In a society that rewards initiative and offers opportunity, free enterprise fosters aspiration and ambition. In a social democracy with economic stagnation, you find envy, resentment, unrest — just look at Greece and Spain, where people are demanding government benefits instead of demanding to keep more of what they earn.
Five Myths
A feature from The Post’s Outlook section that dismantles myths, clarifies common misconceptions and makes you think again about what you thought you already knew.
4. The free market caused the financial meltdown.
It wasn’t free enterprise that was at fault; it was the lack of free enterprise. Statism and its co-dependent spouse — corporate cronyism — melted down our economy.
As my American Enterprise Institute colleague Peter Wallison has documented, two decades of misguided government policy contributed to a massive bubble in housing. When it began to deflate, so did the whole financial system. And who showed up first in the bailout line? Large corporations, including car companies and mortgage giants Fannie Mae and Freddie Mac. Find me an opportunistic politician chumming the waters with tax loopholes, and I’ll show you a corporate shark.
This isn’t the free market at work — not even close. It’s a toxic mix of big government and its corporate clients. We need more free enterprise, not less — free enterprise where entrepreneurs put their money on the line and earn a profit or suffer a loss.
5. Free enterprise is unfair.
When I was an economics professor, my students would sometimes argue that it was “not fair” for the rich to have so much more than the poor. So halfway through the course, I proposed that a quarter of the points earned by the top half of the class be passed on to the students in the lower half, to improve grade equality. Unanimously, the students agreed that this would be unfair.
I didn’t have to spell out my point much.
Income redistribution is necessary to pay for the state and desirable to finance a social safety net, but as long as incomes are legitimately earned, redistribution is not intrinsically “fair.” For a majority of Americans, fairness means not redistribution, but rewarding merit — and that is what free enterprise does.
In 2006, the World Values Survey asked a sample of Americans to consider two similarly placed workers, one of whom was more reliable and efficient than the other. Was it fair, they asked, that the better one was paid more? Approximately 89 percent of respondents said it was.
And since 1973, the General Social Survey has asked Americans this question: “Some people say that people get ahead by their own hard work; others say that lucky breaks or help from other people are more important. Which do you think is most important?” For 40 years, between 60 percent and 70 percent of Americans have chosen “hard work.”
Unless you believe that Americans don’t earn their success, you must recognize that free enterprise makes our nation more fair.
Arthur Brooks is president of the American Enterprise Institute and the author of “The Road to Freedom: How to Win the Fight for Free Enterprise.”
Read more from Outlook:
Obama says it’s only ‘fair’ to raise taxes on the rich. He's wrong.
America’s new culture war: free enterprise vs. government control
President Obama shouldn’t be afraid of a little class warfare
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