The Fraser Institute of Canada just released a new book called Demographics and Entrepreneurship: Mitigating the Effects of an Aging Population. The book contains a series of 10 chapters on the connections between entrepreneurship and prosperity, and the contribution (or subtraction) of government policy to both.
I contributed at chapter called “Liberty’s Unfinished Business: How to Eliminate Political Barriers to Global Entrepreneurship.”
As the title implies, my recommendations were aimed at policymakers, some proposals more aggressive than others.
But more on those later. I also thought it appropriate to aim at the entrepreneurs themselves. Scholars in Fraser’s book defend the economic freedom that makes the entrepreneurs’ great works possible. But that support, the cheerleading from academics who admire the wealth creators (and, if anything like me, are a little jealous) alone cannot suffice. To prevail over the political/regulatory class, the entrepreneurial sector itself has a “duty” to defend free enterprise over the coercive, rent-seeking, regulatory defaults that prevail.
Forge “do-er/thinker alliances”: Important here is the work of Fred L. Smith Jr, founder of the Competitive Enterprise Institute (my organization), on the necessary alliance between the world’s “do-ers (the entrepreneurs) and thinkers” in advancing economic liberty, and in influencing (or for that matter, becoming) policymakers. As Smith argued in the 2012 article “Countering the Assault on Capitalism,” “Properly mobilized, forces for economic liberty can mount a vigorous defense of capitalism and possibly even recapture some of the ground they have lost over the last century.
In 1942’s Capitalism, Socialism and Democracy, Joseph Schumpeter wondered if capitalism could survive, and feared it could not; capitalism would be despised and attacked by the same intellectuals whose leisure to live as intellectuals was made possible by capitalism itself. Moreover, businesspersons would be reluctant to speak out in defense (p. 161).
Consider how they [businessmen] behave when facing direct assault. They talk and plead—or hire people to do it for them; they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideals and interests.…[Rather than educating its] enemies, [business] allows itself . . . to be educated by them. It absorbs the slogans of current radicalism and seems quite willing to undergo a process of conversion to a creed hostile to its very existence.
Smith’s point, and source of hope, is that “what Schumpeter failed to consider was that some intellectuals would resist the allure of statism. Indeed, many have.”
Examples of business self-assertiveness can sometimes be found, such as the Job Creators Network and the global Entrepreneurs’ Organization. Granted, business combinations do sometimes operate against the public interest, becoming and seeking to become rent seekers. But many businessmen have legitimate economic liberalization at heart. And occasionally, before major economic regulatory reforms (say, transportation deregulation in the 1980s in the U.S., or unfunded mandates and small business regulatory reforms in the mid-1990s), there come tipping points where rents become too costly to acquire, and the burden of regulation coalesces such that general, universal regulatory liberalization becomes in the interest of all (or if not all, most; or enough).
Indeed, eventually, given the interconnectedness of business (supply chains, business customer networks) the regulatory bell tolls for all businesses; at certain unpredictable times, it becomes apparent to businessmen that regulation that affects their competitors, will eventually boomerang and affect them too (see Smith 2016 essay The Morality and Virtues of Capitalism and the Firm).
The cultural environment in which business operates is left-leaning and unfavorable to capitalism. The media reports itself as left; Harvard University is avowedly leftist. The political campaign contributions made by members of the media and academic circles are overwhelmingly to leftist candidates. The media and academic classes often detest business, and argue that business-funded research or proposals must be biased, while, however, government research and subsidized National Public Radio are objective. They all (and sadly many tech entrepreneurs) embrace Corporate Social Responsibility (or CSR) as a way of remedying modern capitalism’s alleged faults. However, capitalism is not broken; capitalism is an institution that has spread wealth and fairness more widely than any other has. The average person is an owner of businesses under shareholder capitalism.
Business needs to realize when it is under assault. Capitalism (and its attendant entrepreneurship) needs capitalists defending it, not from a “markets aren’t as bad as you think they are” posture as Smith notes, but proudly from a patch of moral high ground, and using the vast, culturally significant methods of communication, marketing and persuasion that the business sector uniquely possesses.
Noting, “Statists have been far more aggressive in uniting both their economic and intellectual forces,” Smith urges marketing economic liberty: “If we accept the criticisms of the dominant intellectual class, capitalism will fade…. For that reason, we must create a counter-reformation of classical liberal intellectuals and business leaders, who work together to promote legitimizing narratives about capitalism and instill its virtues in the hearts and minds of our global society” The practice of entrepreneurship is legitimate and moral; and entrepreneurs and large businesses alike, with their vast cumulative resources, need to direct their communiques to Joan Citizen as well as Joan Consumer.
Regulators rather than market forces have long overwhelmingly directed some of our most economically distressed industries. Capitalism stands among the greatest democratizing innovations in human history, a way for individuals unknown to one another to work together to create unprecedented well-being. It needs to be defended as the precious institution it is. As Smith noted in 2016, “A moral defense of capitalism needs to illustrate how capitalism not only makes people wealthier, but also advances other important values and concerns, such as fairness and justice. Failure to make that case leaves business vulnerable to attack by anti-market critics, demagogic office-seekers, and overzealous regulators.
While policymakers (we hope) perform the tasks of entrepreneurial liberalization, business needs to get up from its crouching position and demand that capitalism be portrayed fairly as the moral, democratic institution that it is.
As I’ve heard Fred Smith joke, “Business would win more battles if it fought any!”