By Arthur C. Brooks
Sunday, May 23, 2010
This is not the culture war of the 1990s. It is not a fight over guns, gaysor abortion. Those old battles have been eclipsed by a new struggle between twocompeting visions of the country's future. In one, America will continue to bean exceptional nation organized around the principles of free enterprise --limited government, a reliance on entrepreneurship and rewards determined bymarket forces. In the other, America will move toward European-style statismgrounded in expanding bureaucracies, a managed economy and large-scale incomeredistribution. These visions are not reconcilable. We must choose.
It is not at all clear which side will prevail. The forces of big governmentare entrenched and enjoy the full arsenal of the administration's money andinfluence. Our leaders in Washington, aided by the unprecedented economic crisisof recent years and the panic it induced, have seized the moment to introducebreathtaking expansions of state power in huge swaths of the economy, from thehealth-care takeover to the financial regulatory bill that the Senate approvedThursday. If these forces continue to prevail, America will cease to be a freeenterprise nation.
I call this a culture war because free enterprise has been integral toAmerican culture from the beginning, and it still lies at the core of ourhistory and character. "A wise and frugal government," Thomas Jefferson declaredin his first inaugural address in 1801, "which shall restrain men from injuringone another, shall leave them otherwise free to regulate their own pursuits ofindustry and improvement, and shall not take from the mouth of labor the breadit has earned. This is the sum of good government." He later warned: "To takefrom one, because it is thought that his own industry and that of his fathershas acquired too much, in order to spare to others, who, or whose fathers, havenot exercised equal industry and skill, is to violate arbitrarily the firstprinciple of association, the guarantee to every one of a free exercise of hisindustry and the fruits acquired by it." In other words, beware government'seconomic control, and woe betide the redistributors.
Now, as then, entrepreneurship can flourish only in a culture whereindividuals are willing to innovate and exert leadership; where people enjoy therewards and face the consequences of their decisions; and where we can gamblethe security of the status quo for a chance of future success.
Yet, in his commencement address at Arizona State University on May 13, 2009,President Obama warned against precisely such impulses: "You're taught to chaseafter all the usual brass rings; you try to be on this "who's who" list or thatTop 100 list; you chase after the big money and you figure out how big yourcorner office is; you worry about whether you have a fancy enough title or afancy enough car. That's the message that's sent each and every day, or has beenin our culture for far too long -- that through material possessions, through aruthless competition pursued only on your own behalf -- that's how you willmeasure success." Such ambition, he cautioned, "may lead you to compromise yourvalues and your principles."
I appreciate the sentiment that money does not buy happiness. But for thepresident of the United States to actively warn young adults away from economicambition is remarkable. And he makes clear that he seeks to change our culture.
The irony is that, by wide margins, Americans support free enterprise. A Gallup poll in January found that 86 percent of Americans have apositive image of "free enterprise," with only 10 percent viewing it negatively.Similarly, in March 2009, the Pew Research Center asked individuals from a broadrange of demographic groups: "Generally, do you think people are better off in afree-market economy, even though there may be severe ups and downs from time totime, or don't you think so?" Almost70 percent of respondents agreed that they are better off in a free-marketeconomy, while only 20 percent disagreed.
In fact, no matter how the issue is posed, not more than 30 percent ofAmericans say they believe we would fare better without free markets at the coreof our system. When it comes to support for free enterprise, we are essentiallya 70-30 nation.
So here's a puzzle: If we love free enterprise so much, why are the 30percent who want to change that culture in charge?
It's not simply because of the election of Obama. As much as Republicans maydislike hearing it, statism had effectively taken hold in Washington long beforethat.
The George W. Bush administration began the huge Wall Street and Detroitbailouts, and for years before the economic crisis, the GOP talked about freeenterprise while simultaneously expanding the government with borrowed money andincreasing the percentage of citizens with no income tax liability. The 30percent coalition did not start governing this country with the advent of Obama,Nancy Pelosi and Harry Reid. It has been in charge for years.
But the real tipping point was the financial crisis, which began in 2008. Themeltdown presented a golden opportunity for the 30 percent coalition to attackfree enterprise openly and remake America in its own image.
And it seized that opportunity. While Republicans had no convincingexplanation for the crisis, seemed responsible for it and had no obvious plansto fix it, the statists offered a full and compelling narrative. OrdinaryAmericans were not to blame for the financial collapse, nor was government. Thereal culprits were Wall Street and the Bush administration, which had gutted theregulatory system that was supposed to keep banks in line.
The solution was obvious: Vote for a new order to expand the powers ofgovernment to rein in the dangerous excesses of capitalism.
It was a convincing story. For a lot of panicky Americans, the prospect of apaternalistic government rescuing the nation from crisis seemed appealing asstock markets and home prices spiraled downward. According to this narrative,government was at fault in just one way: It wasn't big enough. If only there hadbeen more regulators watching the banks more closely, the case went, the economywouldn't have collapsed.
Yet in truth, it was government housing policy that was at the root of thecrisis. Moreover, the financial sector -- where the crisis began and where ithas had the most serious impact -- is already one of the most regulated parts ofour economy. The chaos happened despite an extensive, intrusive regulatoryframework, not because such a framework didn't exist.
More government -- including a super-empowered Federal Reserve, a consumerprotection watchdog and greater state powers to wind down financial firms andpolice market risks -- does not mean we will be safe. On the contrary, suchchanges would give us a false sense of security, especially when Washington, aprimary culprit in the crisis, is creating and implementing the new rules.
The statist narrative also held that only massive deficit spending couldrestore economic growth. "If nothing is done, this recession could linger foryears," Obama warned a few days before taking office. "Only government canprovide the short-term boost necessary to lift us from a recession this deep andsevere. Only government can break the cycle that is crippling our economy."
This proposition is as expensive as it is false. Recessions can and do endwithout the kind of stimulus we experienced, and attempts to shore up theeconomy with huge public spending often do little to improve matters and insteadchain future generations with debt. In fact, all the evidence so far tells usthat the current $787 billion stimulus package has overpromised andunderdelivered, especially when it comes to creating jobs.
If we reject the administration's narrative, the 70-30 nation will remainstrong. If we accept it, and base our nation's policies on it, we will be wellon our way to a European-style social democracy. Punitive taxes and regulationswill make it harder to be an entrepreneur, and the rewards of success will beexpropriated for the sake of greater income equality.
The new statism in America, made possible by years of drift and acceleratedby the panic over the economic crisis, threatens to make us permanently poorer.But that is not the greatest danger. The real risk is that in the new culturewar, we will forsake the third unalienable right set out in our Declaration ofIndependence: the pursuit of happiness.
Free enterprise brings happiness; redistribution does not. The reason is thatonly free enterprise brings earned success.
Earned success involves the ability to create value honestly -- not byinheriting a fortune, not by picking up a welfare check. It doesn't mean makingmoney in and of itself. Earned success is the creation of value in our lives orin the lives of others. Earned success is the stuff of entrepreneurs who seekvalue through innovation, hard work and passion. Earned success is what parentsfeel when their children do wonderful things, what social innovators feel whenthey change lives, what artists feel when they create something of beauty.
Money is not the same as earned success but is rather a symbol, important notfor what it can buy but for what it says about how people are contributing andwhat kind of difference they are making. Money corresponds to happiness onlythrough earned success.
Not surprisingly, unearned money -- while it may help alleviate suffering --carries with it no personal satisfaction. Studies of lottery winners, forinstance, show that after a brief period of increased happiness, their moodsdarken as they no longer derive the same enjoyment from the simple pleasures inlife, and as the glow of buying things wears off.
The same results emerge with other kinds of unearned income -- welfarepayments, for example. According to the University of Michigan's 2001 PanelStudy of Income Dynamics, going on the welfare rolls increases by 16 percent thelikelihood of a person saying that she or he has felt inconsolably sad over thepast month. Of course, the misery of welfare recipients probably goes wellbeyond the check itself. Nonetheless, studies show that recipients are farunhappier than equally poor people who do not receive such government benefits.
Benjamin Franklin (a pretty rich man for his time) grasped the truth aboutmoney's inability by itself to deliver satisfaction. "Money never made a manhappy yet, nor will it," he declared. "The more a man has, the more he wants.Instead of filling a vacuum, it makes one."
If unearned money does not bring happiness, redistributing money by forcewon't make for a happier America -- and the redistributionists' theory of abetter society through income equality falls apart.
The goal of our system should be to give all Americans the greatestopportunities possible to succeed based on their work and merit. And that'sexactly what the free enterprise system does: It makes earned success possiblefor the most people. This is the liberty that enables the true pursuit ofhappiness.
To win the culture war, those of us in the 70 percent majority must reclaim-- and proclaim -- the morality of our worldview.
Unfortunately, we often fail to do this. Instead, we sound unabashedlymaterialistic. We talk about growth rates, inflation and investment, while the30 percent coalition walks off with the claims to happiness and fairness.(According to Obama, for example, we need to restore "fairness" to our tax codeby increasing taxes on the wealthy and exempting more people at the bottom frompaying anything.)
The irony is that it is the 30 percent coalition, not the 70 percentmajority, that is fundamentally materialistic. What do they consider thegreatest problem of poor people in America? Insufficient income. What would beevidence of a fairer society? Greater income equality. For the leaders of the 30percent coalition, money does buy happiness -- as long as it is spread evenly.That is why redistribution of income is a fundamental goal and why freeenterprise, which rewards some people and penalizes others, cannot be trusted.
The 70 percent majority, meanwhile, believes that ingenuity and hard workshould be rewarded. We admire creative entrepreneurs and disdain rule-makingbureaucrats. We know that income inequality by itself is not what makes peopleunhappy, and that only earned success can make them happy.
We must do more to show that while we use the language of commerce andbusiness, we believe in human flourishing and contentment. We must articulatemoral principles that set forth our fundamental values, and we must be preparedto defend them.
This defense is already underway, in a disorganized, grass-roots, Americankind of way. Protests against the new statism have flared around the nation formore than a year. And while some have tried to dismiss the "tea party"demonstrations and the town hall protests of last summer as the work ofextremists, ignorant backwoodsmen or agents of the health-care industry, thesemovements reveal much about the culture war that is underway.
Just compare the protests in America with those in Europe. Here, we see teapartiers demonstrating against the government's encroachment on the freeenterprise system and protesting the fact that the state is spending too muchmoney bailing out too many people. Why are people protesting in Greece? Because they want the government to givethem even more. They are angry because their government -- in the face of itsworst economic and perhaps existential crisis in decades -- won't pay the lavishpensions to which they feel entitled. There's no better example of the culturaldifference between America and Europe today, yet it is toward European-stylesocial democracy that the 30 percent coalition wants to move us.
Fortunately, it is hard to dismiss the voice of the voters in some of ourmost recent electoral contests. Scott Brown won the late Ted Kennedy's Senate seat from Massachusetts inJanuary by declaring himself not an apparatchik Republican but a moralenthusiast for markets. "What made America great?" he asked. "Free markets, freeenterprise, manufacturing, job creation. That's how we're gonna do it, not byenlarging government." His cultural pitch for free enterprise hit just the rightchord, even in liberal Massachusetts. It struck at the heart of the 30 percentcoalition's agenda for America.
Brown's victory -- and Rand Paul's triumph in Kentucky's Republican Senate primary lastweek, for that matter -- are but warning shots in the burgeoning culture war.The most intense battles are still ahead.
To win, the 70 percent majority must come together around core principles:that the purpose of free enterprise is human flourishing, not materialism; thatwe stand for equality of opportunity, not equality of income; that we seek tostimulate true prosperity rather than simply treat poverty; and that we believein principle over power.
This final idea is particularly challenging. In Washington, a lot of peoplethink they know how to win. They say what is needed are telegenic candidates,dirty tricks and lots of campaign money. To them, thinking long-term meansthinking all the way to 2012. In other words, they talk only of tactics, partiesand power.
They are wrong. What matters most to Americans is the commitment toprinciple, not the exercise of power. The electorate did not repudiate freeenterprise in 2008; it simply punished an unprincipled Republican Party.
But political turmoil can lead to renewal, and the challenges of this newculture war can help us mobilize and reassert our principles. The 2008 electionwas perhaps exactly what America needed. Today there is a very real threat thatthe 30 percent coalition may transform our great nation forever. I hope thisthreat will clear our thinking enough to bring forth leaders -- regardless ofpolitical party -- with our principles at heart and the ideas to match. If freeenterprise triumphs over the quest for political power, America will be thestronger for it."
Arthur C. Brooks is the president of the American Enterprise Instituteand author ......"