necessary to pay for public goods, and his fears that wages would be kept low by owners of businesses in order to maximize profits. As Adam Smith wrote: “Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free as well as the most despotical” (Smith, 1776, Book II, Chapter II).
The early 20th century market fundamentalists are identified as the owners and managers of large businesses, often monopolies who came under attack in the early decades of the century. The book begins with a robust discussion of National Electric Light Association (NELA). At one time NELA represented companies generating 90% of the nation’s electrical power. NELA fought the expansion or incursion of the government into the generation and distribution of electricity on many fronts. These efforts included opposing efforts to electrify rural communities, opposing the creation of the Tennessee Valley Authority (TVA), opposing the construction of the Hoover Dam, opposing unionized labor, and opposing investigations into utility rate making. On the other hand NELA pro-actively funded university curricula on the benefits of private utility ownership, and funding the propagandist-like public relations campaigns advocating continued private ownership of electrical power generation and distribution. The authors also cite the emergence of the National Association of Manufacturers (NAM). NAM was initially tasked with stemming the rising tide of unionization. Unions were advocates for safer workplaces, compensation for work-related injuries, and living wages. Powerful allies across many industries coalesced in opposition as these causes were categorized as “attacks against the American way.”
If trust busting, passage of nascent laws restricting child labor, improving working conditions, and rising unionization were perceived as the initial attacks against the American way, the New Deal may have been considered all-out war. New Deal policies, some enacted within weeks of President Franklin Roosevelt’s inauguration in March 1933, were a direct response to the Hoover administration’s laissez-faire approach to record unemployment, breadlines, bank failures, bankruptcies, and world-wide economic depression. The New Deal was immediately attacked by NELA, NAM and other business interests as communist, socialist, and anti-freedom. Opposing the New Deal was a cause which united most of the business sponsored organizations which to this point had previously fought more parochial battles related to individual industries. The opposition might have coalesced around the common New Deal enemy, and become more organized, and better funded, but it continued to lose the vote of the people as President Roosevelt followed up his 1932 electoral win with his largest margin of victory in 1936.
It was at this point that business owners began to believe that to win the hearts (and votes), the minds must be won as well. In 1947, the William Volker Fund, came under the direction of William Volker’s nephew, Harold Luhnow. The Volker Fund continued its historic charitable efforts but also became a leader in promoting and financing free-market, libertarian economics, and conservative political movements. For example, Luhnow and the Volker Fund were instrumental in the recruitment and support of Austrian classical liberal economists Ludwig von Mises and F.A. Hayek enabling them to obtain positions with American universities, New York University and University of Chicago, respectively. Perhaps the most well-known member of the University of Chicago/Viennese school of thought was Milton Friedman, whose free-market capitalism teachings are consistently quoted today by anti-government and anti-ESG advocates.
The influence of these economists, in combination with their financial backers, cannot be underestimated with respect to accelerating and perpetuating the influence of market fundamentalism to the present day. Businesses and businessmen who viewed the government as the enemy of profits and power were fully engaged in the business of equating government economic and regulatory policies as anti-freedom and now had academic credibility. The NAM, the U.S. Chamber of Commerce, and numerous other organizations were called to action to oppose not only regulations of markets but to advocate and fund pro-business political candidates and conduct anti-union campaigns. The actors behind the scenes of spreading this Myth were some of the wealthiest Americans at that time — J. Howard Pew (Sunoco), Lemuel Boulware (GE), Alfred P. Sloan (GM), and Ronald Reagan (an actor and soon-to-be President).
The term “Propaganda” is used often in the book, and propaganda needs propagandists. The list of aiders and abettors discussed includes Ayn Rand, Walt Disney, Readers Digest, Hollywood studio heads, television networks (General Electric Hour), which provided the airwave content and conduits to deliver the message of economic freedom directly into the home. A particularly interesting discussion in the book is the role of Laura Ingalls Wilder, specifically her daughter, and the Little House on the Prairie tales as a tool of the market fundamentalists. Churches are identified as useful propagandists as well. The pulpits of Billy Graham and Norman Vincent Peale are specifically cited. It should be noted the list of persons and organizations singing to the hymn of more freedom for markets is bipartisan. President Jimmy Carter’s domestic energy policies and President Bill Clinton’s move to deregulate financial markets are also detailed. Both administrations contributed to the disintegration of regulatory safeguards enacted during the post-Depression era.
It would be remiss not to note the complicity of Harvard Business School (HBS) discussed in the book. The authors specifically cite two HBS Professors. The first being Philip Cabot who started at HBS as a professor of utility management in the late 1920s and published a widely distributed text book and many case studies on utility management. It appears that his research expenses and salary may have been paid by the anti-regulatory utility trade group NELA, cited earlier. His faith in unfettered regulation of the industry did become undermined in his later years. A second, more serious industry advocate, was Clyde Ruggles who joined the HBS faculty in 1928 (from Ohio State) as a professor of public utility management and regulation. He was also an advocate of private ownership of utilities, opposing government intervention in electric power markets whilst receiving monthly income from NELA. The authors state that “Ruggles’s most lasting impact was in expanding and strengthening the Harvard Business School along business-friendly lines.”
Oreskes and Conway, as research academics, analyze the actions and events which have occurred to explain cause and effect. A working knowledge of economics, political science, sociology and philosophy is necessary to understand the full story they seek to portray. To address concerns that they might be tackling topics not within their field of expertise, they diligently support their conclusions with over 1,100 footnotes recorded in 117 pages at the end of the book. A reader can contrast this level of academic rigor with the paeans of free markets which each contain but a fraction of citations, and the popular novels by libertarian Ayn Rand.
The Big Myth is not the first book to address the cause of anti-market fundamentalism. Bernard Harcourt’s The Illusion of Free Markets: Punishment and the Myth of Natural Order (Harcourt, 2011) is a prominent recent effort which focuses on the necessity of market regulations from their earliest proponents in 18th century France, through Adam Smith and the troubled advent of privatized prisons to the financial crisis of the early 2000’s. The Big Myth, however, does a better job at tying together a logical story of market fundamentalism from its origins to today’s front pages.
Perhaps the lasting victory of the propagandists of market fundamentalism is the broad acceptance of the mantra that equates non-regulated markets with the terms “freedom” and “liberty.” Today it seems like any position seeking to impose corrective policy addressing the wrongs of markets, or criticizing market shortcomings are labeled socialist, anti-capitalist, communist, or even totalitarian.
The Big Myth makes a case that government participation in markets has been very beneficial to society — the FDIC protecting depositors as demonstrated recently during the Silicon Valley Bank meltdown in March 2023 and originally during the 1930’s run on banks; the provision of electrical power to all Americans; the development of the internet; space exploration and satellite networks; cell phones; interstate highways; the creation of pandemic vaccines; etc. The book spends some but not a lot of time on these topics. The book’s arguments focus on the protagonists who propagate the Myth, the actors who equate regulation and government to socialism and communism, and synonymous to a direct assault on Freedom though none of our nation’s founding documents refer to economic freedom, free markets, corporations, fiduciary duty, or shareholders. I found it useful to learn how a numerically small but politically and financially powerful opposition to protecting the public good formed. I also learned of the ideology that coheres the opposition to government intervention in markets and of the efforts to maintain this opposition. For readers seeking to engage in social impact, this well researched book is a valuable resource in understanding the entrenched nature of the opposition, the players, and the tactics they have developed.
Oreskes and Conway conclude that “Free Markets” are a construct created to gain popular support to defend corporate power and wealth by conflating them with an assault on individual liberty. Thankfully the authors, operating under the umbrella of real freedoms, as expressed in our Bill of Rights, have provided us a well written, logically posited, exhaustively researched rebuttal to the fallacy of Market Fundamentalism. It may now be up to us to read it and take notice of when and by whom our freedoms are really being endangered in the name of FREEDOM.
About the Author:
Keith Forman is a Harvard Advanced Leadership Initiative Senior Fellow with 40 years experience leading global companies in the energy industry. He is currently Chairman of Capital Product Partners, a shipping company based in Greece, and senior advisor on global energy transition issues to Kayne Anderson Capital Advisors, an investment management firm in Los Angeles. Previously, Keith has served as CEO of two renewable energy companies, as well as Independent Director, CFO, and SVP of Finance of various hydrocarbon infrastructure companies, including Crestwood Midstream Partners, El Paso Corporation, and GulfTerra Energy Partners. He began his career advising natural gas pipeline clients at Manufacturers Hanover Trust.