American capital markets — stock exchanges, bond markets, over-the-counter markets for securities and derivatives of all types — are often praised as paragons of free-market dynamism. But beneath that reputation lies a market structure shaped less by entrepreneurial forces than by layers of regulatory design. While market structure may seem like an abstract or technical topic, it directly affects the prices we all pay and receive — for gas at the pump, groceries at the store, or the stocks and bonds in our 401(k)s — because it determines how trades in capital goods are executed and how prices are discovered. The National Market System (NMS) that ties together various stock exchanges and electronic trading venues is not a spontaneous product of competitive, entrepreneurial forces, but rather — and quite ironically — an elaborate bureaucratic construct born of sustained government intervention.

Nowhere is this irony more visible than in Regulation NMS (Reg NMS), adopted by the Securities and Exchange Commission (SEC) in 2005. At the time, the SEC claimed it was modernizing fragmented exchanges into a coherent, investor-friendly system. At the heart of Reg NMS lies Rule 611, the Order Protection Rule, which prohibits trade-throughs — i.e., executing orders at worse prices than those displayed elsewhere. This rule, intended to guarantee the “best price,” also had countless unintended consequences: it spawned an explosion of trading venues, fragmented liquidity, and a hyper-focus on speed and order type engineering.

At the time, two SEC commissioners (Paul Atkins and Cynthia Glassman) dissented from the final rule. Their warning was clear: rather than promoting competition, Reg NMS would ossify it — enshrining one model of execution, suppressing innovation, and ultimately reducing market choice. “Far from enhancing competition,” they wrote, “Regulation NMS will have anticompetitive effects.” 

Two decades later, with the SEC now revisiting the rule amid mounting criticism of complexity and gaming, their dissent looks increasingly prescient.

The background to Reg NMS’s adoption is equally revealing. In 2005, fears of a “duopoly” gripped the industry as the New York Stock Exchange merged with the Arca ECN and Nasdaq acquired Instinet. In both cases, two central stock markets bought electronic trading venues that deeply entrenched them in US securities trading. Smaller players like the Philadelphia Stock Exchange (PHLX) scrambled to remain relevant, striking deals with Citadel and Merrill Lynch to form a so-called “tripoly.” This turf war among exchanges wasn’t a natural market realignment — it was driven by the regulatory architecture. If the best quote must be accessed and honored by law, why maintain multiple venues displaying it? The answer became clear: only those who could afford the technological and legal arms race would survive.

Over the following years, dozens of new exchanges and dark pools emerged — not because of entrepreneurial freedom, but because Reg NMS made it profitable to exploit its mechanics. Algorithmic firms like Tradebot launched BATS to capitalize on the guaranteed protection of displayed quotes. Matching engines were designed to game the rules rather than serve human investors and traders. The market became increasingly fragmented: as of 2023, trades in US equities were routed through at least 16 exchanges and over 30 dark pools, with orders often pinging across venues in microseconds to comply with regulatory obligations rather than optimize execution quality.

This complexity wasn’t accidental — it was built. As former SEC Commissioner Daniel Gallagher has noted, today’s market structure is “the product of extraordinary regulatory change,” not spontaneous order. The SEC effectively codified not only how trades must be priced and routed, but also how exchanges must behave, who can compete, and which kinds of data must be purchased. The bastion of capitalism is a product of collectivist planning.

The SEC argues that Reg NMS lowered trading costs and democratized access. That’s partly true. But it did so by standardizing a particular model of trading and empowering firms that could comply with, or arbitrage, the rules. The losers weren’t just inefficient brokers or legacy exchanges — they were also individuals and firms who now face hidden complexity, reduced transparency, and rising market data costs.

As the SEC revisits Rule 611 in its September 2025 roundtable, the real question isn’t about passing judgment on Regulation NMS — it’s about deciding the future path of our markets. Do we allow competitive forces to reshape market structure and move away from the innovation-stifling, one-size-fits-all regime that now governs price formation? Or do we continue to bear the hidden but very real costs of central planning in the most critical arenas of American economic life? Regulation NMS continues to earn praise from the same regulatory bodies that imposed it, but its legacy is a market architecture engineered in Washington, not discovered through market processes.

In an interview last month, Citadel founder and CEO Ken Griffin revealed how excited he is about the charter school options in Miami, citing them as a reason he’s so excited his company now calls the city home. 

The finance giant, based in Chicago for years, officially moved its headquarters to Miami in 2022. Its employee migration out of Chicago is ongoing, but as of 2025, most of its employees have made the exodus to South Florida.

One of the reasons Griffin cited for the move was the low quality of life in Chicago for his family and his employees — including Illinois’ struggling schools. As he explained in the interview: “There are some 50 schools in the state of Illinois where not a single child is at grade level.” And those districts are just the very worst of the bad performers.

Of course, there are myriad reasons why Florida is appealing to Ken Griffin as a headquarters for Citadel. Florida’s lack of a state income tax makes it a financially strategic decision. Miami’s crime rate is a small fraction of Chicago’s, making it a safer place for his employees to raise families: “There are more murders in Chicago on a bad weekend than there are in Miami in a year.”

But the education quality available to Citadel employees — and available to the surrounding community, which is a leading indicator on the quality of said community in years to come — is important enough to Griffin to be worth mentioning.

This is just another example of the second- and third-order effects of bad education policy. It’s basic cause and effect: if a school district delivers a poor quality education, residents with means will move to a better district. If schools in an entire region deliver a poor quality education, families, and indeed companies, will start moving out of the area altogether.

We’ve known for years that people move locally for schools. There’s a reason Zillow listings tout good school districts as a core part of their marketing. More recently, it has become clear that people take education policy into consideration when moving across longer distances too. 

Jenny Clark, founder of Love Your School and proponent of Arizona’s school choice movement, says she regularly talks to parents who relocate to her state for its school choice options. Arizona’s school choice vouchers are particularly appealing to parents with special needs children (like Clark, who first used Arizona’s ESA vouchers to support her dyslexic son’s reading education). In many places, it’s hard to get support for students who don’t perfectly fit the conventional classroom mold; ESA vouchers allow parents to take matters into their own hands and find the very best resources without their local district as a gatekeeper.

Arizona was the first state to pass universal school choice (in 2022), so it’s had longer to accumulate data and monitor policy effects on its migration and economy. Other states have since followed suit, and while it’s too early to have clear data, the early indicators are clear: parents are paying attention, and they’re factoring school choice options as they decide where they want to live.

As Griffin revealed, corporations are paying attention, too.

In the interview, Griffin — who recently offloaded his downtown Chicago penthouses for a 44-percent loss as he cut ties with the city – voiced his excitement over what’s happening in Florida’s education market.

I was with the governor of the state of Florida a couple weeks ago, we welcomed the Success Academies to South Florida. They’re going to open several schools in the Miami area. There are hundreds of thousands of kids in the state of Florida who are in charter schools.

That number is likely to rise quickly once Success Academy opens its doors.

Success Academy is one of the shining lights of recent education innovation. A charter school network originally based out of Brooklyn (but quickly expanding into the rest of New York City, and now to new states), Success Academy was founded in 2006 by Eva Moskowitz, a former teacher and New York City Council member who was deeply troubled by the state of New York’s public schools.

Her first location, the Harlem Success Academy, quickly eliminated the achievement gap on standardized tests between its low-income students and those in the city’s top-performing public schools, attracting national attention. That performance trend has held even as the charter network has expanded to its current 57 locations.

Success Academy focuses on holding students to high standards, surrounding them in a culture of excellence, maintaining firm discipline, and delivering a strong academic curriculum. It has offered a world-class education to thousands of kids who would’ve otherwise been stuck in failing public classrooms. And now, its program is expanding to Miami.

This Success Academy announcement is just the latest in a long string of education moves happening in Florida. The state passed universal school choice in March of 2023, and since then, the state has seen an explosion of innovation. As one of the states with the least bureaucratic red tape for new schools, it has become a hotbed for innovation and entrepreneurship.

The state has seen myriad microschools and independent programs launch. It’s also become an incubator for networks working to expand on a national scale.

Primer, a network of K-8 microschools headquartered in San Francisco, based its early schools in South Florida because the state was so friendly to startup programs. Similar to Success Academy, Primer’s goal is to reach underprivileged kids who otherwise wouldn’t have high-quality options. Primer opens schools in areas it calls “school deserts” and brings choice into communities that only have a low-performing public school and no other private options.

Primer is quickly expanding, opening locations in other school choice states like Arizona, Alabama, and Texas. But for the time being, Florida remains its center of gravity, because Florida has been such a favorable state to work with.

Griffin voiced his excitement about the school choice culture in Florida.

Eva Moskowitz was blown away by one thing – everybody, everybody extended her the warmest of welcomes. We want her in Miami. We want our children to have the future that Success Academy will prepare them for…I mean, these will be kids that will go on from every socioeconomic background to have great careers and great lives because they had a great K-12 education.

This enthusiasm — from families, entrepreneurs, and perhaps most surprisingly corporations — is something politicians and lawmakers should be paying attention to. People are demonstrating that they’re willing to immigrate to good educational regions and emigrate from bad ones. Companies are considering education culture when choosing cities in which to open offices.

Parents want the best for their kids. Corporations want to move to strategic locations to attract top talent. And even with all the politics and bureaucracy as we have, states are, in a sense, competing in a market to attract residents and businesses, especially wealthy ones. 

School choice policy will always be most exciting because of the possibilities it opens up for children. Nothing will ever compare to the shifts in life trajectory made possible by access to better schools, for kids who wouldn’t have had choice otherwise. But school choice policy is also an important thing to watch as an indicator of what states may be on the up and up, and which ones may be on the decline if they don’t stay competitive.

Daniel Flynn’s recent biography, The Man Who Invented Conservatism: The Unlikely Life of Frank S. Meyer, sheds an interesting light on the origins of American conservatism. It also provides an account of the unlikely life of a communist organizer turned architect of a conservative political movement. 

Flynn found boxes of hitherto unknown correspondence and files that highlight particularly colorful and revealing conversations and relationships within the nascent conservative movement of the 1950s and 1960s. Although “conservative” might be a bit of a misnomer. 

Meyer famously wrote In Defense of Freedom: A Conservative Credo and single-handedly developed and pushed the idea of “Fusionism” between conservative and libertarian thought. He thought that the “sharp antithesis between reason [libertarians] and tradition [traditionalists] distorts the true harmony that exists between them and blocks the development of conservative thought.”

Hayek wrote along similar lines in “Why I Am Not A Conservative.” Traditionalists protested that they were being caricatured. Russell Kirk described (classical) liberal principles in his handbook on conservatism: “[j]ustice means that every man and every woman have a right to what is their own” and “So far as possible, political power ought to be kept in the hands of private persons and local institutions.” Kirk’s first principle of conservatism basically describes natural law: “Men and nations are governed by moral laws; and those laws have their origin in a wisdom that is more than human—in divine justice.”

Much of his contribution to the conservative movement stems from his longtime position as a senior editor at National Review. He also helped found the American Conservative Union and its subsequent Conservative Political Action Committee, and later the Philadelphia Society with Friedman, Buckley, Feulner, and Evans.

Meyer’s conservatism, much like Whittaker Chambers’, was forged in the crucible of the Communist Party. While Meyer never acted as a spy for the communists as Chambers did, he was one of their more influential boosters in 1930s England and in the US. He was in deep enough to be called to testify in several trials and hearings of communists in the 1950s.

Frank, along with his wife Elsie, lived an eclectic life in Woodstock, New York. The family (including their children at all ages) never went to bed before midnight. Friends and guests of all stripes would talk into the wee hours of the morning. Meyer famously spent exorbitant sums on his phone bill — in some years as much as a fifth of his reported income — and was notorious for calling people at two or three in the morning to discuss his latest idea.

Meyer and National Review, like Russell Kirk, were much taken with Barry Goldwater and his 1964 presidential campaign. But unlike Kirk, who retreated from political activism in light of Johnson trouncing Goldwater in the election, Meyer doubled and tripled down on building a successful conservative political movement. Thus. the ACU and later CPAC were born.

While Flynn presents Meyer as “the man who invented conservatism,” the biography provides scant detail around how and why Meyer’s thinking developed. One of the key events, however, was his reading of Friedrich Hayek’s The Road to Serfdom, which he briefly tried to reconcile with communism. Another key thread was Meyer’s patriotism. While still a booster of the Communist Party in America, Meyer worked to reconcile communism with the founding ideals of the country. The attempt failed spectacularly. Meyer then shifted to a more libertarian and individualist stance, yet still desired to marry his political philosophy with the American tradition.

That attempt, as well as rubbing shoulders with other conservatives at National Review and the Philadelphia Society, moderated his libertarian impulses and elevated the conservative ideals of tradition and custom in his thinking. Meyer’s larger-than-life personality led him to feud with anyone and everyone: Russell Kirk, Harry Jaffa, James Burnham, and even Bill Buckley. Yet the impression one gets from reading his writing and correspondence was that these disputes were driven almost entirely by his ideas rather than by grievances or personal animosity.

Meyer’s contribution also came indirectly. In his role at National Review, he largely commissioned reviews of books and art. His desire for quality, rather than for ideological purity, in his contributors is surprising and apparently made his section of the magazine particularly good. He was a man with strong political beliefs who also cared deeply about culture, art, and excellence.

There can be no doubt that Meyer was an important figure in American conservatism. While his primary contribution seems to be institution building (NR, ACU, CPAC, etc.), he was no doubt an important interlocutor for other conservatives. And the Fusionist project, though falling on hard times recently, has been an important constitutive element of modern American conservatism. 

Meyer’s book on freedom also remains relevant to the modern conservative thinker. He advocated a free market perspective at home and in international development: 

Nor can active benevolence, charity, be an aim of foreign policy, since charity is the privilege and responsibility of individual persons, not of the custodians of money taken from people by taxation; and, in the specific case relevant today — backward nations — the only way seriously to advance their economies, in any case, is through investment under the controls of the market system.

Flynn perhaps exaggerates Meyer’s intellectual contribution to conservatism. Russell Kirk, Leo Strauss, Friedrich Hayek, Milton Friedman, and their many disciples populate conservatism today. These men are still read carefully and broadly by conservatives. Meyer, much less so.

Yet his life has some extraordinary qualities to it, beyond his idiosyncratic eccentricities. . His influence on others was substantial but hard to quantify. So, too, his impact forming long-lasting conservative organizations. Flynn’s book reminds us that hard work, intellectual passion, and a bit of eccentricity can go a long way toward advancing the cause of freedom.

According to reports released this past summer, 80 percent of the Sustainable Development Goals (SDGs) are off track for the UN’s 2030 target, and progress on more than half of the goals has been “weak and insufficient.” About 30 percent of the SDG initiatives have either been abandoned or “gone into reverse.” 

Development debates are on the rise, thanks in part to the recent release of Ezra Klein and Derek Thompson’s book, Abundance (2025), along with Marian Tupy and Gale Pooley’s previous publication, Superabundance (2022). Both these books emphasize advancement, but distinguish the role of government and how factors for progress are assessed.

The determinants of growth are a tricky matter, making the study of development as frustrating as it is fascinating. In the introduction to Johan Norberg’s latest book, Peak Human (2025), Norberg asserts that “Golden Ages are not dependent on geography, ethnicity, or religion but on what we make of these circumstances.” This assertion harks back to the field of development studies when Ragnar Nurske (Problems of Capital Formation in Underdeveloped Countries, 1953) argued that the process for economic growth is not one that can be standardized. In Nurske’s own words, “economic development has much to do with human endowments, social attitudes, political conditions — and historical accidents.”  

Assessing the past and mapping the potential future is a worthwhile endeavor, even though it is impossible to predetermine what is the right path.

Vicious Circles to Virtuous Cycles

Historically, countries that progressed quickly in productivity and living standards benefited from industrializing the domestic market and leveraging scale economies from manufacturing processes (obvious examples being the United Kingdom, the United States, Germany, and Japan). Investment inflow and human capital formation enabled the sharing of competencies and technologies, and this spurred a stronger environment for wealth creation.

Essentially, the transfer of knowledge, along with the creation and sale of assets, incentivizes infrastructure development and fosters a more diverse and robust market. Industry formation ignites opportunities for increasing returns since businesses serve as each other’s customers. Indeed, companies require backward linkages for materials and services along with frontward connections for distribution and sales. The larger the company, the larger its networks.

Paul Rosenstein-Rodan’s big push theory (1943) proposed that such networks can help break the vicious circle of poverty and replace it with a virtuous cycle of demand and supply. Similarly, Albert Hirschman’s theory of unbalanced growth (1958) also drew attention to the benefits of linkages, in that such connections encourage technological advancements to be harnessed.

Hirschman, among other prominent theorists in development studies, believed that efficacious industries rely on strong linkages, and the better the industry, the better the demand derived from it. And the better the demand, the greater the likelihood of job opportunities and the expansion of complementary as well as competing firms. This process is said to trigger ‘dynamics of development’ and, as demonstrated throughout Norberg’s work, individual liberty and credible institutions are positive prerequisites for getting it started.

Individuals and Ownership

According to Nurske, societal progress is largely dependent on the individuals within it.

Capital formation can be permanently successful only in a capital-conscious community, and this condition, which is just as important for the continued maintenance as for the initial creation of capital, is promoted by a wide diffusion of investment activity among individuals. Nothing matters so much as the quality of the people.

Ayn Rand also emphasized the role individuals play for economic advancement.

America’s abundance was not created by public sacrifice to the common good, but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes.

It is important to note, though, that the attainment of “private fortunes” necessitates the establishment of property rights. Hernando de Soto, the influential Peruvian development economist, proposed that a formal system of property rights is a must for promoting prosperity. Property devoid of title is what de Soto calls “dead capital,” since individuals are unable to engage in capital formation or utilize their assets as collateral.

Norberg also emphasizes de Soto’s point in stating that, for citizens to be “free to experiment and innovate,” the society in which they live must also have “peace, rule of law, and secure property rights.” Thus, formal and informal institutions play a major part in economic performance, particularly legal infrastructure and a stable business environment.

When both market systems and corporate governance structures are weak, risk-averse producers are unlikely to upgrade or invest, and entrepreneurs are unlikely to gamble with profit and loss potential. “Institutions provide the incentive structure,” as aptly put by Douglas North, and so the stability and legitimacy of a country’s political economy is of great importance.

Institutional vs. State Capacity

Market expansion relies on credible institutions. The concept of an institution and its impact upon the business realm is broad, spanning from laws and standards to culture and expectations. Institutions set the ‘rules of the game’ and scholars such as John Locke, Adam Smith, and John Stuart Mill have all argued that institutions serve as a primary determinant for why some countries are rich and others are poor.

Institutional capacity-building can help attract investments and investments tend to be of great interest to politicians as well as their constituents. Instead of focusing on how to make it easier and more secure to do business, however, politicians often focus on how to incentivize business activity, and those incentives may hurt development more than they help. Whenever grants, subsidies, preferential treatment, etc. are used as incentives for entrepreneurial activities, individuals are tempted to curb their aspirations or shift their efforts toward that which is being offered. Attention gets redirected to competing for rents, rather than being alert to market opportunities. And, if government assistance is attained, further actions may be guided (or tainted) by the strings (or stipulations) attached to what is received.

As businesses become accustomed to bestowed benefits, efforts to retain assistance and demonstrate a persistent need will supplant aspirations for a thriving bottom line. Political elites, instead of customers and investors, will determine who gets rewarded in the marketplace.

Frédéric Bastiat said it best when declaring that “Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.” So, with all this in mind, it seems the primary question for abundance advocates is — who determines the mode for advancement?

Spontaneous Order or Central Planning

As tempting as it is for those with power to think they can spur on progress, entrepreneurship does not function under force or imposition — it comes from the ground up. And, when markets are tampered with, price and demand signals get muddled and the application of individual know-how gets pushed to the side. To be sure, government action only entrenches procedural processes toward collective ends rather than private interests.

F.A. Hayek, in The Use of Knowledge in Society (1945), cautioned that a paternalistic state can dampen an entrepreneurial spirit and impede the development of spontaneous order. Hayek claimed that sustainable development relies on individual intuition.

If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them.

Truly, the ability and opportunity to earn, while having autonomy when doing so, can serve as a powerful force for the progression of markets. When value is produced, so too is the creation of wealth — and the accumulation of wealth and assets can have a spillover effect elevating the status of society at large. And, as pointed out by Donald Boudreaux, we are currently living “better than ever.”  

Matt Ridley attests, in How Innovation Works (2020), that innovation “is the reason most people today live lives of prosperity and wisdom compared with their ancestors.” According to Ridley, “innovation is the child of freedom, and the parent of prosperity.”

“Prosperity, peace, and progress,” however, according to Norberg, have been “rare in human history” and in the closing chapter of Peak Human, Norberg exclaims that “if we want our culture to thrive, it is necessary to think about what makes that possible and what ruins it.” As such, the current buzz about abundance is a good thing as long as debates focus on principles more than politics. And while the path to progress will inevitably vary for each community, one aspect seems to hold true — society is best served by those free to transact in accordance with their abilities and their personal desires for abundance.

“The welfare state as we know it today can no longer be financed by our economy.”

With that single sentence, Chancellor Friedrich Merz broke one of Germany’s and Western Europe’s greatest political taboos, daring to question the welfare state’s sacred status at a time when its economic costs can no longer be ignored.

For decades, Germany was celebrated as Europe’s economic success story. Its postwar Soziale Marktwirtschaft — the social market economy — combined free-market dynamism with a limited welfare for those truly in need, powering West Germany’s rise from postwar devastation into one of the world’s most prosperous nations. 

Today, however, that model is faltering. Germany faces stagnating growth, declining competitiveness, and the heaviest welfare burden in its history — signs that Europe’s economic engine is seizing up under the weight of its own system.

From Economic Miracle to Welfare Trap

Germany’s rise from postwar ruin was built on Ludwig Erhard’s economic vision — a system that balanced free enterprise with a modest social safety net within a competitive framework. By liberalizing prices and trade, stabilizing the currency, and cutting taxes, Erhard unleashed competition, ended inflation, and sparked the so-called Wirtschaftswunder — the “economic miracle” that brought rapid growth, full employment, and rising living standards.

Yet Erhard’s vision of a modest safety net gradually gave way to extensive welfare expansion — proving why the state should never be trusted with the power to engineer social balance through taxpayers’ money. Once governments gain legitimacy to intervene in the economy “for fairness,” intervention rarely stops; it only grows. 

Starting with the 1957 pension reform and continuing through the 1960s and 1970s, successive governments expanded health insurance, education support, family benefits, housing subsidies, and unemployment protection — laying the foundations of one of Europe’s most generous welfare systems. Today, Germany spends 31 percent of its GDP — roughly €1.3 trillion — on social programs, one of the highest levels among OECD countries.

The pension system is the clearest example of this excess, consuming 12 percent of GDP — over twice the share spent in the UK (5.1 percent). As the population ages and the workforce shrinks, the strain on public finances has become unavoidable. In 1962, six workers supported each retiree; today, barely two do, and that number is expected to continue falling in the years ahead. A system built on such demographics cannot last — it can survive only through higher taxes, mounting debt, and growing deficits.

To sustain this model, German employers are paying the price. Under German law, they must cover half of their workers’ insurance contributions, so every welfare expansion directly raises labor costs. Since the pandemic, non-wage labor costs have risen faster than total wages, eating into profits and leaving little room for pay increases. Social security contributions — long stable below 40 percent of salaries — have now climbed to 42.5 percent and are projected to reach 50 percent within a decade. The result is predictable: squeezed employers, fewer hires, smaller raises, and declining competitiveness.

How Welfare Expansion Undermined Germany’s Prosperity 

The economic toll of Germany’s overgrown welfare state is now unmistakable. Once Europe’s growth engine, Germany has become one of its laggards. Since 2017, GDP has grown by just 1.6 percent, compared to 9.5 percent in the rest of the eurozone. By 2023, it had ranked as the world’s worst-performing major economy, shrinking by 0.3 percent and 0.2 percent in two consecutive years — the first contraction since the early 2000s — and continued to slide under the new current government, with GDP falling by 0.3 percent in Q2 2025. 

Nowhere is this decline more apparent than in the automotive sector — the backbone of Germany’s postwar prosperity. Once global pioneers, Volkswagen, Mercedes-Benz, and BMW now lag behind leaner Chinese and American rivals. Soaring labor costs (€62 per hour, compared to €29 in Spain and €20 in Portugal), combined with heavy regulation and rigid labor rules, have eroded competitiveness. A slow transition from combustion engines to EVs has enabled BYD and Tesla, with faster innovation cycles, advanced technology, and competitive pricing, to seize the lead in the industry.

The energy crisis has deepened their woes: the sudden loss of cheap Russian gas, combined with the government’s arguably short-sighted decision to phase out nuclear power, has left German industries paying up to five times more for electricity than their American or Chinese competitors. Weighed down by high costs and slow adaptation to new technologies, automakers have been forced into painful cost-cutting measures, from plant closures to mass layoffs. Since 2019, the industry has already lost 46,000 jobs, and another 186,000 could follow by 2035.

Meanwhile, welfare and debt continue to grow. Germany’s famed fiscal discipline — once anchored in its constitutional “debt brake” — has all but collapsed. Repeatedly suspended since the pandemic, the rule has been bypassed through off-budget funds and “emergency” spending to finance welfare spending and energy subsidies. Now, Berlin plans to borrow €174 billion in 2026, three times the level of two years ago and the second-highest in postwar history — threatening not only its own stability but also the credibility of Europe’s fiscal rules.

At the root of Germany’s malaise lies a dangerous illusion: that generous welfare can coexist with high productivity. When redistribution outpaces wealth creation, prosperity tends to fade. Left unchecked, welfare states expand faster than the economies that fund them, eroding productivity and burdening future generations. Yet reform remains untouchable — aging voters resist cuts, politicians fear backlash, and the young bear the cost of a system that may not survive.Europe is watching closely. If Germany — the continent’s anchor of fiscal discipline and industrial strength — exposes the limits of its oversized welfare state, the European faith in expansive welfare systems could finally collapse. The first step is to end the denial; the next is to rediscover the realism that once fueled the Wirtschaftswunder. Germany once taught Europe how to rebuild prosperity from ruins. Now it must teach Europe how to confront the truth about welfare states — before they collapse under their own weight.

President Trump last week ended trade talks with Canada because of an advertisement sponsored by the Ontario government featuring snippets of a 1987 speech Ronald Reagan gave, explaining the dangers of protectionism. The point of the advert was clear: protectionism hurts everyone, including the country imposing the protectionist policies. In response, the Ronald Reagan Presidential Foundation & Institute has said that “the ad misrepresents the Presidential Radio Address, and the Government of Ontario did not seek, nor receive, permission to use and edit the remarks.”

While it is presumably true that the Government of Ontario neither sought nor received permission to use and edit the remarks, the question of whether Reagan’s general view of tariffs and trade was misrepresented isn’t really open for debate. No, the ad uses Reagan’s own words to beautifully capture his principled support for free trade and exchange. Reagan would have approved the overarching message of the ad, even if we must agree with the Foundation that it does strip out some of the nuance and context of his April 25, 1987 “Radio Address to the Nation on Free and Fair Trade.” 

As Reagan emphasized in his address, he supported free trade, advocating for bilateral reductions in trade restrictions where he could and unilateral reductions where he could not.  It is true that under his watch, and to a great extent at his discretion, the US did impose tariffs and other trade restrictions. This has caused scholars like Sheldon Richman, then at the Cato Institute, to refer to Reagan as “the most protectionist president since Herbert Hoover,” Victor Davis Hanson, in 2017 to characterize the actions of President Trump during his first term as “a return to, or a refinement of, Reagan’s and the elder Bush’s principled realism: the acceptance that the United States has to protect its friends and deter its enemies,” and New Right thinkers like Oren Cass to claim Reagan as a “trade protectionist” who “basically started a trade war with Japan,” holding him up as a paragon of “trade restrictions done right.”

In doing so, however, these scholars reveal that they have fundamentally missed the forest for the trees. Ironically, they are the ones misrepresenting Reagan’s thoughts on international trade, not the Canadians.

To understand why, we need to appreciate the context within which Reagan took office in 1981.  The US economy was in a deep economic downturn, with high inflation, rising interest rates, and an overall weak economy still trying to recover from the 1980 recession. If there was any industry that was hurt the most by this, it was the American car industry and its union workers, who were hurt not just by the recession, but by the arrival of cheaper, more fuel-efficient, and higher quality Japanese cars.

Faced with mounting pressures not just from the domestic automakers and their unions, but also a protectionist (and Democrat) Congress poised to enact sweeping protectionist legislation, Reagan had a difficult choice before him.  In his autobiography, he writes, “Although I intended to veto any bill Congress might pass imposing quotas on Japanese cars, I realized the problem wouldn’t go away even if I did.” “The problem” Reagan referred to here was not “Japanese imported cars.” It was the demand for protectionist measures from Congress and the union autoworkers.  

Reagan understood that vetoing any protectionist bills that Congress sent him would only forestall the inevitable and use up valuable political capital in the process.  He understood, however, that he needed to do something, so he established the Auto Task Force.  At a meeting, Vice President George H.W. Bush reportedly said, “We’re all for free enterprise, but would any of us find fault if Japan announced without any request from us that they were going to voluntarily reduce their export of autos to America?” Thus, the idea of voluntary export restraint was born.  Reagan dispatched his trade representative, Bill Brock, to help with discussions.  

This led to a meeting in the Oval Office on March 24th, 1981 with the Japanese foreign minister, where, in Reagan’s words, “I told him that our Republican administration firmly opposed import quotas but that strong sentiment was building in Congress among Democrats to impose them. ‘I don’t know if I’ll be able to stop them,’ I said. ‘But I think if you voluntarily set a limit on your automobile exports to this country, it would probably head off the bills pending in Congress and there wouldn’t be any mandatory quotas.’” In a statement given by then-Vice President Bush on April 8, 1981, he said that the White House is not “suggesting to the Japanese what they should voluntarily do” and that “[The administration wants] to avoid starting down that slippery slope of protectionism.” 

In the end, Japan agreed to voluntarily restrict their exports to the United States, initially for a period of three years, though this was extended several times before finally being lifted in 1994.

One might argue that what Reagan was really doing was strong-arming Japan into reducing their exports by threatening the country with something worse if it did not comply.  This is revisionist history at its finest.  Reagan understood that choice is between actual options, not imagined ones.  By preventing Congress from passing a protectionist import quota, Reagan had deliberately chosen the least protectionist option of the actual options before him, as David Henderson (a member of Reagan’s Council of Economic Advisors) notes. Reagan was committed not to protectionism, but to preventing protectionism precisely because, as he notes in his now-even-more-famous Radio Address, “over the long run such trade barriers hurt every American worker and consumer.”

Another example is Reagan’s 1987 imposition of tariffs to stop the Japanese from dumping semiconductors into the US market, which was the occasion of the radio address that the Canadian advertisement drew from. But even in this instance, Reagan attempted to use tariffs as a scaffold, not as a sledgehammer. Reagan accused Japan of violating their agreement in the US-Japan semiconductor trade agreement and placed a 100 percent tariff on specific goods to limit the adverse effects on American consumers. These targeted tariffs were used as a last resort, aimed at forcing compliance with an existing trade deal. As they started to have their intended effect, Reagan was able to reduce them, first in June of 1987 (two months after they were imposed) and then again in November (six months after they were imposed); they were eliminated entirely in 1991. Still, the tariffs harmed US consumers and did little to improve US industrial competitiveness. The use of tariffs to force a country to honor its previous obligations was a dangerous tactic, and Reagan was deeply aware of the consequences if the Japanese responded in kind. The fortieth president understood that trade wars hurt everyone involved and free trade was the ideal. The trade principles and policies of President Trump — easily the most protectionist president since Herbert Hoover — couldn’t be further from Reagan’s. Trump is imposing massive and sweeping tariffs on our allies, whereas Reagan bemoaned targeted tariffs to force compliance with an existing trade deal. 

We can debate whether Reagan compromised his principles when he supported measures like voluntary export restraints or semiconductor tariffs. But we cannot honestly debate what those principles were. As Reagan himself said, “imposing such tariffs or trade barriers and restrictions of any kind are steps [he is] loath to take.”

Reagan was a free-trade advocate through and through. As America revisits trade policy in 2025, we should remember his true legacy — using every tool available to preserve and expand free trade, not to abandon it.

On Wednesday, the Federal Reserve lowered its federal funds target range by 25 basis points, to 3.75–4.0 percent, its second cut in as many meetings. The move came as no surprise to markets, which had largely anticipated another reduction despite inflation remaining stubbornly high. Two officials dissented in opposite directions: Governor Stephen Miran favored a larger 50-basis-point cut, while Kansas City Fed President Jeffrey Schmid preferred to hold rates steady.

At his post-meeting press conference, Fed Chair Jerome Powell reiterated that policymakers face challenges on both sides of the central bank’s dual mandate that calls for a “balanced approach.” Although the government shutdown has delayed the release of official labor market data, the available evidence suggests that hiring has slowed and conditions continue to soften even as inflation remains above the Fed’s two-percent target.

Still, Powell said economic activity is expanding at a moderate pace. Gross domestic product grew 1.6 percent in the first half of the year, but data released before the shutdown indicate that growth may be running somewhat stronger than expected, driven by resilient consumer spending and steady business investment. He cautioned that the shutdown will temporarily weigh on output but added that any drag should reverse once the government reopens.

Job gains, Powell noted, have slowed noticeably in recent months as labor-force growth weakens, reflecting lower immigration and participation. Labor demand has also softened, with both hiring and layoffs remaining low. Surveys show that households see fewer job opportunities and firms report less difficulty finding workers — both of which are signs of a cooling labor market. In short, he noted, “the downside risks to employment appear to have risen in recent months,” which is why the Fed decided “to take another step toward a more neutral policy stance.” 

Powell acknowledged that inflation remains above the Fed’s two-percent goal. He said overall and core Personal Consumption Expenditures (PCE) inflation was running around 2.8 percent through September — slightly higher than earlier in the year — as goods prices have picked up while services inflation continues to ease. Short-term inflation expectations have risen this year, amid new tariffs, but longer-term expectations remain anchored near two percent.

Powell observed that “higher tariffs are pushing up prices in some categories of goods, resulting in higher overall inflation,” but described the effect as primarily a one-time increase in the price level rather than a lasting source of inflation. Even so, he warned that these cost pressures could persist longer than expected and said that the Fed would adjust policy if necessary to keep inflation under control.

The Fed now faces a “challenging situation” with “no risk-free path for policy,” Powell emphasized. Inflation risks remain tilted to the upside, while risks to employment have grown on the downside. Tightening policy too much could further weaken the labor market, but easing too quickly might reignite inflation pressures. Consistent with its framework, the Fed is taking what Powell called a balanced approach to managing both sides of its mandate. With the labor market softening, he said, the balance of risks has shifted, prompting the committee to take another step toward a more neutral policy stance.

The Fed, Powell added, remains well positioned to respond swiftly to new economic developments. Policymakers will continue to be guided by incoming data and the evolving balance of risks when setting the stance of monetary policy. The central bank still faces uncertainty on both sides of its mandate, and committee members hold sharply differing views about the path ahead. Powell stressed that policy is not on a preset course, and that “a further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”

Alongside its rate cut, the Fed announced it will end the runoff of its balance sheet on December 1, concluding more than three years of quantitative tightening. Powell said the move reflects the Fed’s “long-stated plan…to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions.” He pointed to tightening financial conditions in short-term funding markets. The decision, Powell noted, represents the “next phase of our normalization plans” that is designed to preserve stability rather than to signal a new policy direction.

The Fed’s latest moves reveal a central bank struggling to navigate competing risks with imperfect tools. The dual mandate practically requires monetary policymakers to treat rising prices and falling employment as opposing problems rather than considering the extent to which the movements in prices and employment are consistent with the underlying fundamentals. A nominal GDP target would collapse the false distinction between the two sides of the mandate, allowing the Fed to stabilize demand directly and let prices and employment adjust naturally. Such an approach would reduce the need for fine-tuning and spare policymakers from having to choose — again and again — between fighting inflation and protecting jobs.

Thirty years ago, Congress failed by just one vote to send to the states a constitutional amendment requiring a balanced budget. Today, federal debt held by the public stands at $29 trillion. As a percentage of the economy, it has doubled since 1996. When you add in other liabilities for federal employee pensions and health care, not even including the entitlement programs of Social Security and Medicare, the federal government’s liabilities extend to $45.5 trillion.

The federal government’s financial position is dire by any measure. Even adding assets (cash, inventory, loans receivable, and equipment, but not federal land) leaves them at a net worth of negative $40 trillion. Future Social Security and Medicare shortfalls for those already alive amount to over $65 trillion. So the unfunded future obligations of the federal government come to over $800,000 per US household.

A balanced budget amendment (BBA) would require Congress to stabilize the federal debt. Since Congress won’t voluntarily do it, it might be the only option to prevent massive tax increases and inflation within the next 30 years. But Congress repeatedly fails to take action. Why?

The main reason is that Democrats oppose it. The last time the House voted on a BBA, it won a majority, but not the two-thirds needed to advance a constitutional amendment. Democrats voted against it, 178 to six.

The Democrats might have been right to oppose it. The law would have required a balanced budget every year, unless Congress waived it by a three-fifths vote of each House or by a joint resolution that the provisions of the BBA would not apply during a military conflict. It also would have required a three-fifths vote to raise the debt ceiling.

Since there is no hope that Congress could manage to balance the budget in a single year (the just-closed fiscal year’s deficit is projected to have been $1.9 trillion), this amendment would have effectively required a bipartisan three-fifths vote to pass a budget every year. Sound familiar? As of this writing, Senate Democrats cannot agree with Republicans to pass a continuing resolution, which requires a three-fifths vote, and as a result, the government is shut down.

A better BBA would eliminate shutdowns and build in enough flexibility to make it unnecessary to override its provisions. Rep. Jodey Arrington’s 2024 resolution would have done some of this, but it never got a vote. It would have limited spending to the prior-three-year average of revenue plus population and inflation, built in a 10-year gradual closure of the deficit after ratification, and required a two-thirds vote for override.

Switzerland’s debt brake is an even better idea to adapt. It allows expenditures to equal no more than the revenues that would be expected from trend GDP. In other words, deficits are allowed during times of recession, and surpluses are expected during times of peak growth.

A flexible debt brake is more likely to be honored than a strict, every-year balanced budget rule. And one of the counterintuitive insights of rational-choice political science is that a higher-spending “reversion point” makes political actors less likely to vote for higher spending. For example, if we eliminated government shutdowns and simply legislated that whenever a budget fails to pass, the previous year’s budgeted expenditures would carry on, then defeating a budget would be a more tolerable option. The decisive voter in Congress would be less likely to acquiesce to high spending as the price to pay to avoid an intolerable shutdown.

Most Democrats are true believers in Keynesian aggregate demand management through fiscal policy. The debate among economists about the effectiveness of fiscal versus monetary policy goes on, but there is no need to resolve that debate for all time in the Constitution. A cyclically adjusted balanced budget amendment would address the concerns of the pro-fiscal stimulus camp while not foreclosing the possibility of even stricter fiscal rectitude if there is a congressional majority for it. Thus, a Swiss debt brake-type proposal could get the bipartisan support needed to advance a constitutional amendment.

It’s well past time for Congress to get serious about controlling runaway federal debt. A well-crafted, flexible balanced budget amendment to the US Constitution could finally get bipartisan support, end shutdowns, and set a hard limit on the federal government’s fiscal profligacy.

When a sharply lower price per gallon pops up at local gasoline pumps, it can induce a momentary cognitive dissonance. I mean, where is inflation? During the first 10 months of President Donald Trump’s second term, the price of oil has slid markedly. It is now, in mid-October, around $57 per barrel, down from about $70 in late July — a drop of roughly 20 percent in three months. It is the lowest in almost five years: that is, since Trump ended his first term and Biden took over. What lies behind this decline? Has the administration’s “Drill, baby, drill” approach resupplied starved markets — or do global forces get some of the credit?

From day one, the second Trump administration moved to reverse climate-oriented policies and promote fossil-fuel production. On January 20, 2025, Trump signed executive orders lifting restrictions on oil and gas development in Alaska’s Arctic National Wildlife Refuge and expediting liquefied natural gas (LNG) infrastructure approvals. A companion order directed agencies to halt or review clean-energy initiatives and accelerate oil-and-gas permitting. Observers called the early rollbacks as sweeping as those of his first term, extending to federal-land leasing, emissions limits, and pipeline construction. Polling by Pew Research Center showed a partisan divide: 57 percent of Republicans favored expanded drilling on federal lands, compared with 9 percent of Democrats.

By contrast, the Biden administration (2021–2024) emphasized carbon reduction and tighter regulation of fossil-fuel production while subsidizing renewable energy and electric vehicles. Biden did not halt all drilling — the momentum of US output remained high — but his regulatory regime was more restrictive. The return to Trump represented a decisive pivot back to fossil-fuel liberalization. Experts caution that US policy alone cannot control prices in a global market. One Brookings Institution analyst stated the obvious: the United States is not the world. “Oil is priced internationally … US actions alone will not have such a large impact.”

Has the “Drill, baby, drill” attitude itself caused the price slide? Not yet, at least. The expected surge in rigs has not had time to materialize; Inside Climate News reported in July that “Trump promised a drilling boom. The new rigs haven’t …” Actual infrastructure responses always take time. And undeniably, oil prices reflect a global market. The International Energy Agency (IEA) estimates a worldwide surplus of some two million barrels per day so far in 2025, potentially rising to four million next year. The US Energy Information Administration (EIA) projects Brent crude averaging about $62 a barrel in late 2025 and $52 in 2026 as inventories build. Reuters summed it up on October 17: “Oil prices set for weekly loss … after the IEA forecast a growing glut and US–China trade tensions.”

But one pundit’s “glut” is another man’s return to freer-market production that brings down prices for consumers. When scarcity is politically engineered, abundance looks like loss of control. The term “glut” implies waste, but it signifies that producers are finally freer to meet demand without artificial ceilings. In industry terms, a “glut” means daily production exceeding demand by roughly one to two million barrels — a surplus sufficient to swell inventories and push futures into contango, but hardly a collapse. It is the market’s way of re-establishing balance once production is allowed to breathe again.

The international context underscores the point. OPEC and its allies (OPEC+) are raising output by roughly 1.4 million barrels per day this year. Exports from the Middle East reached two-and-a-half-year highs in September. Russia, despite sanctions and infrastructure risks, continues significant exports, while Venezuela, Libya, and Nigeria have added supply. China’s crude imports fell to their lowest level since January, reflecting weaker industrial demand and a pause in stockpiling. Altogether, rising supply and softening demand have pushed futures markets into contango — a classic signal of near-term oversupply.

For drivers, homeowners, and businesses dependent upon power supplies, cheaper oil is welcome; lower gasoline and heating costs boost disposable income and ease upward pressure on prices caused by huge Fed money supply increases. This is how markets are supposed to work: as competition expands, prices fall to the benefit of every consumer. What some pundits call “market pain” is simply the end of protected pricing. Producers don’t welcome lower prices, but for how long have we read about galloping profits of “Big Oil” as a side effect of the war on fossil fuels? The Wall Street Journal recently warned that “lower oil prices are severely affecting the domestic oil industry, which is already struggling with job losses and shrinking profits.” Even so, ExxonMobil, Chevron, and Shell are reporting profit margins still above their 2015–2019 averages — evidence of normalization, not collapse. Goldman Sachs expects prices to decline through 2026 because of excess supply and weak demand. Market analysts see the drop as signaling a broader economic slowdown linked to US–China trade tensions. Gulf stock markets have also softened on the weak oil price outlook.

And that amounts to what? For the four Biden years, competition in the oil industry was suppressed by attacks on fracking, restrictions on drilling permits, and the blocking of major supply pipelines — not to mention the moral denunciation of fossil fuels as planetary doom. When Washington throttled new leases and raised compliance costs, small independents were forced out. What survived were the giants, protected by scale and legal muscle — and applauded as “responsible corporate citizens.” Now, in America at least, competition is unleashed again, price competition is back, and “Big Oil” profits are reverting to market norms. As Shale Magazine editor Ronald Rapier said, “It’s an irony that when Democrats are in there and they’re putting in policies to shift away from oil and gas, which causes the price to go up, that is more profitable for the oil and gas industry.” Ironic that suppressing supply drives up prices so existing companies profit?

Environmentalist voices, unsurprisingly, are raising alarms of a different kind. PBS reported that market forces (rising prices) could undercut the administration’s plans to increase the use of fossil fuels, but Trump plans to roll back climate regulations, end clean-energy incentives, and promote fossil fuels. Climate-policy groups condemn the agenda as “a dream for polluters and a nightmare for America.” Cheaper fuel may slow investment in renewables and electric vehicles, reducing momentum toward emissions targets.

And that is where we are just 10 months into Trump’s second term. His policies reinforce a pro-fossil-fuel trend that is increasing US supply and could continue over time. It is early days, so the administration’s commitment is consistent with lower prices, but not yet the dominant cause. There is speculation that a $60 per barrel price, slightly higher than now, might represent current market equilibrium. Should oil fall below $60 for long, some producers may curtail output — the CEO of TotalEnergies has already warned that non-OPEC supply would decline at that threshold.

Energy abundance, however, is not an anomaly. It happens when government stops treating energy as a sin. Trump’s policy did not “distort” the market; it let the market remember what freedom feels like. Consumers enjoy cheaper fuel, producers face genuine competition (but fewer accusations of “obscene profits”), and environmentalists, as ever, lament lost momentum.

It must be added that if this is good news, it is not all good. Free market policies are doing their job, but the Trump tariffs are not free market and are a headwind.  The Federal Reserve Bank of Dallas’s quarterly survey of oil and gas producers reported that one-third of respondents thought that higher tariffs on steel imports might result in drilling fewer wells. And three-fourth said tariffs raised the cost of drilling and completing new wells. 

Mr. Trump is not notable for articulating consistent principles and clear policies. As long as that is the case, results will be mixed and the case for free-market measures will be vulnerable to a confusion of the benefits of partial economic freedom with the damage from continued partial controls. Such confusion always advantages the side with the weakest arguments.