Free Markets 101: Free Markets Enable Prosperity and Compassion
The U.S. economy has generated more wealth for more people than any other economic system in human history, and it’s not even close. What began as a small group of colonies clustered near the eastern seaboard of a mostly empty continent founded by political and religious refugees somehow become more wealthy and powerful than any of the empires and dynasties that came before it.
And yet, we as Americans know that there is still work to be done. We know that the power of our free enterprise system, this incredible juggernaut of wealth creation, has not satisfactorily lifted the conditions of every American. In working to ensure that all boats rise with the rising tide, we must not ignore the complex and enduring systems that have enabled our rise.
The great folly of the economic left, if I could choose just one, is to ignore the realities of economic growth and development, going back to when humans first began to produce anything that could be called wealth.
The first reality to confront is that poverty is not created by complex and hidden forces behind a curtain somewhere; it is the natural state into which man is born. Throughout the vast majority of human history, it has also been the state in which the majority have died as well. But starting a few thousand years ago with the development of stable agrarian societies, small groups of people finally began to produce economic output that, in total, exceeded the minimum necessary inputs for survival. Even after thousands more years of development, however, it wasn’t until shortly after the industrial revolution, an historic blink of the eye ago, that the average person had any chance to accumulate real wealth and economic security.
We must not forget that this was all made possible because a handful of nations stumbled their way towards an ideal combination of free markets, limited government, and the rule of law as central doctrines, creating a perfect and virtuous storm through which human beings can realize their potential. When people begin to realize their potential, and the prosperity created by free enterprise systems is unleashed, it is this wealth creation that allows us to be compassionate, to invest in and take care of one another.
There is a great deal of evidence throughout history that charity and empathy are best manifested at the local level. However, we cannot ignore the role that some government programs have played to assist those too poor, sick, or infirmed to care for themselves. We cannot, for example, ignore the role of social security in helping the elderly to retire with dignity. Where once one out of three elderly Americans were living in poverty, that number now hovers around ten percent. This is true even though the poverty line used today would have been solidly middle class at the time Social Security was begun just a few generations ago. Americans know that sometimes people need a temporary hand up, not a handout, from the government because all else has failed them. And we also know that we are a rich and kind enough country to make sure that happens.
However, making government so large that you end up throttling economic growth is shutting down the very wellspring that makes any type of compassion or charity possible. This is why economic policies, even so-called welfare policies, must have as their goal empowering Americans to chart their own course and move up the economic ladders of success. This is supported by the vast majority of empirical evidence as well, which consistently shows that finding and keeping a job is the single best path to get and stay out of poverty.
Finally, we must almost make sure that once back on their feet, we allow our countrymen to keep more of their money so that they can invest in their future, their children’s future, and by doing so in our country’s future as well.
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.