Escolar Documentos
Profissional Documentos
Cultura Documentos
ISBN 978-0-307-95157-1
eISBN 978-0-307-95159-5
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First Edition
It’s not the cure but the cause of critical problems plaguing the
economy and society. A consensus is emerging: The only way to
a truly fair and moral society is through economic freedom—
free people and free markets.
This book will explain what is driving this shift in attitudes,
the growing perception that free markets are moral and Big Gov-
ernment isn’t.
because it could not monitor their fiber, fat, and salt contents.13
More and more Americans are coming to see Big Government
as being guilty of the sins that statists ascribe to the private sec-
tor. Its ever-expanding bureaucracies and policies are driven by
selfishness, greed, and the hunger for political power.
Questions are also being raised about the true legacy of
FDR. Economists and historians, including Amity Shlaes, Bur-
ton Folsom, John Cochrane, and Robert Higgs, have all per-
suasively made the case that FDR’s incessant interventionism,
in fact, prolonged the Great Depression. The taxes needed for
FDR’s Keynesian spending and job creation programs sucked
capital out of the economy. FDR’s price controls and production
quotas also created uncertainty that inhibited businesses from
hiring. All this delayed recovery until after World War II.
People are also better informed than ever before about cur-
rent events, better able to see through Big Government moral-
ity rhetoric. Until the late 1970s, there were only three major
networks. Radio was a local medium. Today there are countless
news outlets such as cable, national talk radio, and, of course,
the Internet. They’re providing a forum for nontraditional per-
spectives, including a new appreciation of the moral founda-
tions of free enterprise and free markets.
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Everyone wants a fair and moral society. But is the best way
to get there through a politically driven government bureaucracy
or through the democracy of the marketplace, where everyone
votes with his or her dollars? More to the point, are government
bureaucrats beholden to political interests really the ones to de-
cide what is fair and moral?
Calls for more government intervention to end poverty and
injustice ignore the fact that previous government regulations
and programs failed to solve those problems. And in many cases
they helped to cause them. Americans are a humane and chari-
table people. There are unquestionable real problems in sectors
like health care and elsewhere in our society. Resisting demands
for a government program that will supposedly help others can
be difficult. But the heart-tugging rhetoric deflects attention
from the fact that the proposed solution is usually more bureau-
cracy. Liberals advocating “compassion” and “human rights”
might think again if they realized that what they’re really fight-
ing for is more rules, regulations, and red tape that restrict our
freedoms. Government bureaucracies have a poor record of
respecting the rights of individuals. And bureaucracy deals in
strictures—more and more rules.
The discussion in this book is about how America sees itself
as a nation. Is America still committed to the Founding Fathers’
vision of economic and personal freedom—the fundamental
right to “life, liberty and the pursuit of happiness”? Or are we to
become a European-style welfare state? The chapters that follow
present the real alternatives to be considered in this debate. Our
national identity and our future are at stake.
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Free markets are about meeting the needs and wants of people.
Adam Smith described the fundamental free market transaction
using his iconic metaphor of the butcher and baker. Both sell you
dinner in order to make a living.1 Buyer and seller are motivated
by self-interest. But this self-interest is not selfishness. Each party
meets the needs of the other. In a sense, the reciprocal transaction
that takes place in a voluntary market is the economic expression of
the Golden Rule: Do unto others as you would have them do unto
you. Each side seeks to meet the other’s needs by giving something of
equal value.
A free market, Smith explained, consists of millions of these mu-
tually beneficial exchanges. They form an “Invisible Hand” that
spontaneously creates and allocates resources in a way that provides
the most benefit to the greatest number of people, given real-world
conditions of supply and demand.
Free market critics insist that markets are driven by “greed.” But
selfish, greedy people and companies won’t last in the marketplace
unless they provide a product or service people want. The quest of
individuals and companies to find solutions for people’s needs oc-
curs, furthermore, when profits are far from assured. Entrepreneurs
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will launch a venture with the knowledge that, if it fails, they may
never see a dime of profit.
This motivation of individuals and companies to solve prob-
lems and meet needs— what John Maynard Keynes called “animal
spirits” 2 — is the heart and soul of free enterprise. When govern-
ment doesn’t interfere, people in free markets will always mobilize
to meet a demand. Many times, entrepreneurs will try to anticipate
it. As Steve Jobs put it to biographer Walter Isaacson, “Our task is
to read things that are not yet on the page.” 3 This entrepreneur-
ial impulse is why free markets have been historically successful at
generating the innovations and wealth that have raised living stan-
dards and allowed society to advance.
Big Government, in contrast, is not accountable to a market.
Unlike private sector companies that have to compete for customers,
government does not have to get results or please people to stay in
business. Executives or entrepreneurs must constantly answer to cus-
tomers, investors, and shareholders. But government officials only
face voters at election time.
Big Government’s foremost concern, therefore, is with its own
bureaucratic interests. This is clearly apparent whenever govern-
ment delivers services. The classic illustration is the comparison
between FedEx and the Postal Service. Ask the question, “FedEx
or the post office?” and even those who otherwise support Big Gov-
ernment know what you’re talking about. Mention the post office,
and just about anyone will think of long lines and sluggish service.
FedEx, meanwhile, has become a symbol of efficiency and reliabil-
ity. Over the years, both FedEx and the Postal Service have had
to raise prices.4 But FedEx has responded to change and compe-
tition by consistently and dramatically expanding its services, of-
fering more options to meet customer needs— like cheaper ground
shipping, and also printing. The Postal Service, with some limited
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thing as failure. Inept agencies aren’t shut down. They only get
bigger. Thomas DiLorenzo, a professor of economics at Loyola
University, explains in “The Futility of Bureaucracy” that “the
worse any government bureaucracy performs, as a rule, the more
money it gets”:
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treacherous city traffic. Taking all this into account, one could
certainly argue that there are better ways to spend millions of
taxpayer dollars than on bike lanes only a tiny number of people
use—and most people don’t want. Smaller-scale attempts to in-
stall lanes in the 1970s and 1980s met with such fierce opposi-
tion that the lanes were removed.20
So why did New York’s Big Government ignore the needs
of its majority, not to mention common sense and past history?
Because New York City bike riders today are an influential con-
stituency with the ear of the city transportation commissioner.
Thus they’re more politically powerful than merchants or peo-
ple who drive. That may be starting to change. The lanes are
facing a growing backlash from people finally fed up with an
impractical Big Government “solution” designed to assuage a
small, highly vocal minority.
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North Korea or the now defunct Soviet Union with its chronic
shortages. The Invisible Deadweight of Big Government is also
responsible for the sluggish economies of European social de-
mocracies. British journalist and politician Daniel Hannan
reminds us that, in the decades after World War II and up
until the mid-1970s, Western Europe actually outperformed the
United States. But then those nations turned to socialist policies
intended as a “Third Way”—a middle ground between Rus-
sian communism and American capitalism. Europe’s economic
growth has lagged that of the United States ever since.32
The countries that now form the European Union had
a 36 percent share of world GDP in 1974. That has fallen to
26 percent—and by 2020 it’s expected to be only 15 percent. In
contrast, the U.S. share for thirty years has remained surpris-
ingly constant. Hannan makes the startling observation that, “if
we exclude the United Kingdom, the EU failed to produce a sin-
gle net private-sector job between 1980 and 1992” (our italics).33
Meanwhile, the United States surged ahead. From the early
1980s until the financial crisis, U.S. economic growth averaged
3.3 percent, while Western Europe grew at a rate of less than
2 percent a year.34 That’s despite the fact that we have the largest
economy in the world, and “big” doesn’t usually grow as fast.
Since the financial crisis, the United States has had a taste
of European-style stagnation and unemployment. Is this kind
of listless economic torpor—where people linger for years with-
out jobs or hope—a moral society or the kind of life Americans
want?
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✶ ✶ ✶
People who become successful often talk about the need to “give
back.” Think about how misguided this is. Did Thomas Edison
need to “give back” for bringing electric light to people’s homes?
Should Mark Zuckerberg have to give back for revolutionizing
the way we communicate online with Facebook? Or for creating
wealth and jobs for thousands of people that would not have
otherwise existed? And why should a successful car dealer or
real estate broker have to apologize? Think of where you’d be
without their services.
This is not about the merits of giving to charity (we’ll get to
that later). What we are disputing, however, is the underlying
notion that those who have created wealth in our market system
need to somehow atone for “taking” from others.
Free enterprise guru George Gilder put it succinctly in “The
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There is a story about Steve Jobs that illustrates the moral value
of profit. Biographer Walter Isaacson writes that Jobs and Apple
cofounder and childhood friend Steve Wozniak had very differ-
ent views of the world. Wozniak, a brilliant engineer, subscribed
to the ethos of “Give to help others.”44 Like his fellow hackers,
he believed in giving away information and technology. When
he developed the Apple I personal computer, he wanted to give
it away for free. The visionary Jobs, however, saw the poten-
tial of what his friend had created and talked him out of it. He
convinced Wozniak that they should start a company and sell
his creation. They founded Apple and the rest, as they say, is
history.
Was Jobs being selfish and greedy? Some may be tempted
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such as KKR and Blackstone. What they don’t see is the value
their investments create—not only for direct investors but also
the broader society. Between 1991 and 2006, private equity
firms worldwide created more than $430 billion in net value
for their investors—which include universities, charitable orga-
nizations, and pension plans covering tens of millions of Ameri-
cans.45 Those “greedy” profits translated into stronger pension
plans for employees, more financial aid and scholarships at pub-
lic and private colleges, as well as funds for research that will
develop cures for diseases.
Another reason why we need profits is that new ventures have
very high rates of failure. Profits provide a source of new capital
that covers the cost of those failures. They’re also vital to main-
taining the operations of existing companies. Without profits,
companies couldn’t replace machinery that becomes obsolete,
or worn out. That’s why you so often see run-down buildings in
third world Big Government nations where people are prevented
from making a profit. After expenditures on day-to-day opera-
tions, there’s no money left for maintenance and new invest-
ment. The result is decay.
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