Free enterprise is under attack from across the political spectrum. Socialists and their allies regard it a source of corruption and as antithetical to democracy. Some even regard it as racist. Many conservatives — some of them erstwhile believers in free markets — regard it as plutocratic and destructive: the source of our various economic troubles. For classical liberals and Burkean conservatives, it can become dispiriting to witness relentless attacks on a system that has given us all so much.
I was delighted, then, to come across this rousing defense of free enterprise from Margaret Thatcher in 1975. At this point, Britain was still a social democracy — something to which the conservatives had acquiesced for far too long. Thatcher had been elected to lead the Conservative Party only a few months before. “Free Enterprise is an essential part of Britain’s future,” she began her speech. “Free Enterprise provides . . . jobs, exports, wealth and inventiveness. These four — they are the basis of our prosperity. They depend on Free Enterprise.”
Those words were true in Britain in the 1970s and they’re equally true about America today. We dismiss them at our peril. Let’s consider each in turn.
First, American jobs depend on free enterprise. Eight-five percent of them are in the private sector. Even where those jobs support government, as in federal contracting, they do so by using the initiative and flexibility that free enterprise provides. Unemployment is currently at historically low rates, and where pockets of higher unemployment exist, they tend to be in states with higher regulatory barriers to employment, such as California or New York.
American exports depend on free enterprise, too. The U.S. is the world’s second-largest exporter of goods and the world’s biggest exporter of refined petroleum, medical devices, and aircraft parts. Were Thatcher to speak today, though, she would likely talk about “trade” rather than just exports. That’s because imports also add to our prosperity. We often import things to support our industry and create things the rest of the world wants. Our exports of refined petroleum, for instance, depend on imports of crude.
America’s wealth provides the basis for a government hungry for revenue, which last year took in over $4 trillion and expects to raise that to almost $6 trillion by 2027. (Recall that it took in only $2.5 trillion before the financial crisis, in ’08.) That would be impossible without the wealth created by free enterprise. Whatever you may think of this or that government program, the government’s essential functions — such as our military defense and the justice system — are paid for by the wealth created by private enterprise.
Wealth also helps in other ways. A wealthier society is a healthier one, which enables us to devote otherwise scarce resources to environmental protection and philanthropy, from promoting the arts to helping the less fortunate.
Finally, free enterprise is the real mother of invention. The link between economic freedom and innovation is well-established. The more we restrict economic freedom, the more we restrict innovation. China may manufacture much of the world’s goods, but its centralized government stifles innovation. In fact, there is evidence that innovators are fleeing China as its government pursues a return to highly heavy-handed state intervention.
Why, then, why would anyone criticize free enterprise? As Margaret Thatcher pointed out, the reasons are often unpersuasive:
But, say the opponents of free enterprise you have to restrict economic freedom to gain political freedom. You have to control private enterprise in order to give more power to the people. What nonsense. These days we hear — from both left and right — that free enterprise is dangerous for democracy. Both sides say that big corporations buy political power. Yet in both cases, the solutions suggested give more power not to the people but to bureaucrats.
As Thatcher noted:
They have given much more power to bureaucrats, much more power to extremists, much more power to . . . Ministers. But it is power to the people which only free enterprise can provide. Power is primarily the power of choice.
Choice in small things, and in big things — the food you buy, the house you rent or the home you own; the clothes you wear or the holidays you choose. Where you invest-the risks you take. All these individual choices are a fundamental part of freedom, and free enterprise makes them possible.
Thatcher’s insight is important: Individual choice is the true political power. The concept of revealed preference is important here. If people really don’t like how Disney chooses to lobby, for instance, they will stop subscribing to Disney+ and stop buying Disney merchandise. In a world with investor primacy, that would be enough to change Disney’s habits: a method and principle far better than attacking Disney directly. Yet sadly that, too, is under attack — not only from the left but from a growing corporatist assault, nominally, at least, from globalist interests.
As Thatcher concluded, “It is so easy to believe that freedom means giving greater power to politicians and officials of the State.” It’s a warning we all should heed.