Saturday, July 14, 2012

"Free Enterprise" and the Real Issues Facing America

The Post is running an op-ed by Arthur Brooks called "Five Myths about Free Enterprise" which I think makes a mishmash of the economics and the politics. One of his myths is "free enterprise hurts the poor," and he points out that people in capitalist countries are much richer than people in India and Africa. Ok, sure, capitalism is better than peasant agriculture, or Maoism.

The thing is, we do not have in America, Europe or Japan anything like a pure "free enterprise system," and the alternative to our current system would not be peasant agriculture or socialism. What we have is a "mixed economy," with a very large public sector, legalized unions, and extensive regulation. The political conflict in America is not about whether to have a free enterprise system or socialism; we are not going to have either. The argument is about the right mix of government and private action, and about how taxes should be apportioned. America's poor made their greatest economic progress during the period when our government exercised the most economic control, and when unions were strongest, from 1940 to 1980. Since we turned back toward a less regulated, less unionized system in the 1980s, the poor have been treading water while the rich get ever richer. Some level of free enterprise is good for the poor, but unlimited free enterprise is not.

I think this is an important point because many forces in American politics want us to see our choices in apocalyptic terms. The argument that Obamacare is "socialism," for example, when any real socialist could only roll his eyes at its protections for insurance companies and drug companies. Within the whole range of possible economic systems, the difference between Obama and Mitt Romney is actually pretty small. I think it matters, but it is an argument about how to tinker with the system, not about fundamental change. When Republicans respond to every new regulation or tax increase with paeans to "free enterprise", they are setting up a false choice that has nothing to do with the issues we face now.

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