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The Moral Case Against Serfdom

Arthur Brooks makes the winning case for free enterprise.

By From the July - Aug 2012 issue

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The Road to Freedom: How to Win the Fight for Free Enterprise
By Arthur C. Brooks
(Basic Books, 214 pages, $25.99)

THOUGH THE SUICIDAL EDITOR of this magazine has written in his new book, The Death of Liberalism, that Liberalism is no more, I'm not so sure. The question still confounds some of us conservatives: If we're so smart, why aren't we winning? I'm still waiting for a good answer, though some clues at least are contained in Arthur C. Brooks' The Road to Freedom: How to Win the Fight for Free Enterprise.

Part of the problem lies in the old cliché, which, like most, actually contains a modicum of truth: Liberals think with their hearts and conservatives with their heads. This may make liberals wrong most if not all of the time, but it also makes them appear big-hearted. And it gives them a leg up because, after all, they begin debates already standing on the moral high ground.

Conservatives, on the other hand, talk up GDP growth and incentives and individual rights and pulling one's self up by the bootstraps and (yikes!) Capitalism. Barack Obama is the master of caricaturing what conservatives believe. Mitt Romney wants no regulation of the drinking water or Wall Street; John Boehner favors "a system where everyone is left to fend for themselves and play by their own rules"; Paul Ryan is so cruel that his budget proposal would take away health care from "babies with Down syndrome."

Mr. Brooks asks: Isn't it about time for conservatives to charge up the hill and seize the moral high ground when defending free enterprise, the Constitution, low taxes, less government, and business? Hell yes. But how? First, to win the policy battle we must understand the game leftists are playing. They aren't trying to socialize 50 or 60 percent of the economy overnight. "In America," Brooks reminds us, "the road to serfdom doesn't come from a knock on the door by a jackbooted thug. It comes from making one little compromise to the free enterprise system after another." So true. It was George W. Bush, after all, who gave us prescription drug benefits and No Child Left Behind. To seem compassionate, Mitt Romney endorsed an increase in the minimum wage—a policy that is economically imbecilic and inarguably harmful to the poor. Romney also agrees with Barack Obama that we need more subsidized loans for college students. This isn't going to win Mr. Romney the election.

Next, conservatives need to realize it is not money that makes one happy and fulfilled, but the feeling of earned success—that is, a purpose. People who are handed money by the government, a family member, or even a winning lotto ticket are not much happier over time than everyone else. Brooks' own studies have found that those who work the hardest tend to be the happiest. Small business owners earn on average about $50,000 a year, barely more than the median income. But they are happier. One reason that free enterprise is morally superior is that it links hard work with financial and spiritual reward.

Further, we must recognize that capitalism, not socialism or progressivism, is fair, because it provides equality of opportunity and creates the most prosperity for society. Seven in 10 Americans believe that in America most people can succeed. More than 6 in 10 say that success is determined by "hard work"; fewer than 2 in 10 credit "lucky breaks." That is to say, most Americans still believe this country is a meritocracy, and for the most part they are right. There is considerable income mobility in America over time, and growing up poor doesn't consign one to be poor; just look at the immigrants who come to this country with nothing and end up with everything.

Moreover, capitalism is morally superior to socialism because the poorest citizens are better off materially in free enterprise countries than more statist ones. Per capita GDP is $2,000 per person in nations that are least economically free, almost $8,000 in nations with average freedom, and just under $12,000 in the most economically free nations. Now, where do you want to live?

As for those who fall through the cracks due to physical or mental disability, bad luck, or lousy parents and schools: Yes, they deserve help in a rich nation. It's not a kid's fault that his father is a creep or that she had to grow up in the rathole of Detroit. So how best do we create opportunity? Brooks shows that $1 of charitable giving can increase output by as much as $19, whereas $1 of government welfare spending increases GDP by at most $1.50. This suggests an idea: Get rid of all welfare and just require Americans to give, say, 10 percent of their money to the charity of their choosing every year, an idea roughly similar to what Charles Murray has recommended.

Mr. Brooks' book is stocked with many other such nuggets of wisdom. He notes, for example, that regulation is obviously not always in the public's best interest, no matter what Elizabeth Warren, Mr. Obama's onetime financial meddler-in-chief, might think. For example, the Dodd-Frank law includes hundreds of pages of regulation, all intended to prevent another mortgage meltdown. We also spent at least $200 billion on mortgage modification programs, and a big percentage of recipients eventually defaulted later anyway. But Brooks has solved the mortgage crisis with one sentence and not a single penny of taxpayers' money. "Lenders could simply require a 20 percent down payment on any residential housing loan." This doesn't need to be mandated. But for a homeowner to take a mortgage deduction or receive any federal guarantees, the 20 percent down would be required. It's brilliant, and never again would we have a nationwide foreclosure crisis.

Mr. Brooks is a fan of a flat tax, and he's right that it can and should be defended on moral and economic grounds. A fair tax system is one in which everyone pays the same rate. If you make 10 times more than me, you pay 10 times as much. Not 20 or 30 times more. If we live next to each other, and we both earn $75,000 a year, we both pay, say, $10,000 in income tax. But you shouldn't pay less than me because you've got an energy efficient refrigerator, invest in municipal bonds, or donate to the Sierra Club. I agree wholeheartedly with Brooks that the way to counter the Buffett rule, a proposed income tax surcharge on millionaires, is not by defending the current corrupt tax system, but by advocating a new, simple flat tax that makes everyone play by the same rules.

This moral case for free enterprise is necessary. I'm not persuaded it's sufficient. For example, Brooks argues that it was, in the end, the moral depravity of communism that brought the Soviet Union down, not the material depravity. I'm not so sure that the Russian people weren't sick of seeing America's riches and yearning for a taste of a prosperous lifestyle. The Chinese turned to capitalism not because of its moral superiority, but because they wanted to rule the world, and you can't do that under collectivism. But we need both arguments. If conservatives are to succeed, we need to convince people in the U.S. and around the world that capitalism makes them richer and freer. Given the mountains of evidence on our side, why is it so damn hard?

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About the Author

Stephen Moore is the chief economist at the Heritage Foundation.