Free Enterprise vs. Socialism: A Brief History

Free Enterprise vs. Socialism: A Brief History

Business conservatives have demonized every piece of progressive legislation as “creeping socialism” since the 1930s. Now that a democratic socialist has called their bluff, they’re at a loss.

Chamber of Commerce president Thomas Donohue and Senator Harry Reid, 2010 (Center for Am. Progress)

Thomas J. Donohue, the head of the U.S. Chamber of Commerce, is worried. In an article published on the Chamber’s website on March 7, he called the “debate over free enterprise versus socialism” engendered by Bernie Sanders’s presidential campaign “a cause for real concern.” Assuring us that “the free enterprise system works,” Donohue claimed that “it is a system to celebrate, not vilify.” Denouncing socialism, he urged “all Americans to reject this failed, antiquated, and discredited economic system.”

The fear of socialism is nothing new for the U.S. Chamber of Commerce, nor the celebration of free enterprise as an antidote to it. Since the 1930s, business conservatives have seen portents of the triumph of socialism in every piece of progressive legislation, every call for increased public spending, and every expansion of social insurance and the welfare state. Bernie Sanders, in identifying as a democratic socialist, has called their bluff. Having cried wolf and equated even mild reform with socialism for many generations, the Chamber has nothing new or different to say about the popularity of Sanders or the surprising acceptance of the socialist label as a form of political identification, especially for young adults. Sanders has essentially accepted the debate on the conservatives’ terms and shown that he can still win it.

Just as Sanders’s program is more liberal than socialist—even if he claims the label—right-wing redbaiting has long been aimed more at liberals than at actual socialists. The language of “free enterprise,” a hardy perennial on the American right, achieved wide currency in opposition not to socialism but to attempts by liberals to reform capitalism. (The current meaning of the word “liberal,” which in the nineteenth century suggested libertarianism, itself only dates back to the New Deal era, when Franklin Roosevelt recast liberalism as a movement to rescue capitalism with aggressive government action.) As early as 1936 the Republican Party platform pledged to “preserve the American system of free enterprise” which had been “displaced” by the New Deal.  Advocates of free enterprise in the Chamber of Commerce and the rest of the business lobby, as well as the politicians, ministers, and pundits who supported them, described it somewhat paradoxically as simultaneously the nation’s firm foundation and a fragile flower. While they celebrated and even invented a tradition that dated back to the nation’s founding, they also employed an urgent, even apocalyptic tone, portraying what they called “the free enterprise system” as perpetually besieged.

Advocates of free enterprise understand every effort to constrain capitalism as dangerous. Minimizing the force of corporate power, they condemn the bureaucratic state and economic “planning” as the only obstacles to freedom in the modern world. They claim that reformist liberalism is what Herbert Hoover, the former president and leading free-enterprise critic of the New Deal, called “a disguise for the totalitarian state.” Hoover and others questioned the long-term viability of a mixed economy. “The American system of freedom” and “a planned society,” the ex-president declared, “cannot be mixed.” For Hoover, the country faced a stark and consequential choice: it could revive the “free enterprise” that produced wealth and freedom or continue on the path to “collectivism” that inexorably tended toward political slavery and economic deprivation.

The binaries that Hoover and others depended upon were based on a mythical reading of the American past. Denying the role of the government in economic development (think: railroad subsidies, the military dispossession of Native Americans, and land grant universities), they described government involvement in the economy as a radical and dangerous break with what one commentator in 1936 called “traditional capitalistic individualism.” This either/or framing allowed the celebrants of free enterprise to paint New Deal reforms to the capitalist economy as revolutionary. Rather than disagreeing about policy, they framed their differences as existential. The fate of the nation hung in the balance, they argued, evoking the Civil War to stress the urgency of the moment. Conservatives invoked Abraham Lincoln’s “house divided” speech so frequently in their tirades against the mixed economy that the New York Times called them out on it: “obviously not all half-and-half combinations are fatal,” the paper quipped in 1936.

Since the early 1930s, business conservatives have refused to distinguish between liberal reform and totalitarian collectivism. If, as Dechard A. Hulcy, another President of the Chamber of Commerce, claimed in 1952, “socialism is just another name of big national government,” virtually no programs for social insurance or public spending qualified as non-socialist. Business conservatives described first the New Deal and later the welfare state (after that term was popularized in 1949) as inevitably tending toward not just socialism but a totalitarian version of it. “Whatever you may choose to call it,” the Republican presidential candidate Wendell L. Willkie declared on the campaign trail in 1940, “state socialism, state capitalism, or Communism . . . are merely different names for the same thing—absolute and arbitrary power in the hands of the government.”

While such arguments might sound familiar in our post–Ayn Rand era, it was Willkie and his fellow opponents of the New Deal who pioneered “slippery slope” arguments about the dangers of reforming capitalism. As one conservative economist claimed in 1939, a full five years before Friedrich A. Hayek popularized the “road” metaphor in his bestselling Road to Serfdom, the “New Deal has started this nation on the road to totalitarianism.” Free-enterprise advocates posited a binary worldview in which, as one critic of the New Deal state said in 1947, “the only known alternative to the private free enterprise system is first, collectivism and then, totalitarianism.” From the Social Security Act to Obamacare, free enterprise advocates have used a similar language of fear, rejecting virtually every humanitarian reform as what in 1945 the President of the National Association of Manufacturers called a “wolf in sheep’s clothing.”

Bernie Sanders may be the first successful candidate in decades to embrace the socialist label. But his supporters are hardly the first to reject right-wing fearmongering about the attack on free enterprise.

Business conservatives have long expressed incredulity that many Americans did not appear to recognize the stakes of the war on freedom, and the need for a fierce counterattack—or worse, that they actually supported that “war.” The Chicago Tribune, whose arch-conservative editorial board emerged as a leading opponent of the New Deal, declared in frustrated amazement in 1936 that the “average man” was unaware of “the distance we have traveled toward state socialism or toward dictatorship during the last three and a half years.” The Tribune called for “a hard and bitter political campaign” that would “check the dangerous trend of our public policy toward state socialism.” By the late 1930s, the Chamber of Commerce and other business lobbyists had launched a coordinated campaign to “sell free enterprise,” as a way of combating the advances of the New Deal.

A key aim of this lobby was the vilification of taxation and many forms of public spending. Long before modern Republican candidates adopted the mantra of “It’s your money! It’s your money! It’s your money!” (to quote Bob Dole in 1996 on the immorality of taxation), free enterprisers described government spending on the welfare state, although not on military expenditures and the national security state, as a form of theft. In his recent article on the Chamber’s site, Thomas Donohue unearths an old chestnut from Margaret Thatcher: “The problem with socialism is that you eventually run out of other people’s money.” But he could just as easily have quoted Herbert Hoover, who in 1939 complained of the New Deal that “extravagance with other people’s money is shifted from a sin to a virtue.”

The main claim of the free-enterprise campaigns, which continued through the 1970s, was that unencumbered big business had brought the nation great riches and its citizens unprecedented “freedom of choice,” both of which would be undermined by regulation or expansion of the welfare state. “The private competitive enterprise system, with a limited government,” according to the Chamber of Commerce in 1964, has “produced more things for more people (including freedom and real security) than any other system yet devised.”

By this time, the conflation of the welfare state and socialism had become a commonplace, one given additional urgency by onset of the Cold War. For free enterprise advocates, it was always “five minutes to midnight” for American capitalism. Speaking before the Los Angeles Chamber of Commerce in 1949, Eddie Rickenbacker, the World War I flying ace and president of Eastern Airlines, feared that his country “is rushing toward the welfare state—Socialism—unless some superhuman effort is made to head off disaster.” Or, as Lewis F. Powell, the future Supreme Court Justice said in his famous confidential memo of 1971, “business and the enterprise system are in deep trouble, and the hour is late.” Mitt Romney tried in vain to revive these themes in his 2012 presidential campaign, claiming that the free enterprise system was “on trial” and that Obamacare might send it over the edge.


Why all the panic? Why can’t advocates of free enterprise live with the prospect of reform? In spite of the dire warnings of Hoover, Willkie and many others, the New Deal, after all, saved American capitalism.

The answer, I think, lies in their view of capitalism as the embodiment of a system—the “free enterprise system”—whose existence is endangered by the view that it is constructed, not natural. Any effort to regulate it means recognizing at a fundamental level that “the economy” is a political project. To accept that capitalism’s worst excesses can and should be redressed is to acknowledge that economic and political flourishing requires government intervention—a state that can shield workers and their environment from the storm gusts of the market. It is to highlight the hypocrisy of business conservatives, who have condemned government in the abstract while endorsing many of the most potent forms of modern state power, such as mass incarceration and military Keynesianism, which have shaped modern capitalism far more than the platonic free market that they celebrate. It is also to challenge the view that political freedom is best embodied by unrestrained capitalism, and to insist that democracy requires a state strong enough to regulate and sometimes displace capitalists. In short, it is to undermine the view that freedom, justice, and prosperity are best achieved through faith in what Ronald Reagan called the “miracle” of free and unplanned markets.

When asked by Anderson Cooper whether she was a “capitalist” during one of the Democratic debates in October, Hillary Clinton said that she was. But she also highlighted the need to “save capitalism from itself,” words not so different from those uttered by President Franklin Roosevelt and Harry S. Truman when they were accused of destroying free enterprise. Although Bernie Sanders disavows the label capitalist, what he calls “democratic socialism” is a descendent of those very same presidents’ projects. In his speech at Georgetown University in November of last year in which he laid out his economic worldview, Sanders celebrated Franklin Roosevelt’s efforts to combat the Great Depression with activist government. “And by the way,” Sanders noted, “almost everything he proposed was called ‘socialist.’” With this turn of phrase, Sanders has effectively defanged the notion of socialism for a mass American audience.

In doing so, he has helped to redress the outsized influence that business conservatives have had on American political culture. Although they have lost many battles, from Social Security though Obamacare, free-enterprise advocates have been remarkably effective in shaping the common sense of U.S. elites, especially their representatives in the House and Senate. Their basic premise is strikingly reactionary—namely, that, in the long run, there is no such thing as moderate reform, since all regulatory proposals tend inevitably toward overwhelming statism.  When one holds, as did the Wall Street Journal in 1942 in the midst of the war effort, that “planning is the direct antithesis of liberty,” then it is difficult to justify government intervention in any form.

By turning debates about policy into condemnations of government itself, the right wing has dangerously narrowed the range of economic debates in the United States. The Sanders campaign, by calling their bluff, has broken these debates wide open again, forcing a wide swath of Americans to consider the economy as a political construction, not a force of nature. For eighty years, advocates of free enterprise have worked to preempt that discussion with their either/or worldview, their “sky is falling” rhetoric, and their pervasive mislabeling of progressive reform as nascent totalitarianism. At a moment of acute economic anxiety, the limits of the free enterprise system offered by the Chamber of Commerce—one in which celebration of abstract ideals is used to disguise naked corporate  power—can be seen perhaps more clearly than at any time since the term was introduced to forestall necessary economic reform eighty years ago. We should celebrate what Thomas Donohue laments; the new critics of capitalism are, following an American tradition that extends back to the New Deal, reinvigorating American democracy, not harming it.

Lawrence B. Glickman teaches history at Cornell University.  He is the author, most recently, of Buying Power: A History of Consumer Activism in America (University of Chicago Press). He is working on a history of the meanings of free enterprise in U.S. history.