OK, I'm baffled by something, and you should be, too.
For as long as most of us can remember, people who call themselves conservatives have chided people they call liberals for trying to second-guess market outcomes and "pick winners." A stoic willingness to let market chips fall where they may is supposed to be at the heart of the right's free-market "principle." It's the idea that animates conservative rhetoric, serves as a philosophical bludgeon against nanny-state meddling, and actually shapes policies that affect all of us as investors. In 2008, for example, you might have noticed the impact of financial liberalization on your 401(k) balance.
But there's no lofty principle that reality can't trump, as that apostle of high-minded conservatism, George F. Will, showed last week. Will—to his credit, let us note—has signed on to the quite reasonable notion that large, systemically risky financial institutions ought to be made safe for capitalism. He's urging GOP standard bearer Mitt Romney, in effect, to follow the lead of other conservatives—Jon Huntsman, Alan Greenspan, Bill Kristol—and call for a break-up of the biggest banks.
Wait. Did I miss something? Breaking up big banks might be prudent, but it would also amount to picking winners on a scale Stalin would envy. If the market, through the private process of merger and consolidation, wants to produce gargantuan, systemically important institutions, shouldn't market fundamentalists be willing to let it? If they're not, how are they any less guilty than "liberals" of an impulse to pick winners, or any more principled than the opportunistic meddlers they love to disparage?
Market purists might hasten to interject here that Too Big To Fail resulted from an act of government—namely the 1999 Gramm-Leach-Bliley Act, which removed the last barriers to bigness under the guise of "modernizing" finance. But that argument is itself at odds with the spirit of free enterprise, at least as the right has always defined it. Gramm-Leach-Bliley, after all, removed a state-mandated constraint on banks—precisely the sort of thing conservatives should want to see removed, and indeed got removed, partly through the power of laissez-faire evangelism.
OK, so what? The right contradicts itself; it contains multitudes.
But this is not just some idle rumination about philosophical purity. It's about the essentially conservative notion that ideas have consequences. The idea of the "free market" as the sacred, infallible engine of all human progress—and the idea of government as little more than a market impediment—has had concrete consequences in everything from the widening income gap to the decline of unions, to the financial Chernobyl of over-the-counter derivatives that Congress refused to regulate in the late 1990s.
To the extent that Messrs. Will, Huntsman and Greenspan represent the right, it would appear that conservatism is conceding what liberalism has always claimed: that the term "free enterprise" is next to meaningless because it begs the question of how free.
On that question, conservatives have proved themselves no more principled or coherent than liberals, as Will and Congressman Paul Ryan, it so happens, demonstrated spectacularly last year. The occasion was an ABC television debate that pitted Will and Ryan, for the right, against Barney Frank and former Labor Secretary Robert Reich, for the left. The general theme was the proper role of government, but the fun really began when Frank asked, in essence, when Will would muster the courage of his laissez-faire convictions and support decriminalization of marijuana.
It's marvelous to watch a career ideologue flee into arms of pragmatism when confronted with the dissonance of his own untempered principle. Will's response: "I need to know more about whether it's a gateway drug to other drugs. I need to know how you're going to regulate it, whether you're going to advertise it…"