(Bloomberg Opinion) -- Donald Trump took a sledgehammer to Republican economic policy. His trade war, lack of even a rhetorical commitment to fiscal responsibility and warm embrace of industrial policy and crony capitalism redefined the relationship between the GOP and free-market economics.
The former president’s political future is up in the air. But his party is sorting through Trumpism, trying to figure out what elements to keep and what to discard.
The uncertainty has produced a discordant clash of economic visions among leading Republicans. Recent speeches by Senator Marco Rubio of Florida and Nikki Haley, the former U.S. ambassador to the United Nations and South Carolina governor, provide a study in acute contrasts that could shape the future of their party.
In a November address to the National Conservatism Conference, Rubio joined Trump in rejecting the GOP’s traditional embrace of free markets. Citing “technological changes, globalization and market concentration,” he lamented “a 21st-century economy that has left millions of hardworking patriotic Americans feeling like they’re locked out from the promise of our country.”
“What we need,” Rubio said, “is a Common Good Capitalism,” a phrase he has used for at least two years to describe a more activist government.
When Haley spoke a few days later at the Heritage Foundation, she attacked Rubio’s formulation head-on, though she never used his name.
“It pains me to see some of our friends turning their backs on our principles,” she said.
“You know what I’m talking about,” Haley continued. “The conservatives who claim capitalism no longer works. They conclude that economic freedom fails families and hurts workers. So they’re trying to create a hybrid capitalism — a hyphenated capitalism.”
And she concluded, “It’s all a sham.”
Haley even invoked a specter that Republicans usually reserve for haunting Democrats: socialism. By her account, the conservative populists and economic nationalists currently ascendant in the GOP — Rubio, but also Missouri Senator Josh Hawley and others — who are calling for “more mandates, more rules, and more government control of the economy” aren’t promoting anything that should be called capitalism, but rather are advocates for “socialism-lite.”
Rubio and Haley delivered similar cultural critiques of big business for dabbling in social activism. Rubio attacked “major American corporations boycotting states that pass laws which are not ‘woke.’” Haley’s formulation: “Corporate America should stick to business – and stop preaching.”
But that point of agreement masks a far more consequential rift between the two potential presidential hopefuls over the party’s longstanding support for business. Rubio argues that it’s no longer the case that what’s good for General Motors is good for America. He claims that the economy has changed, with the interests of investors and shareholders diverging from those of workers and families.
Corporations, as Rubio described them in his speech, “try to pay their workers as little as possible and charge consumers as much as they can get away with.”
Haley, in contrast, displayed no sympathy for what Rubio and like-minded critics of business call “stakeholder capitalism,” the view that corporate executives should sacrifice some profits out of a social obligation to customers, suppliers, workers and the broader community. She urged colleagues and business leaders to hew to the principles of economic freedom, and criticized corporate boards that “won’t defend the very principles that allow their business and their employees to succeed.”
China, too, has become a point of contention among conservatives. Rubio argued that “record days for Wall Street and great earnings reports” can be a good thing, but not when they are “the result of sending jobs to and importing more from China.”
Haley labeled the view that “capitalism is bad for America but good for Communist China” the “silliest argument of all” and mocked the idea that “if you’re for the free market, you’re for giving away the farm to Beijing.”
The new Republican divide even extends to the fundamental question of whether the free enterprise system can increase living standards for all Americans.
Rubio seems to embrace Trump’s dark vision of “rusted out factories, scattered like tombstones across the across the landscape of our nation,” asserting in his speech that market economics has left many people “locked out of achieving the American Dream.”
Haley’s tone recalled the optimism of President Ronald Reagan and former U.S. Representatives Jack Kemp and Paul Ryan.
Telling the story of South Carolina’s textile industry, she acknowledged that it had been devastated by technological innovation and trade agreements, hurting workers and families in the process.
“We could have complained and propped up the textile industry with government subsidies,” she said. “We could have told people that welfare and handouts were their only hope.”
Instead, by her account, hard work, smart policies and the free market made it possible for “the same towns that once had textile mills” to “now build planes, cars, tires, and medical devices.” “We are much stronger today than ever before,” she said.
Conservative populists — including, at times, Rubio — indulge a narrative of grievance and victimization. Haley urges citizens to reject their portrayal as “victims with no control over their own lives and destinies,” and should regard themselves instead as empowered by economic freedom.
Empirically, Haley wins the argument. The American Dream is not dead. Economic dynamism is good for typical workers. The American blend of markets and public policy has generally produced good outcomes for typical households.
Big business is a force for good in American life, and corporations should maximize returns for their shareholders. Haley is right that supporting free markets doesn’t mean hurting America and helping China.
And Haley is right — empirically and morally — that people have agency and shouldn’t be treated as victims.
Haley served in the Trump administration and had kind words in her speech for the former president’s economic agenda. Now she has three years to convince her party that moving forward from Trumpism requires rediscovering older truths.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”
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