Mr. Peterson of East Greenville, Pennsylvania, teaches economics and history in junior high school.
Junior high and high school students are having an increasingly difficult time understanding our economy. They are constantly surrounded by talk of the complexities and problems of the economies of the United States and the other leading nations of the world. Confusing terms are bounced over their heads in such a manner that they wonder if even their users understand them. With all the seeming chaos, they fail to realize why our nation has become such an economic success.
Calvin Coolidge said, “If all the folks . . . would do the few simple things they know they ought to do, most of our big problems would take care of themselves.”
Although this bit of practical wisdom was applied against a backdrop of a variety of national problems, it can be applied as well to the problem of simplifying free market prin ciples for young students of the freedom philosophy. And it never hurts for the older, more astute students to review the basics periodically.
Individual students have at times approached me privately to question some statement or statistic they have read or heard concerning the economy. While there have been several instances in which I have had to honestly answer, “I don’t know,” I have found that many of their inquiries can be answered by providing them with an obvious, simply-stated principle of the free market philosophy. Six principles have been of special significance to their learning.
More Freedom, Less Government
First, the free market philosophy increases the freedom of the individual and limits the role of government.
Socialists look upon society as a herd to be directed by governmental herdsmen with no consideration of the individual. They think society produces and consumes goods. In reality, there is no economic activity of masses but only of individuals.
The freedom philosophy permits the maximum activity of the individual. It allows him to make choices and take risks. It does not promise stability, as does collectivism. Instead, it gives uncertainty, challenge, and opportunity. It permits one to dream and then to attempt making those dreams reality. And, in order to allow this activity, it permits failure as well as success. The dreams which are considered worthwhile become successful in the market; those which are deemed worthless or too costly fail.
Socialism promises what unthinking men desire: equality. But in providing a false equality, it takes away the freedom of the individual. Truly free men are not equal, and equal men are never truly free.
There can be no mixture of these two systems, individualism and collectivism. One cannot be an individualist in one area and a collectivist in another. He is either completely one or completely the other in every aspect.
The free market is social cooperation entered into freely without coercion, i.e., social contract. The freedom philosophy, therefore, necessarily must restrict government to the protection of the life, liberty, and property of the individuals comprising society. Government is to act only as an umpire in the interrelationships of individuals, punishing those who harm or threaten to harm the rights or property of others. It is to insure an atmosphere in which the individual is free to pursue his own desired self-advancement provided he does not in the process harm others.
Henry David Thoreau accented this dual action of the freedom philosophy when he wrote in Civil Disobedience, “There will never be a really free and enlightened State until the State comes to recognize the individual as a higher and independent power, from which all its own power and authority are derived, and treats him accordingly.”
Whenever government steps beyond this, its legitimate responsibility, it damages the economic and moral well-being of the individual and of the nation. It can do this in a variety of ways, including excessive taxation, restriction of personal freedoms, or regulation of the economy. The best government is the one that does not go beyond its protective duties or unduly limit the individual. It teaches the individual to govern himself so that government intervention becomes not only undesirable but also unnecessary.
Reward for Achievement
Second, the free market philosophy rewards the work ethic.
In Bible times, the apostle Paul commanded that “if any would not work, neither should he eat” (II Thes. 3:10). This principle was transplanted to America and applied by John Smith in Jamestown. As a result, the colony overcame its difficult first years and prospered.
The free enterprise philosophy offers the prospect of economic success for those who are willing to toil and exert themselves in lawful pursuits. They are free to attempt putting their dreams and ideas into practice and to succeed or fail. Opportunity, not special privilege, is the watchword of the entire system.
Workers in a planned economy, however, are mere cogs in the inter-meshing of governmental gears, striving for a bureaucratic utopia without the incentives of freedom or personal advancement of self-satisfaction.
Free enterprise rewards the worker who exhibits initiative and industry. Workers who give a good day’s work are rewarded with a mutually acceptable day’s wages. Those who shirk or loaf are soon forced out of their jobs by the more enthusiastic workers. The hard workers are further rewarded with bonuses, promotions, and raises to the degree they excel or produce. As one wise person put it, the worker who never does more than he is paid for never gets paid for more than he does.
In a truly free market, unemployment is strictly a voluntary condition. Those who want employment can have it—provided they are willing to work for the wages the market is willing to pay and provided they can supply the goods and/or services the market demands. There is always a job for one who is willing to work for what the market determines he and his product or services are worth.
Third, the free market philosophy encourages thrift.
The door of economic success swings on the hinges of thrift, the wise use of capital. The individual who is master of his money and resources succeeds; he who is mastered by them fails.
Andrew Carnegie, one of the wealthiest capitalists of the late nineteenth and early twentieth centuries, said, “The man should always be the master. He should keep money in the position of a useful servant; he must never let it be his master and make a miser of him.”
Thrift may be simply summarized by five imperatives.
1. Spend less than you receive. Calvin Coolidge once said, “There is no dignity quite so impressive, and no independence quite so important, as living within your means.” Much of the poverty and economic difficulty of our time could be alleviated if individuals and governments had the courage to say, “No, I can’t afford it.”
2. Stay out of debt. First, one should try not to run up bills. Second, if one cannot avoid debt, he should get out of it again as quickly as possible. A man in debt is not his own master; he is at the mercy of his creditors until his debts are paid in full.
3. Never spend anticipated income before it is actually received. In more quaint terms, “Don’t count your chickens before they’re hatched!”
4. Keep a regular and accurate account of all receipts and expenditures. Such record-keeping readily reveals unwise or unprofitable spending. It also shows the importance of little expenditures to the whole. It insures wise and orderly expenditures and produces a visible and encouraging record of income. The record-keeping should in time develop into a wise budgeting system.
5. Make every effort to save some of every amount received. “I should say to young men,” Carnegie advised, “no matter how little it may be possible to save, save that little.” It is from such savings that investment is possible for the development of businesses which produce the goods and services needed and desired in the marketplace. It is from such savings that charity is possible for the assistance of those less fortunate than ourselves.
Fourth, the free market philosophy encourages philanthropy, the caring for the less fortunate and the rewarding of worthy causes by those who are successful. Charity is the giving of one’s own goods to another in need out of the generous desire of one’s own heart, i.e., by voluntary contribution. It is not government-coerced funding for the support of others.
To the extent that freedom is permitted in the marketplace, philanthropy increases, for greater successes in the marketplace mean more help for those who are unable to help themselves. Contrariwise, to the extent that government restricts freedom in the market, philanthropy decreases, and those unfortunate, needy others suffer.
Charity and philanthropy are the duties of private individuals, groups, and churches, not of government. The Bible commands families to care for their own needs and for the churches to care for those who have no families. “But if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel” (I Timothy 5:8).
A list of the world’s great philanthropists sounds like a list from Who’s Who in Capitalism: Philip Armour of the meat industry; Andrew Carnegie, steel magnate; E. I. DuPont de Nemours, chemical manufacturer; Henry Ford, automobile manufacturer; J. P. Morgan, financier; John Wanamaker, department store pioneer. The list could go on and on. These men were able to give vast sums to worthy causes only because the free market permitted them to earn even greater sums. Each of them forgot himself for a while in order to remember others, and practically everyone in the nation now remembers their generosity.
In the area of social welfare, as in all other areas of the free market, government only assumes this familial and religious duty in direct proportion to the degree this obligation is first abdicated by those to whom it legitimately belongs.
Fifth, the free market philosophy thrives or founders according to the moral and spiritual condition of the individuals comprising that market. Their moral and spiritual outlook determines the nation’s economic outlook. As the evangelist D. L. Moody once said, “Nations are only collections of individuals, and what is true in regard to the character is always true of the whole.”
Free enterprise encourages, in fact demands, adherence to the Golden Rule: “Whatsoever ye would that men should do to you, do ye even so to them” (Matthew 7:12). So long as men follow this simple but profound truth, freedom, peace, and prosperity abound. Only when some attempt to force, by government authority, their own desires on the rest do slavery and turmoil occur. When men are bad, society is bad. With such disruption of the market comes economic decline.
Alexis de Tocqueville tried to find the secret of America’s greatness, searching diligently in the fields, in the schools, and in the halls of government. But he concluded those places, though great, did not hold the key to America’s greatness. Not until he observed the moral strength of her citizens, derived from their religious principles, did he understand fully the cause of the nation’s greatness. “America is great because America is good,” he said. “When America ceases to be good, America will cease to be great.”
Part of a nation’s moral standing is determined by whether its citizens have the courage to do what is right regardless of the trends around them. The people with a sound moral condition will have an indestructible confidence in the ability of truth to triumph over error, good over evil. When men lose this faith in God, they inevitably lose their liberty, for God is the Author of liberty.
“Americans,” Calvin Coolidge reminded us, “have not fully realized their ideals. There are imperfections. But the ideal is right. It is everlastingly right. What our country needs is the moral power to hold to it.”
Abiding Principles of Success in the Free Market
Finally, the principles of economic success in the free market are the same regardless of the size of the operation, be it a single individual, a family, a multinational corporation, or an entire nation. Statistics and conditions may frequently change, but principles remain forever the same.
Collectivist bureaucrats would have us believe that economics is a field larger than the common man, an area into which only the experts dare enter. With their array of charts, graphs, and frightening terms and statistics, they quickly convince many that this is exactly the case. What they themselves fail to understand, however, is that economics is, at the lowest level, merely individual human actions, choices and decisions made in the marketplace of goods, services, and ideas.
The common man is deeply involved in the economy on a daily basis. He decides to work or not to work. He chooses to buy or sell or not to buy or sell. He makes trade-offs based on his own needs, wants, and resources. He takes risks. He succeeds or fails. Multiplied several million times all across the nation, this makes up the bulk of economic action in our country. Granted, much influence is exerted on the economy by large corporations, wealthy capitalists, special interest groups, and even governments. But the principles of the free market are always the same regardless of who is involved.
If the free market philosophy was successful, correct, and good in the developmental stages of our nation’s history, it remains so even today. If it has worked for America, it will also be practical and successful when applied to other nations.
The free market philosophy, regardless of where applied, is successful because of simple, obvious principles like the ones briefly examined above. The greatest complexities occur whenever these principles are ignored or forgotten. One cannot overemphasize the importance of the obvious.