The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market

by Naomi Oreskes

In the 1990s, George Soros popularized the name we find most apt: market fundamentalism.1 It’s a quasi-religious belief that the best way to address our needs—whether economic or otherwise—is to let markets do their thing, and not rely on government.

Classical liberal economists—including Adam Smith—recognized that government served essential functions, including building infrastructure for everyone’s benefit and regulating banks, which, left to their own devices, could destroy an economy.

How did so many Americans come to have so much faith in markets and so little faith in government?

Market fundamentalism is not just the belief that free markets are the best means to run an economic system but also the belief that they are the only means that will not ultimately destroy our other freedoms. It is the belief in the primacy of economic freedom not just to generate wealth but as a bulwark of political freedom. And it is the belief that markets exist outside of politics and culture, so that it can be logical to speak of leaving them “alone.”

Market fundamentalists, however, depart from Smith by insisting there is no “common good,” merely the sum of all the individual private goods. For this reason, they reject government’s claims to represent “the people”: there are only people—individuals—who represent themselves, and they do this most effectively not through their governments, even democratically elected ones, but through free choices in free markets.

A key part of the manufacturers’ propaganda campaign was the myth of the Tripod of Freedom, the claim that America was founded on three basic, interdependent principles: representative democracy, political freedom, and free enterprise.

Americans in the early twentieth century were largely suspicious of “Big Business” and saw the government as their ally.18 By the later decades of the century, this had flipped: many Americans now admired business leaders as “entrepreneurs” and “job creators” and believed it made more sense to count on the “magic of the marketplace” to solve problems than to engage government.

As any economist could tell you, markets can efficiently allocate resources. Markets are good for getting productive uses out of the inputs that create wealth. They are also good for amassing information. Markets reveal a lot about what people want, how far they are willing to go to get it, and how much they are willing to pay for it. If efficiency were our only goal, then market fundamentalism might make sense. But efficiency is a tool, not an end.

When asked about their values, Americans don’t say “efficiency.” What most people want are better lives. A pleasant place to live in a safe community, with good health care, education for their children, and recreation for themselves. Maximizing wealth by maximizing market efficiency distracts us from many of the things that matter most in our lives.

The Progressive Era, the New Deal, and the environmental movement all responded to market failures.

They were acknowledging that “The Market” doesn’t exist outside of society but is part of society and, like society’s other parts, must be subject to law and regulation. They were demonstrating that complaints about government “intervention” in the marketplace were incoherent, because they falsely implied that markets somehow could (and perhaps should) be beyond the reach of civil society.

Whether you call a better life “an externality”—as economists do—or a purpose beyond economic analysis, you end up in the same place. Markets are good for many things, but they are not magic. Just look around. Income inequality, the opioid crisis, the lack of affordable housing, retirees who can’t afford to retire, the climate crisis: markets created problems that our market-based system has failed to solve. The only proven remedy is governance.

We think what’s at issue is not capitalism per se. Contemporary conservatives, libertarians, and market fundamentalists are not really defending capitalism, even if they think they are. They are defending a certain idea of capitalism, a vision of growth and innovation by unfettered markets where government just gets out of the way.

Market fundamentalism perpetuates a mistake in categories, conflating capitalism, which is an economic system, with democracy, which is a political system. We think that the properly framed choice is not capitalism versus tyranny; it is democracy versus tyranny, and well-regulated capitalism versus poorly regulated capitalism.

A young man born in America in 1899 would have been safer at age fifteen going to fight in World War I than going to work on the railroads.

In the mid-nineteenth century, 6 percent of workers in the Pennsylvanian anthracite mines were killed every year, with twice again that many injured or disabled. Over his career, a miner at a Scranton anthracite field was more likely to be killed, seriously injured, or permanently disabled than not.

In April 1924, the U.S. House of Representatives passed the Child Labor Amendment, granting Congress the power to “limit, regulate and prohibit the labor of persons under eighteen years of age.”35 The Senate approved the measure two months later and sent it to the states for ratification. Had it succeeded, it would have been the twentieth amendment to the Constitution.

Emery’s pamphlet also marshaled James Madison, quoting Federalist essay number 45: “The power reserved to the several States will extend to all the objects, which in the ordinary course of affairs, concern the lives, liberties and properties of the people; and the internal order, improvement and prosperity of the State.”

In his influential essays on liberty, first published in 1959, the philosopher and political theorist Isaiah Berlin argued that freedom is not an absolute good but needs to be weighed against competing considerations.

Lincoln had noted: “The shepherd drives the wolf from the sheep’s throat, for which the sheep thanks the shepherd as his liberator, while the wolf denounces him for the same act as the destroyer of liberty … Plainly, the sheep and the wolf are not agreed upon a definition of liberty.”

despite New Deal rural electrification, the United States today still has a predominantly private electricity system (about 90 percent) that is less strongly regulated than in many other countries.

Electricity deregulation also proved a disaster for the people of Texas: when the state’s power grid failed in the face of an extreme winter storm in 2021, it left more than seven hundred dead and somewhere between $80 and $130 billion in damages.

It may be true that morality cannot be legislated but behavior can be regulated. It may be true that the law cannot change the heart, but it can restrain the heartless. It may be true that the law can’t make a man love me … but it can restrain him from lynching me, and I think that’s pretty important. —MARTIN LUTHER KING JR.,

But Mises had several additional strikes against him.40 Despite his insistence that economics was a science, he came from a tradition that collected little or no data, and many claims he made were difficult if not impossible to test.

Hayek was not suggesting that governments should simply do nothing, no matter the consequences: “It is important not to confuse opposition against planning with a dogmatic laissez-faire attitude. The liberal argument is in favor of making the best possible use of the forces of competition as a means of coordinating human efforts, not an argument for leaving things just as they are.”

Hayek specifies a surprisingly large number. They include paying for signposts on roads, preventing “harmful effects of deforestation, of some methods of farming, or of the noise and smoke of factories,” prohibiting the use of “certain poisonous substances or to require special precautions in their use,” limiting working hours, enforcing sanitary conditions in workplaces, controlling weights and measures, and preventing violent strikes.

Hayek supported social security, workmen’s compensation, and even a guaranteed minimum income. In The Road to Serfdom, he writes: “There is no reason why in a society which has reached the general level of wealth which ours has attained that … security should not be guaranteed to all without endangering general freedom.” He distinguishes between “security against severe physical privation, the certainty of a given minimum of sustenance for all”—which he considered a legitimate government concern—and “the security of a given standard of life, or of the relative position which one person or group enjoys compared with others”—which he opposed, believing it would disincentivize work.

At the time she was developing her philosophy, she was also helping her mother reconstruct her family history for a writing project. Her mother’s name was Laura Ingalls Wilder. Through a complicated (and for many decades hidden) collaboration, the two of them would produce some of the most beloved American children’s books of the twentieth century, works of libertarian fiction that rival the novels of Ayn Rand in their commercial appeal and ideological impact: the Little House series.

One was the myth of the West as empty or “free” land.

Frederick Jackson Turner’s famous 1893 essay, “The Significance of the Frontier in American History,” posited that the existence of “free land” in the West had served as a “safety valve” for the industrializing east and its waves of immigrants. The frontier, a dynamic boundary between “savagery and civilization,” had shaped a unique American identity, one in which vigorous and self-reliant people found a place for themselves in an expanding land.

Also in 1890, Native American armed struggle came largely to an end with the ignominious slaughter of hundreds of Lakota men, women, and children on the banks of Wounded Knee Creek in South Dakota, not far from a present-day Laura Ingalls Wilder museum.

Another was the myth of the frontier as a locus of diligent, high-quality labor. In fact, Turner had argued that early pioneers were an impatient bunch, many of whom engaged in unsustainable farming practices, staying on the land for only a few years before selling out and moving on.

A third myth was that these pioneers did it all on their own, with little or no help from government. The U.S. Army’s role, for example, in displacing and killing the original inhabitants of these lands was swept aside for a narrative of hard work and just rewards.

In his famous study of the Great American Desert (what we now euphemistically call the Great Plains), geologist and explorer John Wesley Powell had pointed out that dry land farming wouldn’t work in the arid climate, and for ranching one would need far more than the 160 acres provided under the Homestead Act of 1862.

The Dakota Boom began to implode in 1889, and the implosion hit the Wilders.

In 1943, Lane published The Discovery of Freedom: Man’s Struggle Against Authority. She was dissatisfied with it, but it had a big impact. It inspired Leonard Read to create the Foundation for Economic Education (FEE), and it helped earn Lane a place of honor among the three “founding mothers” of American libertarianism, along with novelist and screenwriter Ayn Rand and journalist Isabel Paterson.

Actually, Lane’s view is the opposite of Hobbes’s, for the brutality of life is found not in nature but in the commonwealth. People are not wretched because they cannot take care of themselves; they are wretched because of governments.

Lane’s answer is anarchism, with one exception: protecting private property. For Lane, the right to own property is the foundation of freedom.85 But this is not an inalienable right, like life and liberty; it is a legal right that requires legal protection. In her view, guarding property rights is the only legitimate warrant for government. Lane is a propertarian.

Some might argue that the libertarianism of the Little House books was more unconscious than intentional, and that the basic stories were true—that Rose simply influenced how the details were fleshed out.119 But the stories were not true, not in their details and not in their overall framework. In the Ingallses’ real lives, hard work didn’t bring success. Nor were they rugged individuals: they relied on neighbors and community for their very survival, and their presence on the frontier was predicated on the federal government’s removal of native Osage peoples and distribution of their land to white settlers.

On TV, the Ingalls didn’t stoically survive calamity after calamity. They thrived. They prospered, both emotionally and financially. It was the narrative grafting of the postwar prosperity gospel onto late nineteenth-century frontier capitalism. Ronald Reagan reportedly cried while watching it.125 Viewership peaked during the 1980–81 season, at an average of over 17 million weekly viewers, and the show of course helped to sell more books.

During the nineteenth century, mainline American Protestants had broadly embraced what was known as the “social gospel.” Social gospelists were not socialists, but they did want to ameliorate the wretched conditions industrial capitalism had generated in many parts of the nation, as well as to address the Gilded Age’s breathtaking—and to some observers shameful—concentrations of wealth.

In 1946, Reinhold Niebuhr—a leading public theologian, professor at Union Theological Seminary, and editor of the journal Christianity and Crisis—offered a thoroughgoing critique. What Spiritual Mobilization decried as “pagan statism” included “even the mildest forms of government control. If its standards are accepted, every nation beside our own is already caught in this paganism. Said a British Tory, not a British socialist, visitor to this country who had been given a leaflet of this organization: ‘the uncritical identification of “Christian liberty” with a laissez faire economic program would not be possible in any modern nation except your own.’

Rejecting the false dichotomies between freedom and security and between democracy and totalitarianism, Niebuhr observed that Scandinavian governments, continental European governments, and Britain were all “seeking a middle way between too much planning and a too unregulated freedom, with the resultant economic insecurity.”

In 1977, Peale would officiate at the marriage of Donald and Ivana Trump.

As historian Kevin Kruse explains, restricting the reading to just the preamble allowed them to present the Declaration as a “libertarian manifesto, dedicated to the removal of an oppressive government.” The full Declaration includes a “long list of grievances about the absence of government and rule of law in the colonies”; it critiques the British government for failing to do the job the colonists wanted—indeed, needed—done.

Robert McAfee Brown, who held a bachelor of divinity degree from the Union Theological Seminary, had studied at Oxford, and was soon to complete his doctorate in the philosophy of religion at Columbia, published a lengthy criticism in Reinhold Niebuhr’s journal Christianity and Crisis, Brown summarized the underlying assumptions of Christian Economics as: Godless Communism is the major threat to civilization. Socialism is a halfway house on the way to Communism; Britain has reached that point and America is not far behind. Therefore, only a return to free enterprise, under God’s sanction, will save America and/or civilization.60

The circulation of Christian Economics peaked around three hundred thousand, about ten times that of Fifield’s Faith and Freedom or Niebuhr’s Christianity and Crisis.69

Still, Pew wanted more. He found Kershner’s magazine focused too much on economics and not enough on theology, and he considered Kershner’s Quakerism too liberal.70 So Pew tried again. This time, he leveraged evangelical leader Billy Graham.

In 1946, Eric Johnston—president of the U.S. Chamber of Commerce from 1941 to 1946 and a former board member of Spiritual Mobilization—became president of the Motion Picture Association of America. He immediately began redirecting Hollywood’s mythmaking machinery. In a talk to screenwriters, Johnston said: “We’ll have no more Grapes of Wrath, we’ll have no more Tobacco Roads, we’ll have no more films that deal with the seamy side of American life. We’ll have no more films that treat the banker as villain.”1 Socioeconomic criticism was out, market fundamentalism was in.

It sold 429,000 copies in its first year of publication, but many local governments banned it. In Bakersfield, California, it was burned.12 The House Un-American Activities Committee (HUAC)—which had been established by the U.S. House of Representatives in 1938 and would take extravagant aim at Hollywood during the Red Scare—heard testimony that The Grapes of Wrath was Stalinist propaganda derived from Communist Party notes.