Free Markets 101: A Conservative View of Wealth Creation
Editor’s Note: Damon Dunn breaks down what are often-confusing economic concepts and makes free market economics more relatable to our everyday lives in his new Right by the Bay column, ‘Free Markets 101’. We are pleased to present his debut column below.
One key to understanding the recent populist uprisings on both the left and right in American politics lies in recognizing the role of righteous indignation.
Coming out of the Great Recession, both the “Tea Party” and “Occupy Wall Street” movements shared a mutual distrust of government and big business. However, the revolt from the right ultimately had a larger social and political impact than that from the left due in part to a central flaw in the worldview of too many progressive political thinkers.
Both modern and historical progressive and socialist critiques of free enterprise have failed to recognize the difference between legitimate and illegitimate forms of wealth creation and preservation.
It is true, for example, that those with wealth can take advantage of opportunities not available to those without, especially during tough economic times. In contrast, those that use their wealth and influence lobbying for bailouts and subsidies for their own private interests are engaged in a fundamentally different and unfair practice. These actions are illegitimate not because they perpetuate wealth or privilege, as progressives often charge, but because they involve a direct form of theft from the taxes paid by the less wealthy and well-connected.
While there are limits to what government can (or should) do to intervene in the economy during tough economic cycles, it should be universally agreed upon that the federal government should never act in a manner that disproportionately advantages those with large amounts of capital (be it financial or social).
As an example of legitimate and beneficial wealth preservation, there is nothing insidious about millions of American families moving to the best school district they can afford to maximize their child’s chances for success (leaving aside for now the perversity of an education system that forces students to attend the school to which they happened to be zoned without choice).
Nor is there anything wrong with using wealth built through free and voluntary business transactions to take advantage of investment opportunities. These “legitimate” forms of investment do not trigger the same bipartisan outrage as the collusion between powerful industries and government does, because these investments, whether of parents in their children or of businesses in the economy, are not zero sum.
In fact, we all benefit from these investments in human and physical capital from our fellow countrymen.
The failure of progressives to distinguish between these different types of investment and wealth creation has triggered the noisy protests against the “1%,” as if all actions that perpetuate wealth and opportunity are evil, even from parents to their children.
That said, I believe there is common ground to be had in two important areas. First, we should work to close any avenues through which the powerful use their connections to government to receive ill-gotten gains, guarantees, and other sorts of government largesse at the expense of the American taxpayer.
Second, we need to expand the ability for individuals to “plant their seed” for future success and wealth creation. My mother did this for our family by being the first to attend college, and the seeds she planted have sprouted in her children, and will continue to do so for my children.
As a result, the poverty of my family’s past will be a source of humility and appreciation for my children and grandchildren rather than a cross for them to bear. Intelligent investments like the G.I. Bill created similar opportunities for millions of American families to plant the seeds of their own success. These types of investments in individual opportunity have consistently attracted broad support in our country’s past, and should continue to do so in our future.
Damon Dunn writes the regular “Free Markets 101” Column for “Right by the Bay.” He is a successful real estate developer, investor and businessman, former collegiate and pro football player, and was a Hoover Institution fellow from 2011-13.