The Road to Freedom

by Arthur C. Brooks

  THE ROAD TO FREEDOM

  ALSO BY ARTHUR C. BROOKS

  The Battle

  Who Really Cares

  Gross National Happiness

  THE ROAD TO

  FREEDOM

  HOW TO WIN THE FIGHT FOR

  FREE ENTERPRISE

  ARTHUR C. BROOKS

  A MEMBER OF THE PERSEUS BOOKS GROUP

  NEW YORK

  Copyright © 2012 by The American Enterprise Institute

  Published by Basic Books,

  A Member of the Perseus Books Group

  All rights reserved. Printed in the United States of America. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information, address Basic Books, 387 Park Avenue South, New York, NY 10016–8810.

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  A CIP catalog record for this book is available from the Library of Congress.

  ISBN: 978-0-4650-2941-9 (e-book)

  10 9 8 7 6 5 4 3 2 1

  To the entrepreneurs around the world who earn their success and create the opportunities for the rest of us to earn ours.

  CONTENTS

  PART I: MAKING THE MORAL CASE FOR FREE ENTERPRISE

  1. Why Make the Moral Case for Free Enterprise?

  2. A System That Allows Us to Earn Our Success

  3. A System That Is Fair

  4. A System for Good Samaritans

  PART II: APPLYING THE MORAL CASE FOR FREE ENTERPRISE

  5. Facing the Facts About America’s Statist Quo

  6. The Government We Want: Uncle Sam, or Uncle Sugar?

  7. Winning the Moral Debate on the Policy Issues That Matter Most to Americans

  The Road to Freedom

  Acknowledgments

  Notes

  Index

  I

  Making the Moral Case for Free Enterprise

  1

  WHY MAKE THE MORAL CASE FOR FREE ENTERPRISE?

  Are you satisfied or dissatisfied with the way the nation is being governed?

  If you are like 81 percent of Americans, your answer is “dissatisfied.”1 Since that question was first asked in the early 1970s, dissatisfaction has never been higher. At the height of the Watergate scandal in 1974, it was only 66 percent. When the stock market crashed in 2008, it was 72 percent.

  Some of the dissatisfied Americans are easy to spot. They gather on the Mall in Washington, D.C., for a Tea Party rally against the growth of government. Or they take over Zuccotti Park in lower Manhattan as part of an “Occupy Wall Street” demonstration against big government’s codependent wife, corporate cronyism.

  But these demonstrators are only a tiny portion of the quarter-billion dissatisfied Americans. The majority are ordinary people, too busy to attend a demonstration (let alone sleep in a park), but nonetheless simmering with frustration over what is happening to our country.

  For years now, it seems as if America has been in decline, unable to pull out of an economic funk. The government has responded by bailing out powerful corporations that are “too big to fail” and delivering a stimulus package that doesn’t seem to stimulate anything other than the government itself. Older Americans see the country they have loved their whole lives changing for the worse, and young people see their future prosperity vanishing into thin air.

  So what’s the solution? Some will tell you it’s the 2012 election. In 2008, Americans elected a slate of politicians who promised solutions to growing national problems. But according to many economists and most measures of public opinion, the current administration has made those problems worse.2 The 2012 election should be a chance to set things right. Right?

  The 2012 election is important, to be sure. The continuation of many policies—from ObamaCare, to “Too Big to Fail,” to Keynesian-style stimulus packages—is at stake.

  But the election is not a panacea for all of the problems facing the country; it’s not even close. If America’s current malaise were the product of just three years of bad ideas and poor leadership, we could solve it by brooming out a bunch of politicians. Unfortunately, the predicament is the product of nearly a century of accumulated policy, and the solution won’t come with one election.

  Consider the crushing public debt. As I write these words in the fall of 2011, the national debt comes to $48,000 for every man, woman, and child in America.3 One-third of that amount has accumulated during the past three years, but the rest of the debt existed before the current recession and the current administration. It is a long-standing, unwelcome, and bipartisan gift to our children and grandchildren. Government spending at all levels (federal, state, and local) amounted to 15 percent of GDP in 1940. In 1980, it was 30 percent. By 1990, it was 32 percent. Today, it is 36 percent. For many years, policy makers have turned this flywheel, and today it packs terrifying force.

  The Congressional Budget Office tells us that by 2038, government spending will be 50 percent of GDP. Think about this for a moment. Americans will work from January 1 until June 30 each year just to pay for the government—a government that a large majority believes has too much power, tries to do too much, and provides unsatisfactory services.4

  It’s going to take a lot more than one election to get us off what Nobel laureate Friedrich Hayek called the “road to serfdom.” Americans today are experiencing a low-grade, virtual servitude to an ever-expanding, unaccountable government that, starved for tax revenues, has appropriated for itself funds that entrepreneurs could have used to grow the economy, has created a protected class of government workers and crony corporations that play by a different set of rules than the rest of America, and has consequently left the nation in hock for generations to come.

  Some believe this road inevitably leads us to one of two places: social democracy or long-term austerity. In the former case, the U.S. finally hits a tipping point where few people actually pay for their share of the growing government. At this point, the majority of Americans become truly invested in a social welfare state, which stabilizes at some very high level of taxation and government social spending. Think Norway or Holland.

  But social democracy is expensive. It requires that America emerge successfully from the current economic crisis. If it doesn’t, we get something worse, in which the welfare state collapses under its own weight. That is, at some point, citizens of the world wise up and stop lending the U.S. money, or at least stop lending at relatively low interest rates. In the second scenario, your kids are poorer than you, and their kids poorer than them. Think Greece, Spain, Portugal, and Ireland. After years of deficit spending, these failing welfare states have become unsustainable, forcing their citizens to endure severe austerity. Spanish youth unemployment today is almost 50 percent, and about half of adults under age thirty-five live with their parents.5 In Greece, the general unemployment rate is 17 percent and quickly rising, and the government’s external debt is projected to hit 190 percent of GDP by 2014.6 Yet, after years of this misery, the citizens of these countries know no other way but to clamor for even more government solutions that effectively steal their children’s future.

  In other words, either social democracy wins, or we all lose. We need to get off this road. But I believe it’s going to take a cultural reformation to do so—a return to ou
r founding ideals of free enterprise. This book is my attempt to show how.

  WHAT IS FREE ENTERPRISE? It is the system of values and laws that respects private property and limits government, encourages competition and industry, celebrates achievement based on merit, and creates individual opportunity. Under free enterprise, people can pursue their own ends, and they reap the rewards and consequences, positive and negative, of their own actions.7 Free enterprise requires trust in markets to produce the most desirable outcomes for society. It is the opposite of statism, which is the belief that the government is generally the best, fairest, and most trustworthy entity to distribute resources and coordinate our economic lives.

  At first glance, moving America back toward free enterprise should be simple. Two years ago, I published a book showing that about 70 percent of Americans say they love free enterprise. They favor it over all other alternatives and are proud of the fact that the nation is based on this ideal. Large majorities say they want less government than we currently have.8

  But if that’s true, why is the government today so bloated, so powerful, and so imperious? Why do Americans acquiesce to almost every expansion of government—beyond the boundaries of what the Founders intended, and beyond what they say they actually want? For example, the Obama administration’s health-care reforms are unpopular with a majority of citizens, yet in a poll fielded by CBS News/New York Times in 2010, 64 percent of people said they thought that government should provide health insurance for everyone.9

  This is a paradox, but not a mystery. On the one hand, citizens say they love free enterprise. On the other hand, they sure wouldn’t mind a new government-funded rec center and maybe a few free prescription drugs, and politicians gladly oblige to win votes. Most people hardly have the time to consider the inconsistency between these things.

  In America, the road to serfdom doesn’t come from a knock in the night and a jackbooted thug. It comes from making one little compromise to the free enterprise system after another. Each sounds sort of appealing. No single one is enough to bring down the system. But add them all up, and here we are: 81 percent dissatisfied.

  So what’s the solution? How do we help Americans understand that unless they actively choose free enterprise and eschew big government, they will ultimately only get the latter? Some say Americans need to hear a more forceful argument than ever before about the economic superiority of free enterprise over the alternatives. In other words, capitalism’s advocates need to yell louder that free enterprise makes us richer than statism. Master the numbers, make some charts, and show Americans the evidence.

  As a think tank president, I wish that strategy were correct. Nothing would make my job easier. But that strategy isn’t correct. Materialistic arguments for free enterprise have been tried again and again. They have failed to stem the tide of big government.

  There’s only one kind of argument that will shake people awake: a moral one. Free enterprise advocates need to build the moral case to remind Americans why the future of the nation is worth more to each of us than a few short-term government benefits. To get off the path to social democracy or long-term austerity, all of us who love freedom must be able to express what is written on our hearts about what our Founders struggled to give us, what the culture of free enterprise has brought to our lives, and about the opportunity society we want to leave our children.

  A LOT OF PEOPLE are reluctant to talk about morals or make a moral case for anything in politics and policy. We’re willing to talk about principles, perhaps. Values, maybe. But morals? Especially among conservatives, morality evokes unpleasant memories of the “culture wars” of the 1990s, which focused on schismatic issues like abortion and homosexuality. As a result, many who believe in free enterprise steer clear of all public moral arguments.

  This is a mistake and a missed opportunity. A great deal of research shows that people from all walks of life demand a system that is morally legitimate, not just efficient.10 The moral legitimacy of free enterprise depends largely on how the system enables people to flourish, whether the system is fair, and how the system treats the least fortunate in society.

  Privately, free enterprise’s champions talk about these things incessantly. While they generally believe in the need for a safety net, they celebrate capitalism because they believe that succeeding on merit, doing something meaningful, seeing the poor rise by their hard work and virtue, and having control over life are essential to happiness and fulfillment. But in public debate, they often fall back on capitalism’s superiority to other systems just in terms of productivity and economic efficiency. What moves them is the story of their immigrant grandparents who came to America to be free; but what they talk about is the most efficacious way to achieve a balanced budget.

  The dogged reliance on materialistic arguments is a gift to statists. It allows them to paint free enterprise advocates as selfish and motivated only by money. Those who would expand the government have successfully appropriated the language of morality for their own political ends; redistributionist policies, they have claimed to great effect, are fairer, kinder, and more virtuous.11 Too frequently, the rejoinder to these moral claims has been either dumbfounded silence or even more data on economic growth and fiscal consolidation.

  Average Americans are thus too often left with two lousy choices in the current policy debates: the moral left versus the materialistic right. The public hears a heartfelt redistributionist argument from the left that leads to the type of failed public policies all around us today. But sometimes it feels as if the alternative comes from morally bereft conservatives who were raised by wolves and don’t understand basic moral principles.

  No wonder the general public is paralyzed into inaction, even when dissatisfaction with government is at an all-time high. There just doesn’t seem to be a good alternative to the “statist quo,” and as a consequence, the country is slipping toward a system that few people actually like. Most people, for instance, intuitively understand the urgent need for entitlement reform. But do you seriously expect Grandma to sit idly by and let free-marketeers tinker with her Medicare coverage so her great grandkids can get a slightly better mortgage rate? Not a chance—at least, not without a moral reason.

  AMERICANS HAVE actually forgotten what the Founders knew well. They understood the need to make the moral argument for freedom, and they were not afraid to do so. In fact, they put a moral promise front and center in the Declaration of Independence:

  We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.12

  These famous words were not entirely original. Less than a month before Jefferson drafted the Declaration of Independence for the United States, George Mason wrote the Virginia Declaration of Rights, containing this passage:

  That all men are by nature equally free and independent, and have certain inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.13

  The emphasis on property came from the philosopher John Locke, who believed that all men had the natural rights to acquire, protect, and dispose of property. But Jefferson decided to focus just on the pursuit of happiness instead.

  The shift in emphasis away from material property and toward the pursuit of happiness was a shift from materialism to morality. America was intended as the greatest experiment in liberty in the history of the world. Property was the “what” of this experiment. The pursuit of happiness was the “why.” When asked years later what explained this formulation, Jefferson called it “an expression of the American mind.”14 In truth, it was an expression of the American heart—and still is.

  The Founders did not promise happiness itself, only its pursuit, leaving it to us to define happiness
any way we see fit, matching our skills with our passions. This was the moral promise of the nation to its people: the promise of life and liberty that would allow the possibility of self-realization to a virtuous people.

  We rarely contemplate how radical the promise of the pursuit of happiness is. And indeed, the closest our allies ever came to America’s New Age creed was “liberté, égalité, fraternité” (liberty, equality, fraternity) in France; “life, liberty, and prosperity” in Australia; and from our Canadian cousins, “peace, order, and good government.” (Inspiring, eh?)

  This is not to say that Americans are the only people capable of making the moral case for freedom. At about the same time Jefferson was writing the Declaration, other pioneers in freedom were making the same argument in Europe. Adam Smith, the father of modern economics, did not just offer his audience invisible hands and cold capitalist calculations. Seventeen years before The Wealth of Nations, Smith wrote The Theory of Moral Sentiments, in which he brilliantly argued that humans are social animals, and that their moral ideas and actions are thus an inherent aspect of their nature. Smith believed that if people were left free to live their lives as they saw fit but were forbidden to use force or fraud, mankind would naturally form a rich and fulfilling community. Smith made the moral case for freedom long before he made the economic case for it.

  Anyone who reads the words of the Founders—or Adam Smith—cannot miss their keen emphasis on the morality of the systems they intended to create. Our ideas about free enterprise and liberty were born from a sense of what is right and what helps us to thrive as people, not from a monomaniacal obsession with what makes us rich.

  MORAL ARGUMENTS for freedom have always proven more powerful than material ones in moving ordinary people around the world to act in courageous ways. Evidence of this fact is everywhere. Consider the case of Tunisia’s recent revolution.