Charitable donations in America add up to approximately $300 billion annually. That’s more than the entire GDP of countries like Finland, Portugal, and Peru.37 About three-quarters comes from private individuals, with the rest from corporations and foundations. No developed country approaches Americans’ level of giving and volunteering. In 1995, Americans, gave three and a half times as much to causes and charities per capita as the French, seven times as much as the Germans, and fourteen times as much as the Italians. In 1998, Americans were 15 percentage points more likely to volunteer than the Dutch, 21 points more likely than the Swiss, and 32 points more likely than the Germans. These differences are not attributable to demographic characteristics such education, income, age, sex, or marital status.38
Americans are not charitable just because they’re rich. True, the rich do give the most money. But remarkably, the working poor give a higher percentage of their income to charity than the wealthy and much more than the middle class.39 Charitable giving appears to be part of most Americans’ DNA; it is not just the noblesse oblige of the wealthy few.
But perhaps the most remarkable fact about charity in America is how highly it correlates with ideology and beliefs about the role of government. People who believe in the free enterprise system simply give a lot more—both time and money—than people who don’t. In a nutshell, people who believe in limited government privately give much more than their statist neighbors.
Consider attitudes about income inequality. In 1996, people who disagreed that “the government has a responsibility to reduce income inequality” gave, on average, four times as much money to charity each year as people who agreed that the government should equalize incomes more. People who disagreed strongly with greater forced redistribution gave eleven times more, on average, than those who agreed strongly.40
Figure 4.5. People who agree that, “the government has a responsibility to reduce income inequality,” give far less privately to charity than those who disagree. (Source: 1996 General Social Survey. National Opinion Research Center, University of Chicago.)
This pattern of giving holds for nonmonetary charity as well. For example, in 1996, Americans who believed that the government has a responsibility to reduce income inequality were substantially less likely to volunteer their time than people who did not believe this. People who stated in 2002 that they thought the government was “spending too little money on welfare” were less likely than those saying the government is “spending too much money on welfare” to donate blood, give directions to someone on the street, or return extra change to a cashier. Ironically, they were less likely even to offer food or money to a homeless person.41
People who believe in redistribution are more likely to treat someone uncharitably in subtle ways. For example, they will be late for professional appointments. In one fascinating experiment, a team of researchers from Estonia, Morocco, and the United States interviewed students in those three countries about their views on punctuality. They found that, regardless of the cultures in the study, people with collectivist views also have a more liberal view of what is acceptably late to arrive for a meeting.42
What explains these patterns? Redistributionists generally believe meaningful social action resides principally with the government. Individuals shouldn’t have to give their money or time to help the less fortunate. That’s the job of the state. Ralph Nader commented, “A society that has more justice is a society that needs less charity.”43 Instead of giving to charity, redistributionists vote for progressive policies and candidates who will increase the responsibilities of the government.
Is voting just a different way of giving to help others? Not quite. Voting for a candidate doesn’t mean you are going to pay any more in taxes than your capitalist neighbor who votes differently than you do. It might make you feel unselfish—hey, I’m willing to raise my own taxes!—but it’s only an expression of your views, not an actual sacrifice unless yours is the swing vote in a fifty-fifty election. Good intentions are not gifts, and by themselves, they don’t help the poor.
In November 2011, a reporter from the Daily Caller revealed the redistributionist attitude in a series of interviews with progressive millionaires protesting on Capitol Hill in favor of higher tax rates for the wealthy. She offered each the opportunity to make a voluntary contribution to the U.S. Treasury through the website Pay.gov. None of the wealthy Americans were willing to donate a cent.44
While progressive politicians and the occupiers of Wall Street hurl invective at capitalists for their selfishness, the evidence proves that they’re wrong. On average, people who support free enterprise over growing government are vastly more privately generous than those who oppose it. They understand that the government can’t fix all or even most ills, and that individuals and communities share the responsibility to take care of society’s weakest members.
A CURIOUS FACT about the link between charity and free enterprise is that giving rewards the giver. It really is better to give than to receive.
Prosperity and charity are strongly and positively related. It makes sense that higher income leads to more giving. But new research shows that giving actually stimulates personal prosperity. Analysis controlling for education, age, race, and all the other outside explanations for increases in giving and income revealed that a dollar donated to charity leads to approximately $3.75 in extra income to the giver.45
How can this be? The research suggests that private giving transforms people, even physiologically. It lowers their stress levels, for example. In one experiment, senior citizens were asked to give massages to babies, the idea being that they would do this nice thing with no expectation of a return. Afterward, the adults were found to have markedly lower stress hormone levels in their brains than beforehand.46 The implication is that if you are stressed, you should do something charitable for someone else.
Givers are more popular and more admired than nongivers, which should directly affect their prosperity. In one British university study, participants were given a sum of money and asked in front of others to choose whether to keep it for themselves or give it to a public fund.47 They were also told that everything in the public fund would be totaled, the amount of money doubled, and then the money would be divided equally among the participants. In other words, everyone would benefit from an individual’s public spiritedness, even the selfish people who decided to simply pocket their own cash.
The interesting part of the experiment came after the decisions were made about how to allocate the money. The participants then broke into small groups to choose a leader from among themselves. They did not know each other; all they knew was how the other participants had behaved during the giving experiment. In more than 80 percent of the cases, the groups selected as leader the individual who had placed the highest amount of money in the public fund. People see giving as a leadership quality.
These studies and many others suggest that giving can make people better off—even monetarily. What is true for individuals is also true for the country as a whole: Charity in America stimulates American economic growth. Per capita charity and per capita GDP in the United States have moved in tandem over the years, with the former increasing by 190 percent in real terms since 1954 and the latter by 150 percent. Evidence that the two forces stimulate each other comes from analysis of how past values of one variable affect future values of the other. This analysis shows that a 10 percent increase in charity per person provokes a 3 percent increase in GDP.
Put in dollar terms, $1 of private charity can increase GDP by about $19, an excellent rate of return (especially in these tough economic times).48 Indeed, charity is a much better kind of “stimulus” than government spending. Even the most liberal economists estimate a return to government spending of around $1.50 for every $1 spent, and many find it is actually less than a dollar.49
Givers get rewards that are more important than money, too. For example, the data show that givers are happier and healthier than nongivers. Ameri
cans who give charitably are 43 percent more likely to say they are very happy than people who don’t, according to one 2000 national survey. It doesn’t matter whether people give to a church or a symphony orchestra: Religious and secular giving both leave people equally happy, and far happier than those who don’t give. (And the more people give, the happier they get.)50
Do you want to improve a young person’s life? Don’t tell her to march with a sign demanding her rights to someone else’s money. Teach her to give to others and volunteer. In one study, researchers followed a thousand teenagers over five years and measured the extent of their charitable attitudes and behaviors through such questions as, “For the job you expect to have in the future, how important is helping people?” and, “How often do you spend time performing community service outside school?” The teenagers who were the most giving were the least likely to be involved in street violence and teen pregnancies. They were also the least likely to experience stress and negative feelings.51
Charity exists in a kind of virtuous circle: people give their time and money because they recognize need and want to make life better for others. But in so doing, they also become better, more prosperous people. This in turn adds to economic growth and opportunity for the whole nation. For this reason, it is essential that the state not intervene in ways that will prevent people from acting charitably.
Unfortunately, the government thwarts private charity all the time. Consider this example. In 2006, Fairfax County, Virginia, adopted a policy (later reversed) to “help” the homeless. In order to prevent food poisoning, the county barred residents from giving food to the hungry on the street unless it was prepared in a county-approved kitchen. This policy disqualified the food produced by approximately half the operating shelters and churches that had previously fed the hungry, despite the fact that food poisoning from donated food had never been reported. It also made it illegal for someone to share a homemade sandwich with a homeless person. The results were, of course, entirely negative for the homeless, who were now more likely than before to eat genuinely dangerous food out of dumpsters. It also deprived a community of the opportunity to volunteer by working in a soup kitchen or simply by buying a homeless man a sandwich. These kinds of government interventions are thus doubly destructive; they hurt the people who they’re meant to help and deny the helpers the opportunity to develop their moral lives and flourish through giving.52
WE DON’T HAVE TO ACCEPT the claims about free enterprise and its effects on the poor as a matter of faith. There is ample evidence about how the underprivileged are affected by capitalism and market economies. Free enterprise creates enormous opportunity and prosperity, including, especially, for the least among us.
Free enterprise advocates need to master the facts on this subject. Only then can they combat the common redistributionist argument that capitalism is good for the rich but not the poor, and that it corrupts us morally. The hard evidence clearly shows that free enterprise is the best system for lifting up the poorest in society and the best system for encouraging moral action on the part of private individuals.
Statism halts free enterprise’s virtuous circle in its tracks. When we take away people’s ability to prosper privately, they work less, earn less, spend less, and create fewer jobs for others. When the government crowds out private charity, people give less and we all rely even more on the government.
This destructive dynamic hurts everyone in the income distribution. Frankly, I am not very concerned about the rich: They will do just fine. I am concerned about the poor, who truly suffer when entrepreneurship and private charity are suffocated.
None of this is purely theoretical. For years, I have watched social democratic policies ravage the economy of my wife’s home country, Spain. Government has grown, debt has grown, charity has withered in favor of government welfare, and private entrepreneurs have been vilified and harassed—all for the sake of the working man. The result is that today, unemployment in Spain stands at 21.2 percent, and at 46.2 percent for youths between ages sixteen and twenty-four.53 The poor are the ones suffering most from thirty years of reliance on the bloated, inefficient Spanish government.
I am not arguing that the government has no role in helping the underprivileged. It does. Markets do not always function properly and a social safety net does have a place in American society. In the second part of this book, I offer more specific information about what the government can and should do to help the poor in a free enterprise system.
But the moral of this chapter, I hope, is clear. If you love the poor, then you should privately give more and fight for free enterprise for everyone. It’s what the Good Samaritan would do.
II
Applying the Moral Case for Free Enterprise
5
FACING THE FACTS ABOUT AMERICA’S STATIST QUO
An economist is out for a drive on a country road. Unfamiliar with anything outside the big city, he soon gets hopelessly lost. Spotting a lone farmhouse, he pulls over, knocks on the door, and asks the farmer for help. The farmer gives the economist careful directions back to the city.
The economist thanks the farmer and while turning to leave, he notices the house is flanked by a large field full of sheep. Always on the lookout for a profit-making opportunity, the economist poses this wager to the farmer: “I see you have a lot of sheep there, sir. If I can tell you the exact number in ten seconds, will you give me one of them?”
The farmer, amused by the wager, says, “There’s no way you can tell how many sheep I have without counting them. You’re on.”
The economist immediately employs a complex set of analytic heuristic devices, refining his estimates in rapid succession until he reaches his conclusion: “You, sir, have 863 sheep.”
“Why, that is just amazing,” says the farmer. “That is exactly right!”
Being a man of his word, the farmer invites the economist to pick out any sheep he wants. The economist does so and walks back to his car with the animal in his arms. But before he departs, the farmer stops him.
“You know, I have a wager of my own. If I can tell you your profession, can I have my sheep back?”
The economist, amused, responds, “There’s no way you could know my profession, given that we’ve only just met. You’re on.”
The farmer says, “You, sir, are an economist.”
“Why, that is just amazing,” says the economist. “How on earth did you know that?”
“Simple,” says the farmer. “You got all the numbers right, but you’re walking off with my dog.”
I LIKE THIS STORY because I think it sums up the problems free enterprise advocates have today. They get the numbers right but get the most important things wrong. They’re great at finding evidence that capitalism brings economic growth, but not as good translating that evidence into the real world and convincing people that free enterprise is the best system not only for prosperity, but also for a flourishing America.
The first four chapters of this book consisted of my best attempt to solve this problem—to make the moral case for free enterprise. In the next three chapters, I’ll apply the lessons from those chapters to the issues the United States faces today, by doing three things.
First, I’ll speak openly about what has gone wrong with the U.S. system. There has been a bipartisan slide toward big government over the last few decades, under both Democratic and Republican administrations. People must get over the idea that one election or one particular party will solve the problem—both parties have colluded in the vast expansion of the government over the last hundred years.
To be blunter, there is no guarantee that a Republican administration per se will bolster the culture and policies of free enterprise. In the worst case, Republican political victories can even set back the free enterprise cause, because Americans tend to become complacent when they don’t see that the system is under clear assault. The bipartisan forces of big government creep back in, and the process of state expansion continues.
Second, I’ll lay out what I believe the government should look like. It is insufficient to argue simply that the government is “too big.” Free enterprise advocates have to be more specific and constructive than that, to rebuff the progressives’ suspicions that all free marketeers really want is to help rich people (or that we are secretly storing up canned goods and waiting for the apocalypse).
Third, I’ll offer tangible proposals for policy, not abstractions. Free enterprise’s champions need to form an organized argument about economic growth, jobs, deficits, taxes, and the other key issues of our time—an argument that starts with the rock-solid moral case; uses facts and data to show that reform is necessary and urgent, provides principles for reform, and offers actual, specific policies.
AMERICANS ARE ambivalent when it comes to the role of the state. They say they love free enterprise and dislike big government, but over the last century they’ve let the public sector crowd out entrepreneurship and make deeper and deeper incursions into their lives.
As I noted at the beginning of this book, Americans say they consider free enterprise central to U.S. culture and success. A 2010 Gallup poll, for instance, showed that 86 percent of Americans had a positive image of free enterprise, while only 10 percent had a negative image.1 According to a 2011 Gallup poll, 60 percent of Americans “strongly agreed” that “entrepreneurs are job creators.”2 (Incidentally, the same poll found that just 30 percent of Europeans felt the same way about entrepreneurs.)
By commanding majorities, Americans say they prefer limited government over an expansive welfare state. In early 2010, a Washington Post–ABC News poll asked Americans, “Generally speaking, would you say you favor smaller government with fewer services, or larger government with more services?” To this question, 38 percent favored the latter, while 58 percent preferred the former.3
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