Naomi Oreskes is a professor of the history of science at Harvard University. Erik Conway is a historian of technology at Caltech. They co-wrote the bestselling book, Merchants of Doubt, which told the story of climate change denial.
Below, Naomi and Erik share 5 key insights from their new book, The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market. Listen to the audio version—read by Naomi—in the Next Big Idea App.
1. We’ve been taught to loathe government and love “the free market.”
History shows that many U.S. government programs, from the interstate highway system to the internet, from social security to Medicare, have been enormous successes. These initiatives have strengthened the economy, created jobs, and made life healthier and wealthier for millions of Americans.
History also shows that we need the government to manage markets. During the Gilded Age, in the late 19th century, anti-competitive practices led to giant, powerful, ruthless monopolies. The Sherman Antitrust Act was passed to protect competition and prevent too much money and power from ending up in too few hands. During the Great Depression, millions of Americans were thrown out of work and onto bread lines; it took government action to get the economy back on track.
Our current situation tells us that markets can create problems, like the climate crisis, that require government action to fix.
Despite these facts, many Americans see government as a threat. They see taxation as theft, as opposed to the dues we pay for being part of the organization we call America. Many Americans also think that “Big Government” threatens personal freedom. Yet, history shows that the federal government has worked to protect and expand individual freedom. And many Americans believe “the invisible hand of the marketplace” will sort things out better than any government.
“During the Great Depression, millions of Americans were thrown out of work and onto bread lines; it took government action to get the economy back on track.”
Why do so many Americans hold these views, when history clearly shows that they aren’t true and that many of our most serious problems were created by markets, and require government to remedy? Because for the past century, we have been told that markets are efficient and that government is inefficient. We’ve been told that government programs don’t work and take away freedoms. We’ve been told, as Ronald Reagan put it, that “government isn’t the solution to our problems, government is the problem.” This is what we call “The Big Myth.” Who sold us this story? The powerful leaders in American business.
2. Business leaders sold us the Big Myth to protect their self-interest.
American capitalism in the early 20th century was extremely dangerous. In 1900, one in every thousand American workers was killed on the job—the equivalent today of 1.5 million people every year. It was the equivalent of a COVID pandemic, every year. Indeed, observers at the time likened it to war and epidemics.
Some of these workers were children—as young as two years old—because no laws prohibited child labor. When workers were injured or killed on the job, their families received nothing because there was no workmen’s compensation.
When reformers argued for laws banning child labor and requiring workmen’s compensation, they were opposed by business leaders claiming this was unfair to business owners and a threat to American freedom. A key player in this argument was the National Association of Manufacturers (NAM), a trade group that still exists today and has fought action to stop the climate crisis. NAM claimed that the reformers were socialists and communists who wanted to destroy liberty. They claimed that freedom was “indivisible”—so if you compromised economic freedom, it was only a matter of time before political and religious freedoms were compromised. If you compromised the freedom of manufacturers to run their factories as they saw fit, it was only a matter of time before America succumbed to communism.
Over the next fifty years, business leaders pushed this argument in just about every way they could. One example involved a trade group called the National Electric Light Association (NELA). In the 1930s, NELA ran a massive propaganda campaign. They paid academics to produce studies falsely claiming that electricity in the private sector was cheaper than government-run electricity. They recruited academics to rewrite textbooks with pro-market, anti-government messages and pressured schools and libraries to adopt these rewritten textbooks. They funded academics to create new programs in high schools, colleges, and universities that focused on the virtues of laissez-faire capitalism and the alleged threats of “big government.” In short, NELA tried to control how Americans thought about property, capitalism, and regulation by controlling what we were taught.
3. When the Great Depression hit, market fundamentalists doubled down.
In the late 19th century, Americans needed government to protect competition in the face of ruthless monopolists. In the early 20th century, we needed government to protect workers from injury and consumers from fraud. And during the Great Depression, we needed government to rescue capitalism from near-collapse. But the same business leaders who had defended child labor and lied about electricity fought the New Deal tooth and nail.
Following the pattern created by NELA, the National Association of Manufacturers ran a massive propaganda campaign designed to discredit the New Deal. They hired Edward L. Bernays, the father of modern public relations, to spread the message that New Deal reforms threatened freedom. They paid journalists and academic economists to write pro-industry, anti-government columns. They circulated cartoons and posters warning about the dangers of unions and government spending. And they produced a highly successful syndicated radio show, The American Family Robinson, that criticized “foreign theories” that threatened American free enterprise and the American “way of life,” and was heard by millions of Americans each week.
“They paid journalists and academic economists to write pro-industry, anti-government columns.”
Businessmen also created America’s first libertarian think tank, the Foundation for Economic Education (FEE), established in 1946. Its leader was a man named Leonard Read, who had previously worked for the Chamber of Commerce. Among Read’s supporters were Sun Oil chairman J. Howard Pew and other leaders of NAM; several executives from the DuPont Corporation; the libertarian thinkers Rose Wilder Lane and Ayn Rand; and some of the biggest names in American capitalism: Goodrich, Ford, Kettering, Scripps. Read’s most famous essay, “I Pencil,” introduced the idea of the “mystery of the marketplace”: the idea that the market had an almost magical ability to produce value, and no one needed to be in charge of it.
Market fundamentalists (those who believe the markets should solve our problems) found intellectual allies in Austrian neoliberal economics and built an academic center at the University of Chicago to promote their ideas. A key thinker in this effort was the Austrian economist Friedrich von Hayek. While criticizing socialism as a “foreign ideology,” these businessmen brought the foreigner von Hayek to America and worked behind closed doors to get him hired at the University of Chicago. They also funded an influential project at the University called the Free Market Project, to promote anti-government, pro-market thinking. Its marquee star was Milton Friedman.
These ideas came together under an idea we call the “indivisibility thesis.” It was the claim that political and economic freedom were indivisible, such that any compromise to “economic freedom” (such as laws to prohibit child labor or guarantee a minimum wage) endangered political freedom. This was the central thesis of Friedman’s book, Capitalism and Freedom, which sold millions of copies, became a television series, and influenced political leaders globally. In 1988, President Ronald Reagan awarded Friedman both the Presidential Medal of Freedom and the National Medal of Science.
4. These ideas were carried into popular culture through children’s books and Hollywood films, and then into mainstream politics by Ronald Reagan.
In the 1930s, the libertarian thinker Rose Wilder Lane helped her mother, Laura Ingalls Wilder, compose the famous Little House on the Prairie series. These books were marketed as the true stories of Laura’s life as a young girl on the prairie, but in fact, Rose had rewritten her mother’s life story into a libertarian fantasy, which dishonestly denied the role of the federal government in making their life on the prairie possible.
In the 1940s and ’50s, right-wing moviemakers and their allies deployed censorship, intimidation, and overt propaganda to change the tone of America’s screens, away from films like The Grapes of Wrath, which overtly or implicitly criticized American capitalism, and towards material that celebrated it. A key figure in this was the libertarian novelist and screenwriter Ayn Rand, who was also an architect of Hollywood censorship codes. Her “Screen Guide for Americans,” aimed at influencing movie producers and directors, instructed that American films should glorify wealth, free enterprise, rugged individualism, and self-made men, and never suggest that wealth might be unfairly garnered or that opportunities were not equal.
Another figure in this effort was Ronald Reagan. Before becoming a politician Reagan was an actor, and his flagging screen career was revived by a job with the General Electric Corporation (GE). Reagan hosted the popular television show General Electric Theater, promoting stories of individualism and free enterprise. He traveled across the country on behalf of GE promoting the corporation’s stridently individualist antiunion and antigovernment vision. While Reagan helped GE promote the ideology of free markets and free choice, the company worked to undermine unions and conspired to rig electricity markets. Reagan went into GE a New Deal Democrat and came out an antigovernment conservative Republican. GE transformed Reagan’s political fortunes, as he emerged from his time there with powerful backers in corporate America who helped him to launch his career in elected office.
“In the 1940s and ’50s, right-wing moviemakers and their allies deployed censorship, intimidation, and overt propaganda to change the tone of America’s screens.”
Reagan’s election to the Presidency in 1980 marked the mainstreaming of market fundamentalism. But Democrat Bill Clinton completed the “Reagan Revolution” with his deregulation of telecommunications and financial markets, declaring in a 1996 speech that the “era of big Government is over.” Market fundamentalism had swept both major political parties, leading to financial calamity, giant tech and telecommunications monopolies, runaway wealth inequality, the opioid crisis, and our inability to deal with the greatest threat of our time: the climate crisis.
5. There is no free market, and market fundamentalism bears little relation to Adam Smith.
The century-long campaign to persuade Americans of what Reagan called “the magic of the marketplace” succeeded to a large extent. It relied on falsehoods, half-truths, slippery-slope arguments, misrepresentations of history, and an elaborate system of propaganda. Its proponents claimed to be defending capitalism and constantly invoked Adam Smith. But, they were defending private interests by constructing a radical vision of deregulated capitalism far removed from Smith’s vision.
There is no such thing as “The Free Market.” Markets have existed since Biblical times and they have always operated under rules, sometimes tacit and informal, other times explicit and formalized. This is what the rule of law is: we set boundaries for human activities based on our assessment of how they affect participants and bystanders. We do not allow theft. We recognize property rights, but we also have zoning laws. Even Adam Smith knew banks needed regulation.
The decisions we make about how markets should (and shouldn’t) operate don’t “intrude” on the market, they define it, just as the rules of football don’t intrude on the game, they define the game.
In denying these realities, market fundamentalism hinders our ability to deal with situations in which markets, acting legally, produce problems that markets are unable to solve—such as climate change and income inequality. The remedy for market failure is precisely what free-market ideologues seek to discredit: government.
Ronald Reagan was wrong. Our most consequential problems have arisen not because of too much government, but because of too little. Government is not the solution to all our problems, but it is the solution to many of our biggest ones.
To listen to the audio version read by co-author Naomi Oreskes, download the Next Big Idea App today: