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Retro Review: Irving Kristol's "Two Cheers for Capitalism"

Irving Kristol is mostly known today for being the “father of neoconservatism,” the term for formerly left-wing intellectuals in the second half of the 20th century who came to embrace conservative views. In some conceptions, the neoconservatives started out as young idealists who were (in Kristol’s own favored phrase) “mugged by reality,” but some accounts emphasize that they were always more moderate thinkers who were left behind when the world of center-left political activism itself became more radical in the 1960s. This latter view is consistent with Ronald Reagan’s classic remark on why he himself switched parties in 1962: “I didn't leave the Democratic Party. The party left me.”

In any case, long before we all began debating the wisdom of neoconservative foreign policy during the George W. Bush years, Kristol was writing about domestic economic policy and the future of capitalism for outlets like The Wall Street Journal and the magazine he co-founded in 1965, The Public Interest. His 1978 book Two Cheers for Capitalism contains 30 short chapters that originally appeared as articles and columns published between 1970 and 1977. Thus, while all of the content relates to issues like government spending, corporate governance, and inequality, the book itself doesn’t have a single uniting thesis.

The book has plenty of deep thoughts, however. Kristol addresses the issues of the day like any other columnist of the time would have: taxes, welfare, campus radicalism, and the economic impact of OPEC. But he also grounds that in big picture observations about the cultural evolution of Western democracies and the decline of religiosity in American life. Kristol discusses libertarian thinkers like Friedrich Hayek and Milton Friedman and their arguments for limiting government control over economic life, but also makes distinctly conservative arguments about how people will be dissatisfied with any society that delivers material prosperity but seems to lack a higher meaning.

Similarly, Kristol draws an interesting distinction between the virtues of thinking economically and thinking politically. The former involves weighing tradeoffs, watching for unintended consequences, and being aware of how changes in policy shift incentives for those affected. To me, this basically means being prepared to assess any given issue with a libertarian critique. But he also emphasizes the importance of (and chides libertarians for being tone deaf to) the need to think and govern politically. This means seeking a policy that will reconcile society to itself, promote comity, and establish tranquility among the people.

This is where Kristol’s critique meets up with, for example, the economic nationalists of the Trump era. In the nationalist narrative, globalization has created additional wealth for stockholders of big corporations but accelerated the decline of American manufacturing. Yes, Americans have more affordable consumer goods, but this has allegedly come at the cost of the self-respect and happiness of a swathe of working-class American breadwinners and their families. Economically speaking, policies that facilitate free trade are a slam dunk, but a writer with Kristol’s emphasis on thinking politically—say, for example, Sen. Marco Rubio (R-FL)—might say that any prosperity that contributes to social unrest and unhappiness is not worth the bargain.

While my Competitive Enterprise Institute colleagues and I don’t buy that particular take on trade and globalization, it’s a useful example of Kristol’s view of how sound political judgment needs to take the totality of impacts into account and not simply follow what technocratic verdicts the issue-area experts are moved to announce. No scientific study or finding, in and of itself, requires us, as a democratic nation, to adopt any particular new law or regulation. Policy advocates are fond of making arguments from necessity, claiming that a particular set of circumstances means that we must adopt their preferred policy. But sober reflection reminds us that we always have a range of options with differing costs, benefits, time horizons, and levels of political popularity.

Many more people died from fentanyl overdoses in 2019 than in 2009, for example. Does that mean we should increase criminal penalties for selling black market painkillers? Should we subsidize naloxone? Launch an investigation into Chinese producers? Provide rural health clinics with new guidance on treating chronic pain? Fund more training for addiction counselors? Make acupuncture and yoga available to Medicaid patients? Maybe your answer is “all of the above.” Great—how much taxpayer money are you going to spend on each idea and which existing public health programs are you going to transfer that funding from?

No data set or fatality graph can tell us how to make those decisions. Thinking economically is essential and will arm us with the data we need to evaluate competing claims. But to weigh them and make a final decision, whether as voters or as policy makers, requires us to think politically. 

In this sense, Kristol emphasizes the complex and contingent nature of a lot of the things we take for granted in politics. He described, years before such lauded analyses as Charles Murray’s Losing Ground, how welfare dependency puts low-income households into a “poverty trap” that ultimately leaves them worse off. He describes how statistics on inequality mislead us when we forget to include the rising value of government benefits and the role of age and family size in income statistics. He points out that, then as now, the income tax hits high earners much more heavily than the egalitarians among us will admit.

But more than any of these specific public policy fallacies, he remembers that politics is not and should never be considered a totalizing system of human organization. Government should concern itself with the well-being of the entire population—including, in his view, its moral well-being—but that does not mean that a just government should dictate the proper outcome of every decision and interaction.

Kristol worried that a decline in traditional religious adherence would cause Americans to attack our institutions in a misguided attempt at self-actualization. But I think his prescience, which was so impressive on so many other topics, was at least premature on this front. While specific actions like weekly church attendance have continued to decline since the time that Two Cheers for Capitalism was published, the “younger generation” wasn’t entirely captured by the quasi-mystical fads (lomi body work, EST, and the nude marathon) that he so lamented in the 1970s.

The scientist Stephen Jay Gould has famously advanced the theory that science and religion, the competing conceptual frameworks of modernity, are not so much in opposition to each other as they are examples of “nonoverlapping magisteria,” by which each realm is to be considered sovereign over its proper domains but should not be judged by the standards of the other. Similarly, any free, or—in the traditional sense—liberal society must maintain such a distinction between the proper realm of state control and the proper realm of voluntary action.

Fans of limited government are, of course, always looking to constrain the number of decisions in society that are subject to politics and expand the realm of voluntary decision making. But in some debates, just standing up for the notion that there should be any limits on the powers of the government is considered revolutionary.

In his preface, Kristol explains the book’s title. His point is not, as many analysts before and since have argued, that capitalism is two-thirds good results but one-third inherent flaws. Instead, he writes:

A capitalist society does not want more than two cheers for itself. Indeed, it regards any impulse to give three cheers for any social, economic, or political system as expressing a dangerous—because it is misplaced—enthusiasm.

That insight, coming on the very first page of the text, encapsulates the anti-utopian realism and epistemic modesty of the entire volume. While no consistent socialist would dare claim anything less than the maximum fanfare for his own preferred system, advocates of a free economy and private property have never argued that those things will fix every ailment or magically make us all happy—only that they are better than any available alternative.    

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