Freeman

ARTICLE

Free Enterprise: The Key to Prosperity

OCTOBER 01, 1985 by CLARENCE B. CARSON

Dr. Carson is an experienced observer and analyst of political and economic affairs. He is a specialist in American history with his Ph.D. degree from Vanderbilt University. He is the author of several books, and is currently st work on a five-volume text, A Basic History of the United States.

Free enterprise is widely acclaimed in the United States. Politicians, generally, declare in favor of it; editorialists frequently laud it; Chambers of Commerce have writing contests about it; even automobile stickers praise its virtues. Yet much of our enterprise is restrained, restricted, hampered, regulated, controlled, or prohibited. As an old saw has it, “What you do speaks so loud I can’t hear what you are saying.” By our practice, we say that we believe in free enterprise—except . . . Except for public utilities. Except for the railroads. Except for mail delivery. Except for medical services. Except for housing, financing, and real estate transactions. Except for large corporations. Except for education. Except for interest rates. Except for farmers. Except for small business. Except for industrial workers. In short, a case could be made that Americans believe in free enterprise except in whatever activities they happen to be considering.

It may be helpful, then, to consider free enterprise in terms of itself, minus all the partisan exceptions. The approach here will be to pose five questions: What is free enterprise? What are the objections to free enterprise? How may the objections be answered? What are the practical advantages of free enterprise? Is free enterprise necessary to freedom? The answers to these should provide some perspective on free enterprise.

What is Free Enterprise?

Free enterprise is a way of going about meeting our needs and wants by providing for ourselves or by freely entering into transactions with others. The opposite of free enterprise is hampered, restricted, controlled, or prohibited enterprise. The enterprise itself must be conducted in an orderly fashion within the framework of rules, but if the rules inhibit entry or hamper activity they become restrictions on enterprise. It is clear enough, for example, that traffic at an intersection must be regulated in its flow but that reasonable rules promote rather than inhibit the effective use of the street. On the other hand, if a city made a rule that taxicabs were to be limited to those presently in operation it would be equally clear that enterprise was being hampered. In a similar fashion, if a city adopted a rule forbidding any taxi to use the streets within its boundaries, that type of enterprise would be prohibited. Thus, government may be an adjunct or an obstacle to enterprise.

Free enterprise does not exist in a vacuum; it must be institutionally supported and protected. One of these institutions is government. Government is necessary to prohibit and punish the private violation of the rights of those who peacefully use their energies and resources in a productive way. Government is necessary also to punish fraud and deception, to settle disputes which may arise, and to regulate the use of public facilities such as highways. Another basic institution for free enterprise is private property For enterprise to be free, those who engage in it must be free; that entails having property in themselves and what they produce. Enterprisers must have title to their goods in order either to consume them or trade with others. Real property in land and buildings is essential to have a place to produce and to market goods and services. Private property not only supplies opportunities for the individual to provide for himself but it also places inherent limits on his activity. He can only rightfully sell and convey to another what is his in the first place. Private property also sets bounds to enterprise by restricting the owner to the use of what is his own or to that which the rightful owner authorizes others to use.

A third ingredient of free enterprise is free access to the market. A market is any arena within which buyers and sellers meet to effect their transactions. Under free enterprise neither buyer nor seller is prevented from making transactions by government decree or private threats or use of force.

The motor of free enterprise, indeed, of all enterprise, is individual initiative. Individuals provide the energy for the making of goods and providing of services. They conceive, invent, design, engineer, produce, and market goods through their endeavor. The great spur to produce is the increase of one’s goods or the profit he may make by selling them. Here again, the importance of private property and free access to the market may be seen. If men cannot keep as property what they produce, if they cannot market it, their incentive to produce is lessened or removed.

The great regulator of free enterprise is competition. Competition among sellers keeps prices down and tends to assure that the customer will be served. Competition among buyers provides a market in which those goods that are wanted can be sold at a profit. Prices are the result of this competition. Although any owner may offer his wares at a price acceptable to him, he can only sell when he has found a buyer willing to pay his price.

What Are the Objections to Free Enterprise?

There is no doing without human enterprise, for without it we would all be impoverished and our survival in doubt. The main question we have in regard to it is whether it shall be free or hampered. Reformist and revolutionary intellectuals have launched a massive assault over the past century against the market, private property, the profit motive, and other facets of free enterprise.

The thrust of their efforts has been to discover fatal flaws in the system, which they usually describe as capitalist, and to propose that government either supervise or take over the operation of the economy. They can be classified in one of two broad categories: meliorism or socialism.

Meliorism is the view that what is wrong with free enterprise can be corrected by government intervention. It holds that government can control, restrict, limit, regulate, tax, and redistribute so as to better the lot of the people and avoid the worst difficulties which they believe are inherent in free enterprise. Meliorists are hardly enthusiastic about private property and individual enterprise, but they do not usually attack them head on.

Socialists do directly attack property, private enterprise, the profit system, and what they call capitalism. They propose to abolish them with governmental (or collective or public) ownership of the means of production of goods. Socialism divides roughly into two camps: democratic socialism and communism. Democratic socialists are distinguished by a gradual approach to socialism because they are tied to popular elections and must move as the electorate will. Communists are revolutionaries who move toward socialism swiftly and by drastic measures once they come to power. They are characterized by one-party rule, and by totalitarian control over the lives of the people.

While socialists and meliorists have a barrage of objections to free enterprise, the following points are central to their argument.

One of their arguments which has broad appeal is that free enterprise produces cutthroat competition, often described as dog eat dog, or rugged individualism. The charge is that some people compete so vigorously that they drive competitors out of business or buy them out. While this is made to sound as if it were a special variety of competition, it is really a plea for government intervention to limit and restrain competition.

Competition as War

A related objection to free enterprise is that competition amounts to industrial warfare, that it pits men against one another in the quest for material possessions. Those who advance this notion say that free enterprise depends upon and calls forth the baser human motives, that it is materialistic, that it makes selfishness into a virtue, and that it fosters competition rather than leading men to cooperate with one another. This conception of competition war has served over the years as the major propellant of government intervention by way of antitrust legislation, fair trade laws, and other regulatory measures.

An objection heard frequently is that the consumer is taken advantage of and deceived by advertising and a great variety of marginally different products and services. According to John Kenneth Galbraith in The Affluent Society, all kinds of frills are produced which people do not really need but are induced to buy by advertising. Ralph Nader has made a career out of protecting customers from themselves. The thrust of the consumer protection movement has been to try to replace the ancient rule of letting the buyer beware with government prescriptions about how goods may be sold.

Although those who raise objections to free enterprise are often ambiguous about the merits of free enterprise, one of their objections is that under this system there is imperfect competition. This is the charge that businesses do not compete with one another with sufficient vigor. Instead, they say, companies engaged in the same business conspire with one another to raise prices. Or, as a result of competition, one company drives all others out and proceeds to charge what the traffic will bear.

In the middle of the nineteenth century Karl Marx claimed that in industrial capitalist countries there was a trend toward monopoly where a single company would dominate a whole industry. Indeed, he held that large companies would grow larger until they had a whole industry under their sway. This argument crops up again and again in many different guises. The term “oligopoly” was devised to describe the situation when several giants control an industry. The thrust of these arguments in the United States has been to press for breaking up large concentrations of industry.

Some objectors to free enterprise hold that one of its least desirable traits is that it results in unequal distribution of goods and services. The most commonly repeated phrase is that the rich get richer and the poor get poorer. Many lack the .bare necessities, while others have more than anyone could consume or use. Those who make these charges against free enterprise may not be lieve that goods should be exactly equally distributed, but they do argue that everyone should have enough, at the least, to meet their basic needs.

Probably, the most devastating charge against the free enterprise system is that it is responsible for the business cycle. Business activity does apparently go in cycles, with periods of prosperity alternating with recessions and depressions. The most common claim of reformists is that businessmen claim too large a share of the proceeds from their products, that there is a resulting decline in consumer demand, leading to recession or depression. The way to prevent this, they say, is for government to soak up the excess in taxes and distribute the wealth more or less directly to those who will spend it for consumer goods.

How May Objections to Free Enterprise be Answered?

Many of the objections to free enterprise arise either from misinformation about economics or the hope that somehow the requirements of economy can be evaded—itself a misconception regarding economics. One of the best ways to answer them, then, is to call up some of the basic principles of economics.

Economics has to do with scarcity. The character of economics is indicated by the conventional uses of words related to it. For example, one dictionary defines “economical” as “avoiding waste or extravagance; thrifty.” It “implies prudent planning in the disposition of re sources so as to avoid unnecessary waste . . . .” “Economy” refers to “thrifty management; frugality in the expenditure or consumption of money, materials, etc.” Economics can be defined as the study of the most effective means for persons to maintain and increase the supply of goods and services at their disposal. Goods and services are understood to be scarce, and economics has to do with the frugal management of time, energy, resources, and materials so as to bring about the greatest increase in the supply of goods and services most desired.

There is every reason to believe that man is naturally inclined to use as little energy and materials to produce as many goods as he can from them. In short, he is predisposed to be economical. If this were not the case, it is easy to believe that he would long since have perished from the face of the earth. But this economic penchant gives rise to a problem rather than resolving all problems. There are two ways for an individual to augment the supply of goods and services at his disposal. (1) He can provide them for himself. (2) He can acquire them from others. Again, there are two ways for an individual to acquire them from others. (1) He can acquire them by exchange (in which we may well include free gifts). Or (2) he can take them from someone who possesses them.

It is this latter option that raises hob in determining what is economic. Strictly speaking, robbery could be quite economical for an individual. By stealing, an individual can greatly increase the supply of goods and services available to him with only a very little expenditure of energy and materials. A bank robber may, for example, spend half an hour using a twenty-dollar gun and enrich himself, say, to the extent of $20,000.

That might indeed be economical for an individual, but it is not so for society at large. Economics has to do with the increase of the supply of goods in general, not just the individual’s gain. The bank robber augments his personal supply at the expense of those from whom he has stolen. Moreover, he may reduce the general supply further by the threat he poses to trade and the loss of incentive men have to produce when they are uncertain that they will be able to keep the rewards of their efforts. For these reasons, theft should not be considered economical.

Even so, the example of the bank robber is not frivolous. All redistribution schemes are proposals to use force to take from those who have and give to those who have not. If governments do such things, it is still theft, albeit legal theft. And its effect on the general supply would reasonably be the same as any other kind of theft.

The Problem of Scarcity

The economic question, then, is under what system is the supply of goods most apt to be replenished and increased? Is it one in which there is free access to the market, in which men receive the fruits of their labor for their own use or disposal, in which individual initiative is fully brought into play, and in which sellers and buyers are in competition? Or is it one in which access is controlled, in which property is controlled by government or held in common, in which individual initiative is discouraged, and in which competition is restrained? If we understand that the basic problem is scarcity, these are the questions about enterprise that need to be answered. The problem is really one of production, and with that in mind the objections to free enterprise discussed earlier can now be answered.

The attack on competition, because of the rigors involved in it and because there are losers, is really an attack on effective production. Such attacks gain widespread support quite often because of the desire to avoid the requirements of competition. Anyone can see the advantage of competition when it is among others. After all, competition brings down prices, increases the variety and quality of goods, and increases demand as well as supply. But competition is not nearly so attractive when we have to engage in it, especially once We have made our mark in production. It is not only necessary to get there by competition but also to stay there by changing and improving products, offering superior service, and the like. The argument against cutthroat competition is really not an argument against free enterprise but an argument against having to compete by those who have jobs, have arrived at a position, and want to retain it without further competition. When government restricts entry to any field, it is the “have- nots” who are most apt to be kept out. The main opportunity for men to improve their condition is by way of free access to the market. Free enterprise offers ready entry to all comers and provides what assurance there can be for continued replenishing of goods.

Cooperation and Competition

Competition is not a kind of warfare. To the extent that it pits men against one another it does so by stimulating them to excel. When each man is doing his best all may benefit: those who participate by producing and excelling, the rest of society by what is produced. There are no necessary victims in competition. Of course, not everyone can excel or even compete at the same level. But any man is a winner who discovers that way and level at which he can effectively produce and serve. Most people cannot run the four-minute mile. That does not mean that we put weights on the faster racers in order to enable the slower runners to keep up. People do well to compete at their own levels of ability.

Competition does not prevent or even downgrade cooperation, either. Under free enterprise people must and do cooperate in many ways to provide us with the amenities of life. Industrial production today requires cooperation of a very high degree. The assembly line is the epitome of organized cooperation. The making and selling of automobiles, for example, requires the cooperation of all sorts of entrepreneurs, financiers, service providers, manufacturers, assembly line workers, transportation workers, designers, engineers, and mechanics.

On a less grandiose scale, we usually take for granted that any one of a hundred items will be available when we want it. I may decide, for example, that I need a new box of pencils. I go to the nearest store which carries sundries and discover that the store not only has pencils but a considerable variety of them as well. How did this happen? Did the store know that I was about out of pencils and that they should stock some in case I should come by? Not at all, yet a lot of foresight had gone into providing them for my convenience. Not only had companies brought together in factories those who could make pencils but also the need had been predicted, the capital set aside for producing them, supplies ordered, raw material prepared, and the pencils produced and placed by wholesalers with my local store. True, businesses in direct competition with one another may not do a great deal of cooperating with one another, but that may be largely because of the antitrust laws.

The extensive nature of competition is not generally well understood, and certainly not by most who write about imperfect competition. Most critics talk of competition as if it involved only direct competition among the suppliers of a particular kind of product. That kind of com petition is only the tip of the iceberg of competition. For example, if General Motors were the only maker of automobiles in the United States, there would still be competition. The Chevrolet division would still be competing with Pontiac, Pontiac with Buick, Buick with Oldsmobile, these with Cadillac, and all of them with foreign imports.

Varieties of Competition

But competition is much broader and more varied than the above example would suggest. New cars are in competition with used ones. Automobiles, as a means of transportation, are in competition with busses, airlines, trains, motorcycles, trucks, bicycles, horses, and walking. Further, human wants are extensive, and the means for satisfying them are numerous and diverse. Instead of buying a car, or a second one, a given consumer may choose to add a room on his house, buy a boat, equip his family room with an amusement center, put his money in savings, or what not—all because he judged the car he might have bought too expensive. That kind of choice crops up in whatever direction we look.

The number of foods which will sustain life, either singly or in combination with others, could hardly be counted. There are many fibers, natural and artificial, from which to make clothes, all sorts of building materials, a considerable number of fuels, to give a few examples. If the price of any one of these is raised significantly, or the quality declines, alternative means are likely to be found to gratify the want. If oranges become more expensive, apples may be substituted. Competition may not be as broad as the range of commodities on the market, but we come nearer to the truth when we view it that way than when we attempt to confine it to the makers of a single commodity.

Access to the Market

Imperfect competition, rightly understood, is a condition which exists when access to the market is hampered by legal restrictions or the use or threat of force. Otherwise, the extent of competition may be presumed to be adequate in the market, else new companies could be ex pected to enter the field. Whether competition is adequate or not cannot be determined by counting the number of companies engaged in making a commodity, by comparing the shares of the market which companies have, by calculating their costs and comparing them with retail prices, or any other such empirical device. The effectiveness of competition can only be measured to the extent that consumer satisfaction with the goods offered him in the market can be measured. When there is free access to the market, anyone who believes that there is some unmet want is free to enter the market and supply it. It happens all the time.

The critics are right when they say that under free enterprise goods are not equally distributed among the populace. Where there is private property, not everyone has the same amount of property. If such equality could exist, it would depend upon distributing everything equally and then stopping all transactions or change at that point. It would have to mean, also, the stopping of all births and deaths, for as soon as an imbalance between births and deaths occurred, a new inequality would either exist or an entire redistribution have to take place. But before such a new distribution could be completed the situation would no doubt have changed again and the effort to establish equality have failed.

This is by way of saying that equality in the distribution of goods cannot be. In no extensive society has there ever been equality of possessions; everywhere and always there has been disparity. The present writer does not know of a single family, which is surely the smallest social unit, in which each has exactly the same amount of possessions as every other, nor can he readily visualize how it could happen. Give two small children each a toy. One will have his torn up within the hour, while the other may keep his in good repair for months or years. It is so for adults as well; some manage well, work hard, take care of what they have received, others hardly at all. The basic question for an economy and society is not one of the disparity of wealth but of the justice of the arrangement under which it is acquired and maintained.

Market Success

What is a just distribution of goods and services? Given the differences in talent, tenacity, prudence, and willingness to work, it is surely not justice to distribute goods on the basis of equality, or even need. Under the free enterprise system men are understood to have got what they deserved when they get as property what they have produced and get in exchange for it what the highest bidder in the market is willing to pay. Does that mean that the case of the have-nots is hopeless under free enterprise? Not at all, for free enterprise offers them the best opportunity there is for improving their condition. When there are no obstacles in the way of entering any endeavor, men can and do change from have-nots to haves. There are many historical examples of men who have started with nothing and even attained great wealth. There are many more examples of those who have started with little and attained a competence.

There is much evidence to show that it is government activity, not free enterprise, which is responsible for the so-called business cycle. The cyclical change from prosperity to depression- recession to prosperity can be precisely corollated with increases and decreases in the supply of money. Dramatic increases in the money supply result in expansive business activity and tend to create a boom atmosphere. When the supply of money is decreased or stabilized, activity slows, and recessions follow. If there is a severe deflation, such as the one that followed the stock market crash in 1929, a deep depression can be the result. In precise terms, the cycles result from credit expansions and contractions. The villain of the piece is government manipulation of the money supply by way of the Federal Reserve system. The cure lies not in government intervention to hamper enterprise, but in a sound money that cannot be manipulated.

What Are the Practical Advantages of Free Enterprise?

It is not necessary to rely on theory alone to determine the superiority of free enterprise over other methods in providing for people’s needs. There is historical evidence that when enterprise is freed from the restrictive hand of government and when property is rigorously protected, production increases along with general economic well-being. It needs to be understood, however, that much of economic history is a record of government interventions and restraints and that there are al ways some. Consequently, restriction is usually a matter of degree, not of absolutes. Nonetheless, there have been periods in the life of nations when enterprise has been freed from many of the restraints, and these provide favorable evidence for free enterprise.

England in the 19th century is a striking example of what can happen when enterprise is freed. In the early 1700s there were still numerous restrictions and special privileges hampering enterprise in that land. Beginning in 1689, however, the British made almost continuous progress in the direction of freer enterprise. By the 1820s, enterprise was substantially free in Great Britain, though the movement for free trade is usually thought of as culminating with the repeal of the Corn Laws in 1846. It is worth noting, too, that this freeing of enterprise was accompanied by the general establishment of widespread liberty, the limiting of the monarch, the toleration in religion, and protections of speech and of the press. These things go hand in hand.

The economic results were not long in coming. It has been estimated that England’s industrial output increased tenfold between 1820 and 1913. Coal production was approximately 10 million tons in 1800, 44 million tons in 1850, and 154 million tons in 1880. Iron production was about 17,000 tons in 1740. By 1840 it had reached 1,390,000 tons, and a few years later had nearly tripled from that. Population increase did not quite keep up with industrial production, but there was unprecedented population growth as well. By the end of the 19th century, English-men were generally better off materially than ever before in history.

When Enterprise is Freed

To show Britain’s place of leadership in the world, however, it is necessary to compare British economic achievement with that of other leading countries. Great Britain’s percentage of manufacturing production in the world was 31.8 in 1870. By comparison, that of the United States was 23.3, that of Germany 13.2, and that of France 10.3 among the leading countries. In 1860, Britain had 23 per cent of the world trade, compared with 11 per cent for France and 9 per cent for the United States. In 1880, Britain had more than 6½ million tons of shipping, compared to less than 1½ million for the United States, the nearest competitor.

The 19th century was in many ways a kind of Golden Age. There was a quickening of activity in many nations, and England was surely the center from which so many improvements radiated outward to the rest of the world. The symbol of England’s greatness was the Royal Navy, but the wonders were much more the achievements of the merchant marine. The ships that plied the seas from their home base in the tight little isle carried not only the abounding goods of a productive nation but also statesmen, ideas, and men confident in the superiority of their institutions eager to teach others in the arts of peace. The difference between England and many other lands was the stability of her institutions and the freedom of her enterprise.

In many ways, the emergence of the United States in the early 20th century as the leading manufacturing and agricultural producer was even more reasonable than the 19th-century achievement of Britain. After all, Britain had had several centuries of fairly steady advance on the world stage before the 19th century. What became the United States, by contrast, had been a colony until the late 18th century and had only emerged as a nation to be respected by European nations in the course of the 19th century. Yet in less than a century of independence, the United States was thrusting toward leadership among the producing peoples in the world. The country had been criss-crossed with railroads; the wilderness had been tamed, and the great Mississippi basin had become one of the most productive areas in the world. The political institutions of the United States had been designed from the outset to restrain and limit government. The energies of men were largely released in peaceful pursuits, and the people achieved wonders of building, invention, and development of manufacturing, transportation, and farming.

The Destruction of Enterprise

Examples of the repressive effect of government on enterprise are even more plentiful, but it will be possible here to give only one example. Appropriately, the example chosen will be Britain, since the focus has been upon that land in the freeing of enterprise. In the early years of the 20th century, the British government began to clamp down on enterprise, in what one historian has called The Strange Death of Liberal England. The impact of this on the British was being felt as a general decline by the 1930s, but the assault on enterprise did not reach its peak until after World War II.

In 1945, a Labour Party came to power in England committed to enacting the socialist programs it had long been advancing. The party did so with great haste, and in short order the Labourites completed the wreck of what remained of a once vigorous and healthy economy. The economy had suffered greatly from the interventions of the interwar years. It was hampered even more drastically by wartime restrictions. But the measures of the Labour government came close to banishing private economy from the ]and.

The wreckage was wrought by nationalization, controls, regulations, high taxes, and compulsory provision of services. There was a concerted effort to plan for and control virtually all economic activity in the land. The initiative for action was taken from the people and vested in a bureaucracy. Where industries were taken over, they were placed under the authority of boards which were in no position to act responsibly.

Equal Distinction and Having Less

English socialists had long been committed to as near equal distribution of goods and services as they could. Therefore, the Labour government undertook redistribution with a right good will. They levied steeply graduated income taxes, taxed “luxury” goods at high rates, controlled prices of food, clothing, and shelter, and rationed many items that were in particularly short supply. They provided free medical services, gave pensions, and otherwise aided those with little or no earned incomes. They distributed and they distributed.

The more they distributed, the less they had to distribute. Not only did such shortages as they had known during war continue, but others cropped up as well. One writer says, “By 1948, rations had fallen well below the wartime average. In one week, the average man’s allowance was thirteen ounces of meat, one and a half ounces of cheese, six ounces of butter and margarine, one ounce of cooking fat, eight ounces of sugar, two pints of milk, and one egg.” Even bread, which had not been rationed during the war, was rationed beginning in 1946. The government had first attempted to fool the English people into buying less bread by reducing the amount in a loaf. When that did not work, they turned to rationing. Housing, clothing, food, fuel—everything, it seemed—was in short supply.

By the summer of 1947, the British government was making no secret of its problem. The country was inundated with government posters, proclaiming “We Work or Want,” posters whose threat was all bark and no bite. The fact is that when production is separated from distribution to any considerable extent the incentives to produce are reduced. When this is accompanied by numerous restrictions and loss of private control over property, as it was in England—restrictions which hamper people in their productive efforts—goods and services will be in ever shorter supply.

Since that time, Britain has off and on, but slowly, reduced the extent to which it restricts so as to hamper industry. Democratic socialists in many lands have lost some of their enthusiasm for nationalizing property and have favored government control with largely private ownership, as has been the case in Sweden. The United States in recent years has removed or reduced some of its regulations, though the central features of the Welfare State remain. Communists remain unmoved by all evidence, continue to thrust for government ownership of all productive property, and cause untold suffering with their drastic measures against private enterprise wherever they come to power. The most recent dramatic instance occurred in Ethiopia, with its hunger and starvation.

But whatever rulers have or have not learned from their determined efforts to establish roadblocks to enterprise, one thing appears universally to have alluded them. It is this: They still have not grasped that men must be in control of their own affairs if their enterprising spirit is to be unleashed in constructive efforts. For this, they must have the full measure of freedom, not that portion which politicians prate about as “human rights,” thus ignoring or shunting aside the rights to property.

Is Free Enterprise Essential to Freedom?

Freedom is a seamless cloth, its parts inseparable from one another. Free enterprise is a part of and necessary to freedom within a society. It not only provides bread better than any other system but it also buttresses and rounds out the structure of political, social, intellectual, and religious freedom of a people.

Freedom is indivisible. Some of those who profess to value freedom but not free enterprise have tried to maintain that this is not the case. They distinguish between property rights and human rights, and hold that human rights are superior to property rights. Property rights are, however, human rights, rights of humans to the fruits of their labor. Arguments about which rights are superior are on the same order of those as to whether the heart is superior to the liver or whether the lungs are superior to the kidneys, for the fact is that human life and activity depend on all of these. Just so, freedom depends on the right to property just as it does to rights of free speech.

The reason for this needs to be explored. There is no human activity that does not involve the use of property. We cannot sleep, wake, eat, walk, drive, fly, swim, boat, work, go to church, print a paper, view a movie, make a speech, procreate, or engage in conversation without using property in some one or more of its dimensions. If a church cannot be owned by its communicants, their freedom to worship is under the control of someone else. If a press cannot be privately owned, freedom of the press is an illusion. If government controls all property, freedom of speech is something belonging to government, not to individuals.

The Breadth of Freedom

Free enterprise—which embraces private property—does not mean simply the right to engage in material production and distribution. It means the right to engage in every kind of productive activity: not only the manufacture of widgets but also forming a fraternal organization, starting a charitable organization, publishing a newspaper, organizing a church, and founding a college. Not all undertakings involve profit making, but all do involve the use of property and the making of transactions.

The thrust of government intervention in the economy is toward government control of all life and the destruction of the independence of the citizenry. Not every government intervention will in fact result in the totalizing of intervention, of course. Government may intervene here and not there, may extend its power for a time and withdraw, may even reverse its direction. But the tendency of men in power is to grasp for more. The tendency of those who gain some control over enterprise is to extend it into more and more areas.

Many Western socialists do not accept the totalitarian tendency of their doctrines. They cling to the belief that freedom can be retained in areas that they consider valuable while it is yielded up in the economic realm. They have nowhere, to my knowledge, submitted their theory to the test. Their experiments with socialism have been limited. They have nationalized some industries, expropriated some property, taken over the providing of some services, created bureaucracies to control some undertakings, empowered labor unions, and drawn up various sorts of restrictions. They have usually allowed considerable enterprise within the interstices of their systems. Such systems are oppressive, do hamper enterprise, do not function very well, but they are not totalitarian—not yet, anyway. They are not full-fledged socialism, either.

The same cannot be said for those countries in which there have been all-out efforts to abolish private property, to control every aspect of the economy, to bring all employment under state control, in a word to institute socialism in its most virulent form, Communism. In these countries, freedom is crushed. Such a country is ruled by terror, the terror administered by secret police, by the shot in the back of the neck, by slave labor camps, by the arbitrariness of all government action, which is the ultimate terror. Terror is as essential to thoroughgoing socialism as sunlight is to photosynthesis. It is essential because man naturally has to look after himself and seeks means to do so, turns whatever he has into private property, and exerts his imagination and enterprise to provide for himself and his own. Man forever labors to carve out areas of freedom for himself. By so doing, he subverts socialist control. The only means for holding him back is terror and arbitrary government control.

Those who favor free enterprise are working to maintain or establish human freedom. They are on the side of the human spirit wherever efforts are being made to crush it. Those who stand for free enterprise have a noble cause, for it is the cause of freedom and of free men.

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October 1985

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