Freeman

ARTICLE

Humane Values and the Free Economy

JUNE 01, 1978 by EDMUND OPITZ

The Reverend Mr. Opitz is a member of the staff of The Foundation for Economic Education, a seminar lecturer, and author of the book, Religion and Capi­talism: Allies, Not Enemies.

The average American is in favor of freedom and he’ll tell you so in no uncertain terms. He wants Church and State separate, he would object if government were to censor the press, he doesn’t want some bureau­crat dictating to professors what they should teach. But at the same time he wants government to con­trol and regulate business; he thinks industry and trade need to be policed in order to protect the con­sumer from the wolves. Warming up to his subject he proceeds to catalogue the wickedness of people engaged in commercial activity, and especially the sins of "big business."

Strange to say, these turn out to be the same old sins one finds in every walk of life. Some men in the business world are wicked, no doubt; but so are some ministers, some pro­fessors, some publishers, some en­tertainers, and even some television commentators. There’s no reason for singling out businessmen—except to provide a specious rationale for saddling economic life with ever more bureaucratic regulations and controls. This has adverse economic effects, of course, adding to the costs of doing business and making all of us poorer, but that’s not the worst of it. When economic enterprise is not free every other freedom is in jeopardy.

Human liberty is a precious and a fragile thing. Human liberty can not be won, or even sustained, on the economic level alone; but it can be lost on that level, and it is being lost there. Control the economic life of a people and you control every other aspect of their lives as well. "Power over a man’s subsistence amounts to a power over his will." The truth of this ancient maxim has been pounded home in our time by the conditions of life behind the Iron Curtain.

Now, it is true that business is not the only sector of our society under fire. Our whole civilization—western civilization—has been under siege for several generations; and because our culture so largely embodies bourgeois values, the at­tack against business is reinforced by the revolutionary Communist thrust to unseat the bourgeoisie.

The bourgeoisie are the middle class—townspeople engaged in indus­try and trade—and their emergence in the modern period was opposed by the aristocracy, whose values were quite different. Few of us live next door to counts, dukes or lords: the nobility is distant in time and space, glowingly enshrined in romance and myth. "The nobleman has cour­age, spends without counting, de­spises petty detail. There is a great air of freedom and unselfishness about the nobleman. He will throw his life away for a cause, not calcu­late the returns. That is the noble idea. In reality, he lives by the serf­dom of others, and he broadens his acres by killing, and taking other people’s land-’the good old rule, the simple plan. That they should take who have the power, and they should keep who can." These are Jacques Barzun’s words.

Dr. Barzun continues, "The bourgeoisie opposed such noble free-handedness and supported a king who would replace ‘the good old rule’ by one less damaging to trade and manufacture—and to the peas­ants’ crops. But the regrettable truth is that there is no glamour about trade. Trade requires regular­ity, security, efficiency, an exact quid pro quo, and an exasperating attention to detail. . . . There is nothing spontaneous, generous or large-minded about it. Man’s native love of drama rebels against a scheme of life so plodding and re­sents the rewards of qualities so niggling."

"What a convenient word is bourgeois!" Barzun observes. "How expressive and well-shaped for the mouth to utter scorn. And how flexi­ble in its application—it is another wonderful French invention!"

The Working Class

The free enterprise system—or what is popularly called "cap­italism"—has a special affinity for the type of man we’d call bourgeois or middle class. Industry and trade have never been the preoccupation of any aristocracy, which dislikes to sully its hands with ordinary work. Most of the world’s work today is done by those who have risen from the ranks, largely by their own efforts, in societies which have no rigid caste barriers to prevent upward mobility.

The emergence of the busi­nessman during recent centuries was not a solitary adventure; the freeing of the business sector of western society went hand in hand with the expansion of other liberties we cherish. The story is a familiar one, and it begins with the religious revolution of the 16th century which led eventually to the separation of church and state, and freedom of worship. Free speech and freedom of the press were parts of this liberat­ing movement, and eventually—as Mercantilism gave way before the current of ideas released by Adam Smith, Edmund Burke, and others—economic enterprise was freed from political regulations and controls, and came under consumer guidance.

Consumers—by our millions of daily decisions in the market place to buy this or not buy that—project a pattern; and these buying habits of ours give entrepreneurs the clues they need to direct production into this channel or that, in an effort to please customers. In the free econ­omy the consumer is sovereign. You may regard your product as the best gismo available anywhere at any price, but if the consumers don’t like it they buy elsewhere and you go out of business. You, as an entrepre­neur, have no power over customers except your ability to persuade and the quality of your product. This is the free market economy, and it is an integral part of the free society.

Everyone’s Business

Freedom, we hear it said, is everyone’s business, so each of us really does have a stake in freedom in-general. To the extent that any­one’s freedom is lost, everyone’s freedom is in jeopardy. But there are particular freedoms, and when a particular freedom is attacked you’d expect those directly involved to rush to its defense. And this is what you do find in most instances. When religious liberty is threatened, churchmen unite to oppose the threat. When freedom of the press is imperiled newsmen band together. Any impairment of academic free­dom is challenged by teachers, and intellectuals do battle on behalf of free speech. And when freedom of economic enterprise is being throt­tled by governmental controls busi­nessmen and business organizations mobilize to resist the attack. Right? Wrong!

Businessmen, all too often, are unwilling to speak out vigorously, even in self-defense—as the cele­brated economist, Joseph Schumpe­ter, has scathingly pointed out: "Perhaps the most striking feature of the picture is the extent to which the bourgeoisie, besides educating its own enemies, allows itself in turn 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. . . . This is verified by the very characteristic manner in which particular capital­ist interests and the bourgeoisie as a whole behave when facing direct at­tack. 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—in this country there was no real resistance anywhere against the imposition of crushing financial burdens during the last decade or against labor legislation incompatible with the ef­fective management of industry."

I can imagine an ideal society where each sector was alert to rebuff threats to any other sector; where clergymen would go to bat whenever freedom of the press was threatened, and publishers jealously guarded academic freedom, and professors fought for freedom of medical prac­tice, and doctors resisted every bu­reaucratic invasion of the market place, and businessmen cherished freedom of religion. In real life, however, things do not happen this way.

It is partly the fault of business itself that the freedom most gravely threatened right now is the freedom of the economy, on which not only our prosperity depends, but much else besides. Those immersed in the grubby details of the market place often lose sight of the big picture; the head of a business worries about falling sales and how to meet the next payroll, but here, in this serene academic environment, we can sit back and theorize.

Better Understanding, The Best Defense

The best defense of the free econ­omy is a better understanding of the free economy, shared by more people. So let’s put capitalism to the test. Put aside, for the moment, any opinions you may entertain about the free enterprise system we now have, and let’s draw up some plans for an ideal economic order. If we were starting from scratch what requirements would we lay down for an economic order that would meet with our approval? I’m going to sug­gest that there are four major de­mands we should make of any economic system, and after we have spelled these out a bit each of us can decide for himself whether our pres­ent system falls short and how it might be strengthened and de­fended.

A good economic system has four characteristics:

1. A good economy produces goods and services efficiently.

2. A good economy allocates re­wards equitably, to all partici­pants.

3. A good economy broadens the scope for individual free choice.

4. A good economy functions in harmony with religious and moral values.

There’s no argument on the first point; our present economic system does deliver the goods, as even its enemies admit. The American econ­omy has never been wholly free; it has operated under various political restraints from the very beginning. But compared to the politically planned economies of other nations our relatively free economy has been a paragon.

Producing and exchanging in a largely free country has bestowed a prosperity upon America that the world envies. Americans started poor. There was little per capita wealth two hundred years ago; but our forebears had an abundant faith in the nation’s future under God, a strong belief in themselves, and they practiced the Puritan work ethic. This was the land of opportu­nity, and millions of the poor and oppressed of other nations migrated here to make their own way in this "land of the free." By and large they succeeded; never have so many ad­vanced so far out of poverty in so short a time.

There have been evils in Ameri­can life, and some are there still; along with errors, shortcomings and blind spots. But what other nation is entitled to cast the first stone, or the second, or the third? Lf the American Dream has faded, if there is tarnish on our idealism, where lies the fault? The Church and the School are the institutions charged with the responsibility for things of the mind and spirit, and if we have lost that vision without which the people perish, if our value system is in disarray, we surely can’t blame business and industry—which merely reflect the consensus.

The Goals of Life

The goals of human life, the ends appropriate for creatures such as we, are the primary concerns of reli­gion and education. The increase of material well-being may be the means for achieving the good life; it is certainly not the end for which life should be lived. The economic order has the modest role of supplying our creaturely needs efficiently so that we may have the leisure to pursue our personal goals. In America the economy has performed its role commendably. It is not to be blamed for the failures of other institutions. The relatively free economy we have enjoyed in America has brought unparalleled prosperity, but an affluent society is not neces­sarily a just society. And so we come to the second test we wish to put to the free enterprise system: Does it allocate the rewards fairly and equitably?

In a free society every one of us is rewarded by his peers according to the value willing buyers attach to the goods and services he offers in exchange. This is the market in ac­tion. This market place assessment is made by consumers, and we all know that consumers are ignorant, venal, biased, stupid; in short they are people very much like us! This does seem to be a clumsy way of deciding how much or how little of this world’s goods shall be put at this or that man’s disposal.

Isn’t there an alternative? Yes, there’s an alternative, and it occur­red to people more than two millen­nia ago. We’ll invite the wise and the good to come down from Olym­pus to sit as a council among men, and we’ll appear before them one by one, to be judged on personal merit and rewarded accordingly. Then we’ll be assured that those who make a million really deserve it, and those who are paupers belong at that level; and we’ll all be contented and happy. What lunacy! The genuinely wise and good would not accept such a role, and I quote the words of the highest authority de­clining it: "Who made me a judge over you?"

The market place decision that this man shall earn twenty-five thousand, this one ten, and so on, is not, of course, marked by supernal wisdom; no one claims this. But it is a million miles ahead of the alterna­tive, which is to recast consumers into voters, who will elect a body of politicians, who will appoint bureaucrats, who will divvy up the wealth—by governmental legerde­main. This mad scheme backs away from the imperfect and lurches into the impossible! There are no perfect arrangements in human affairs, but the fairest distribution of material rewards attainable by imperfect men is to let a man’s customers decide how much he should earn; this method will distribute economic goods unequally, but equitably.

We do live in an affluent society, and the fact is that the prosperity generated by our relatively free in­stitutions has been widely shared by the American people. There are the rich, there are the less well to do, and there are still some poor; but this allocation of rewards represents the choices of people themselves—as reflecting their buying habits. But the question still remains; do we have a lopsided society in which a handful of people have accumulated the bulk of the wealth produced in our economy? Dubious statistics are offered to demonstrate that 10 per cent of the people own two-thirds of the wealth, or three-quarters, or 90 per cent, or whatever. Is there any truth in such figures, or do they tell a lie?

There’s a fairly simple way to check this out for yourself. Take home ownership. Is it a fact that a handful of people own the homes most of us live in? To the contrary; 45 million homes are owned by the families that occupy them. Assum­ing the family unit to consist in father, mother and one child this accounts for 135 million persons. Millions of other Americans can afford to own their homes, but choose instead to rent an apartment or a house. Take automobile ownership: 82 million people own their own cars and 33 million own two or more cars. There are 130 million licensed driv­ers in the country.

Eighty-three million housing units have electric refrigerators; there are 125 million television sets, 55 million of them color; 70 million homes have washing machines; and there is a radio for every man, woman and child in the country. And as for food, we are the only nation in history whose number one medical problem is overeating! I do not know who concocted the first share-the-wealth scheme. It was ages ago, and it was a pipe dream from the beginning. It is a pipe dream still for most of the world’s people. But in America that dream has come true—in large measure. Capitalism—the free economy—has produced material abundance, and the benefits of our prosperity are enjoyed by almost every man, woman, and child in the country—as well as by millions of people around the globe.

Let me pursue this point through one more stage. Most people, when they reflect on the matter, agree that there is no concentration of ownership in everyday things like houses, automobiles and food. But when they get into the arcane world of the corporation, they are easily misled by those who have twisted "big business" into a four-letter word; they have been led to believe that the industry of this country is owned by a handful of stockholders.

Widespread Ownership

Pick any one of the giant corpora­tions and examine its annual report. I picked Exxon, a fairly large outfit. The 1976 Annual Report reveals that Exxon is owned by approxi­mately 700,000 shareholders; that’s roughly 5½ times as many owners as employees, and it’s about as many people as live in the whole state of Delaware. That’s a lot of people, but there’s more to come.

Note the large number of stock­holders who are not individuals but institutions. Every major church body owns shares of stock in indus­try, but in some statistics a denomi­nation counts as but one stock­holder. Several thousand colleges own stock, but each is counted as one stockholder. Your local Bank and Trust Company is a stockholder on behalf of its thousands of depositors; every insurance company owns stock on behalf of its millions of policy holders; every pension fund is invested in stocks. Pension funds, including labor union funds, now own about one-third of the total value of all the stocks listed on the New York exchange. The unions have come to own so large a share of American industry that Peter Drucker refers to this phenomenon as "pension fund socialism." In short, nearly every American owns a chunk of the corporate wealth of America!

Now, it is true, of course, that there are some enormously rich peo­ple in this country. What do they do with their money? Some of them spend their money foolishly, just as you and I would do if we were in their shoes. But any millionaire, who wants to preserve his fortune and pass it along to his children and their children, has no choice but to invest it in industries which produce the incredible variety of goods which flood the market places of America soliciting the patronage of the masses of consumers. No other soci­ety has ever allocated its rewards as generously, or so equitably.

Our present economic system, the system of free enterprise, has met our first two requirements; it has made us an affluent society produc­ing over and above our own needs, an abundance that we have gener­ously shared with the world; and every person who has participated in the production of goods and ser­vices shares equitably in the fruits of his production.

The third test has to do with an aspiration deeply rooted in human nature; we want to be free; we want the freedom to choose. We want to be free to worship in the church of our choice, to choose our own schools, to read freely and speak our minds. We want to be free to be ourselves, even if this is to practice what others regard as our harmless eccen­tricities. We want to be free to choose our profession or place of employment. We want solitude when we choose to be alone, and we want the freedom to choose our associates—which includes the right to dissociate. These are some of the demands of human nature itself, this is how God made us. As Jeffer­son put it, "The God who gave us life gave us liberty at the same time." Therefore, the third demand we make of an economic order is that it manifest, in its operations, a crea­ture who is a freely choosing being.

By Acts of Choice

Man’s will is uniquely free. All other creatures—birds, beasts, fish, and so on—obey the laws of their nature willy-nilly. Only man has the capacity to disobey the deep mandates of his being. Ortega, the great Spanish philosopher, re­marked that the tiger cannot be de-tigered but the human being is al­ways in danger of being de­humanized. It is by acts of will, by acts of choice, that man is hu­manized; and this decision pro­cess, in the nature of the case, must be engineered by the individual concerned—by an act of inner re­solve. Each person is self-con­trolling, he is in charge of his own life; and if a person refuses to as­sume responsibility for himself no one can exercise this role by proxy, from the outside.

The free society is our natural habitat; freedom accords with human nature, and the tactic of freedom as it applies in the economic sector is capitalism, the market economy. The economy is free when the productive activities of men re­spond sensitively to the needs of consumers, as these needs manifest themselves in people’s buying habits. It is true, of course, that when people are free to spend their money as they please they will often spend it foolishly—other people, that is! They’ll make mistakes. But isn’t that one of the important ways we learn in life, by being free to make mistakes, picking ourselves up every time we fail and standing a bit taller every time we succeed?

The biggest mistake of all is to persuade ourselves that we can avoid the little mistakes people make in a free society by adopting a planned economy. A centrally planned nation is necessarily a command society. Individual per­sons are no longer free to make their own decisions, their private plans must be cancelled whenever they conflict with the overall political plan. This is a giant step along the road to serfdom.

No Guarantees

To have economic freedom does not, of course, mean that you will be assured the income you think you deserve, or the job to which you think you are entitled. Economic freedom does not dispense with the necessity for work. Its only promise is that you may have your pick from among many employment oppor­tunities, or go into business for yourself. And as a bonus the free economy puts a multiplier onto your efforts, to enrich you far beyond what the same effort returns you under any alternative system.

The American economic sys­tem—free enterprise, capitalism, the market economy, call it what you will—has never been as free as the believer in the free society would wish. But it aspires toward freedom, as do most citizens of our country; and our economy has indeed been freer than the economies of other nations. But despite the restrictions and controls, our relatively free economy has (1) delivered goods and services efficiently; it has (2) allo­cated rewards equitably; and (3) it does expand opportunities for per­sonal choice in society.

There is one final point. Ameri­cans are basically a religious people who try to bring moral values to bear on the issues of public life. Does a person have to put aside his reli­gious and moral values while en­gaged in the sordid business of mak­ing a living—as some misguided voices declare? Or is there, as I be­lieve, a vital relationship between market place and altar? No man’s judgment can rise above his under­standing of the facts; and as I have pointed out, there is gross misun­derstanding of the nature of busi­ness and the economy—especially, it seems, among those given to pro­nouncing moral judgments!

Biblical religion has at least three important and relevant criteria for judging social policy:

(a) the idea of justice voiced by the Old Testament prophets;

(b) the New Testament ideal of the sacredness of persons (i.e., Rights endowed by the Creator); and

(c) the Protestant emphasis on the importance of personal deci­sion—you are closed to God’s grace until you decide to open yourself up.

Put these ingredients together in the proper proportions—justice, the sacredness of persons, and the necessity of choice—and you have the free society. The political struc­tures of a free society are designed to assure the inviolability of every per­son. They maximize his opportunity to pursue his personal goals, and they cultivate an economic order that is guided by consumer demand. This was the social goal envisioned by the eighteenth-century Whigs, the men we refer to as the Founding Fathers. What they founded was prepared for by eighteen centuries of tutelage in biblical religion.

Questions Concerning the Morality of Capitalism

This may sound good, the critic tells us, but doesn’t the psychology of capitalism take the wraps off greed, and doesn’t capitalism ele­vate money-making to the chief end of man? And didn’t Jesus condemn wealth?

The answer to all three questions is No. As my first witness I call upon the eminent sociologist, Max Weber, and quote from his celebrated book, The Protestant Ethic and the Spirit of Capitalism. "The impulse to acquisition, pursuit of gain, of money, of the greatest possible amount of money, has in itself noth­ing to do with capitalism. This im­pulse exists and has existed among waiters, physicians, coachmen, art­ists, prostitutes, dishonest officials, soldiers, nobles, crusaders, gam­blers, and beggars. It should be taught in the kindergarten of cultural history that this greed for gain is not in the least identical with capitalism, and is still less its spirit." Greed is a human frailty, to be condemned where found and overcome if possible. It is not the exclusive vice of any class or occupa­tion. In any event, it has nothing to do with the efficient production of goods and services in the capitalist order and their equitable distribu­tion.

My second witness is the eminent theologian, Reinhold Niebuhr. Late in life, after being converted away from Socialism, Niebuhr made a sage comment on the profit motive. Even the minister is economically motivated, he wrote, "when he moves to a new charge because the old one did not give him a big enough parsonage or a salary adequate for his growing family."

We can better understand Jesus’ attitude toward material posses­sions if we contemplate a seeming paradox: Jesus had harsh things to say about the three R’s; the three R’s in this case being Religion, Righ­teousness, and Riches! We learn from the Gospels that something which resembles religion, but which is ritualistic and external, may im­munize us against the real thing, which is inward and spiritual.

Which of us does not feel, at times, the exasperation which caused a member of Parliament to blow his top and say: "Thank God for the Church of England; it’s all that stands between us and Chris­tianity!" And by the same token, perfunctory righteousness—Phar­isaism—may harden the heart and beget an uncharitable spirit. Riches, too, may pose a peril; but this is a matter of degree only, for it is just as common to be infected with a false philosophy of material pos­sessions by a thousand dollars as by a million. Avarice is a common trait in all cultures and at every economic level. There are misers everywhere, and a miser is one who puts his trust in riches, and in so doing he treats means as an end.

This is the point of Jesus’ parable of the rich man whose crops were so good that he had to build bigger barns. This good fortune was the man’s excuse for saying, "Soul, thou hast much goods laid up for many years! Take thine ease, eat, drink, be merry." There is a two-fold point in the parable; the first is that nothing in life justifies a man in assuming this attitude; we must never stop growing. It has been well said that we don’t grow old, we become old by not growing. The second point is that a material windfall may tempt a man into the error of quitting the struggle for the real goal of life. Jesus condemned the man who put his trust in riches, who "layeth up treasure for himself and is not rich toward God." Which is not the same as condemning material possessions per se, or wealth held under proper stewardship.

Life is probative; our three score years and ten are a test run. As St. Augustine put it, "We are here schooled for life eternal." And one of the important examination ques­tions concerns the economic use of the planet’s scarce resources and the proper management of our material possessions. These are the twin facets of Christian stewardship, and poor performance here will result in dire consequences. As Jesus put it, "If, therefore, you have not been faithful in the use of worldly wealth, who will entrust to you the true riches?"

Economics, the science of means, needs religion, the science of ends. To inflate a means into an end is idolatry. In sober truth, no economic system can be anything more than a means. The ends for which life should be lived take us into another dimension, into the domain of our moral and religious life. As created beings we are designed to achieve a transcendent end: "Thou hast made us for Thyself, and our hearts are restless until they find rest in Thee." But if we are to live as we should live during this life, we must be free; and one of the imperatives of the free life is freedom of economic enterprise.

 

***

Material Rewards

It seems to me one of the great merits of a free society that material reward is not dependent on whether the majority of our fellows like or esteem us personally. This means that, so long as we keep within the accepted rules, moral pressure can be brought on us only through the esteem of those whom we ourselves respect and not through the allocation of material reward by a social authority. It is of the essence of a free society that we should be materially rewarded not for doing what others order us to do, but for giving them what they want. Our conduct ought certainly to be guided by our desire for their esteem. But we are free because the success of our daily efforts does not depend on whether particular people like us, or our principles, or our religion, or our manners, and because we can decide whether the material reward others are prepared to pay for our services makes it worth-while for us to render them.

F. A. HAYEK, "The Moral Element in Free Enterprise"

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June 1978

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