In November 1957, just a month after Russia’s Sputnik satellite blasted into space, causing Americans to fear that they were losing in the space rate, Lawrence gave an optimistic address about America’s strengths to students and faculty at Seton Hall University in South Orange, New Jersey. Lawrence told the assembly, “Spread of shareownership in America brings about a silent revolution, and this people’s capitalism is given impetus by the Stock Exchange.” He continued, “The most dramatic feature of this free-enterprise system has not erupted in newspaper headlines. Nor has it been squeezed into the small talk of ordinary parlor conversation. The phenomenon I’m talking about is the gradual emergence of what we have come to call a People’s Capitalism — the ownership by millions of people everywhere, through their stock investments, of our means of production.”

— Janice M. Traflet, A Nation of Smaller Shareholders: Marketing Wall Street after World War II (Baltimore: Johns Hopkins University Press, 2013), pp. 139–140.

How have views towards the free market changed over time? How society views markets matter, because it may help explain important questions. If, for example, views determined the significant growth rates of the 18th and 19th centuries — after centuries of stagnation —, a change in views could have quite an impact on our future wealth. Indeed, the Great Depression was capitalism’s nadir and communism, socialism, and fascism were at their height between 1920–50. If 1991 shattered the false allure to communism, in 1930 it seemed as if capitalism had failed. Several economists warned of the dangers of anti-liberal and anti-market ideas, arguing that those ideas promote not only low growth, but authoritarianism as well. Some believe that this anti-capitalist mentality has continued into the 21st century. Since the late 1940s, however, the public’s opinion on capitalism has matured and strengthened, and good evidence of this is how the public responded to the 2007–09 crisis.

In certain ways, it seems as if the public’s attitude towards markets has deteriorated over time. The initial reaction to the stock market crash of October 1929 was to blame small investors for making non-expert investment decisions based on emotion. Big finance was not immediately blamed, although its image soon blackened as the world economy continued to plunge, banks began to fail in large numbers, and unemployment rates began climbing to new heights. The 1930s were an “absolute minimum” for free markets, and the experience of the Great Depression continues to inform the public’s opinion. Compare, for example, the initial reaction to the crash of 1929 to that of 2008. Bankers and traders took the brunt of the criticism in 2008; in 1929, they were, at first, given the benefit of the doubt. But, this interpretation leaves part of the story out.

It is true that capitalism’s image was in serious trouble between 1930–50. In A Nation of Small Shareholders, Janice Traflet tells the story of the New York Stock Exchange’s (NYSE) struggle to revive it brand in the face of hostility and mistrust. The initial crash did not immediately wound society’s amicable relationship with markets, but the banking crises, repeated scandals of fraud and theft by part of bankers and wealthy investors, and high unemployment had struck an almost fatal blow. Traflet explains how resistance to regulation and state involvement collapsed by the late 1930s, because, after several crises and scandals, the NYSE and others simply chose to cut their losses and work with regulators, rather than against them. But, by the mid-1950s the situation, for capitalists at least, began to improve. Traflet looks at the NYSE’s advertising program, but external factors were probably even more important for repairing capitalism’s perforated image.

One such external factor was the public’s view of socialism and communism. During the first two decades of the 20th century, many intellectuals held an endearing opinion on socialism. The success of war controls and planning during the First World War served as an important impetus for those looking for a better alternative to capitalism. The initial experience with the Soviet Union was somewhat of a disillusionment — war, famine, and oppression usually are —, but socialist sympathy was at a high point and the Soviet’s rapid industrialization between 1930–50 was inspiring. 1920–40 were the decades of the ongoing socialist calculation debate, where top economics journals became ideological battlegrounds — the possibility for central planning was taken very seriously. “Luckily,” the Cold War would soon change things. Communism, and by extension socialism, became the West’s rival, and between 1950–70 the Keynesian consensus — not quite socialist, but not capitalist enough, either — gave way to a free market revival.

One interesting facet of the revival is the language used to sell capitalism to the people. Financial organizations selling their products, such as mutual funds and monthly investment plans (MIPs), talked about marketplace democracy, shareholding (vs. stocks), and freedom. Capitalism, not communism or socialism, is what empowers the non-wealthy. This is almost a complete reversal from the Great Depression, during which it was the worst off who suffered the most. Capitalism had lost much of its image as a mode of production for owners of capital, at the expense of owners of labor, and gained one of harmony between all classes. This view was not only promoted by industry, but by conservative intellectuals, as well. And, in 1991–92, communism and socialism lost all of its allure as a result of the Soviet Union’s collapse.

While capitalism continued strong during the 1990s, an era of “neoliberalism,” the 2000s is a more ambiguous decade in the context of how the public views markets. The mid- and late 90s are known for a series of crises throughout the world, and the boom of the mid-2000s gave way to the most severe crisis since the Great Depression. Conservatives have interpreted this turn of events as working against free markets. Tom Woods, for instance, declared that we are “back on the road to serfdom.” Oftentimes, rather than looking at the resurgence of popular pro-market sentiment, people look at the growth of the state, concluding that the anti-capitalist mentality has strengthened, or at least gained currency. This interpretation of recent history is problematic, however.

Compare the response to the Great Depression to that of the Great Recession. The 1920s were a period of growing wealth, where all classes seemed to benefit from growth. If Traflet is right, and the initial stock market crash was blamed on the common person (the small investor) instead of on the titans of industry and bankers, pro-market sentiment was very strong prior to 1930. The Great Depression was almost a 180° turn, when markets seemed to benefit only the rich, and at the expense of the poor. That is, the period 1929–33 oversees a dramatic change in public opinion towards capitalism. The 1990s, and even the 2000s, were similar to the 1920s, in that a healthy economy promoted existing market institutions. But, the Great Recession has not had the same effect as the Great Depression, not only in the United States, but also in Western Europe. To be sure, capitalism has received much criticism, but the impetus to choose alternative institutions is weaker — there is much more focus on improving markets. One strong piece of evidence is the pressure to structurally reform markets, and skepticism toward demand-side interventionism.

Why did the Great Recession not cause mass disillusionment with capitalism? First, the extent of the damage has something to do with it. The anti-capitalist mentality is probably stronger in Spain and Greece than in the U.S. or U.K. The two former countries have been hit harder, and a combination of bad demand- and supply-side policy has caused high (20+ percent) unemployment. Still, the extreme right-wing has been benefited almost as much as the extreme left-wing by the depression in those countries. Second, the end of the Cold War. The fall of the Soviet Union, and the gradual “liberalization” of China, shattered whatever credibility non-capitalist institutions, or “modes of production” if you prefer, had. Third, between 1950–06, we had a strong, relatively stable period of growth, where the living standards of all members of society markedly improved. This relates to the role of the end of communism, because elsewhere living standards stagnated or fell as a result of command economies. Capitalism’s great success is more widely appreciated.

The average opinion goes something like this: there are no radical alternatives to capitalism; capitalism is the best we have, it’s just a question of how to achieve robust institutions that minimize the impact of the business cycle. This view stands in stark contrast to average opinion during the 1930s, which did not think very favorably of free markets at all. And that conservatives, and some libertarians, have interpreted the concept of “robust institutions” as evidence of an anti-capitalist mentality actually works in favor of my argument. The standards of the “radical” pro-market advocates have risen. The type of interventions considered “socialistic” or “anti-market” are incredibly tame compared to those of the 1930s — where parts of industry were nationalized, private enterprise was heavily regulated, and public investment stepped to the forefront. We are, on average, a much more market-oriented society today, and the range of allowable changes to these institutions has become much stricter, more narrow. To free market advocates, this is good, not bad, news.

For this reason, the message in books such as The Road to Serfdom no longer resonates with most people. The modern interpretation of this line of reasoning is that any interventionism will eventually lead to full blown socialism. This is not Hayek’s actual argument, who was writing during a period of time in which opinion, intellectual and average, was very hostile towards markets. (In fact, Hayek’s message was, at the time, most popular amongst those looking to synthesize capitalism with a modern liberal democracy.) But, the erroneous interpretation of Hayek is popular because that is the only way one could apply Hayek’s message to the modern context. Many conservatives and libertarians think we are on a road to serfdom, and that there is a strong anti-capitalist mentality that needs to be fought against, but this simply is not so. That The Road to Serfdom is seen, amongst progressive intellectuals, as being mostly wrong is strong evidence that they no longer hold the views Hayek was warning against.

The strengthening of positive opinion towards capitalism is the product of the institutionalization of free market views. Few people believe there is a superior alternative. Communism is seen as a failure. Socialism is taboo. The success of markets in raising the standard of living of all members of society is too obvious to miss. If people advocate intervention, it’s to strengthen markets, not replace them. We are in an era of the pro-capitalist mentality.