We have seen extensive government intervention in free enterprise over the past few months that have surpassed any other by our government since the 1930s. In the past few months the federal government has had to act like a bank because the credit market fell on its face. The loan extended to the auto companies this week is a direct consequence of these adverse market conditions. This intervention, and the poorly executed financial industry intervention, are necessary to rescue the economy from the failing housing, finance, and auto markets. Does this signal the death knell of free enterprise? That of course depends on your view of “free enterprise”.
If you are a free enterprise (“laissez faire”) purist then free enterprise is dead. It started to decline with anti-trust and child-labor laws 100 years ago. It hit its death bed with the new deal and legalized unions in the 1930s, and has certainly passed on with the federal government nationalizing banks and “bailing out” the auto companies. If you subscribe to a view that free enterprise is primarily a means for providing citizens with economic well-being, with private control and profits serving as ways to measure accomplishment of the primary goal, then these government interventions are a matter of course, necessary to assure that the economic needs of the citizenry are met. In that case the free enterprise system is alive and kicking. Apparently President Bush and President-Elect Obama share this view. Bush stated that he would not “let the economy crater to preserve free enterprise” and Obama has advocated heavy government intervention in the economy throughout his campaign and transition to the presidency.
As an advocate of fiscal conservation (“small government”) I have always viewed a “pure” free enterprise system as an ideal that we should at least attempt to emulate as closely as possible. There are a number of reasons why I continue to harbor this view.
Human-beings are self-interested. Profit-based free enterprise provides us with an incentive that feeds that self-interest. The free-enterprise system has also been the primary engine behind the development of the greatest economic market in history, bringing prosperity to the greatest number of people in history. Government-run economies, such as those in the Soviet-block, have largely failed. Even China’s recent success has been due to the infusion of capitalism into its economy. Lastly, government only when necessary means a freer society.
On the other side of the coin, the profit incentive can run amuck with greed. Governments have to intercede to control the greed factor. Anti-trust, child-labor, stock market, and even workplace safety regulations and labor union legalization were all government interventions instituted because of inherent greed in the free-market system. Without these interventions the social goal of economic well-being is arguably realized for relatively few at the expense of many, whose freedom is left in the hands of those who control capital.
The last, and possibly most compelling argument for government intervention in free enterprise, is the fact that the economy is fully globalized now. Other governments intervene in it. We must do the same or our industries will be placed at a competitive disadvantage, a la the auto industry.
In order to stay as close to a pure free enterprise system as we can, we must persuade our trading partners to do so as well. In any event our government needs to create a level playing field for our companies in this world economy. Free enterprise is not dead. It has simply gone global and is not subject to our unilateral control.
No comments:
Post a Comment