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

Abstract: Throughout the 19th century, the U.S. government played a major role in economic life, promoting economic development through infrastructure and education and regulating many markets. In the late century, Americans realized that an even larger hand was needed to address the failures of laissez-faire capitalism, from slavery and child labor to anti-union violence and monopolistic practices. But then something changed.  Americans started to reject “big government” and to believe in the “magic of the marketplace.”
Why?  How did so many Americans come to have so much faith in markets and so little faith in government?  The short answer: a longue-durée propaganda campaign, organized by American business leaders.

In the 1910s and ’20s, businessmen bristled at efforts to make life better through government action, particularly regulation. Trade associations, wealthy powerbrokers, and media allies worked to build a new orthodoxy, insisting that government regulation was both economically unproductive and a threat to liberty. Before World War II, their efforts included initiatives to rewrite textbooks, re-shape and create academic curricula, combat unions, defend child labor, and fight the New Deal. After the war, they promoted the work of neoliberal economists Ludwig von Mises and Friedrich von Hayek, arranging for them to come to the United States and paying for them to teach at New York University and the University of Chicago. At Chicago, they supported “The Free Market Project,” where George Stigler reframed Adam Smith as an anti-government extremist and Milton Friedman reframed Hayek for an American mass audience.  They also worked to promote market fundamentalism in popular culture, through children’s books, radio, film, and television, including a General Electric company -sponsored television show that beamed free-market doctrine (and the young Ronald Reagan) to millions, and launched Reagan’s political career. 

By the 1980s, this crusade had succeeded. It was not merely that Reagan--with heavy support from General Electric and other American corporations had become President. It was that the ideology of “limited government” would define the next half-century across Republican and Democratic administrations, giving us a housing crisis, the opioid scourge, climate destruction, and a baleful response to the Covid-19 pandemic.