Magazine | May 28, 2012, Issue

Beyond Efficiency

It’s time to make the moral case for free markets

A couple of years ago I wrote a book called “The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America’s Future.” I made what I thought was a very clever observation: that America is a “70 percent nation” when it comes to free enterprise. In virtually every survey on the matter, about seven in ten Americans say they believe free enterprise beats all other economic systems, even during recessions.

In response to this, several even cleverer reviewers pointed out an inconvenient truth: Americans may vow a monogamous love for free enterprise, but they have a huge fidelity problem. Tart up a little social democracy and parade it front of most Americans, and they’re all hands.

For example, in a July 2009 CBS News/New York Times poll, 64 percent of Americans said they thought the government should provide health insurance for everyone. Similarly, a February 2011 NBC News/Wall Street Journal poll asked a thousand Americans whether cutting Social Security was an acceptable way to reduce the deficit. To this question, 77 percent of respondents said that it was either mostly unacceptable or totally unacceptable.

This is a paradox, but not a mystery. On one hand, citizens say they love free enterprise. On the other hand, they sure wouldn’t mind a new government-funded rec center and maybe a few free prescription drugs, and politicians eagerly oblige.

Most people hardly have the time to consider the inconsistency between these two sentiments. People leading lives filled with work, church socials, and soccer practices don’t have much opportunity to contemplate the potential damage that each new government act — each tiny encroachment on their freedom — could cause.

This is America’s road to serfdom. No death squads or goose-stepping thugs, just one little compromise after another to the free-enterprise system. Each one sounds sort of appealing, and no single one is enough to bring down the system. But add them all up, and here we are, on our way to becoming Greece.

Don’t believe it? Consider: In 1938, when my own organization, the American Enterprise Institute, was founded to fight the growth of government, government spending at all levels (federal, state, and local) amounted to about 15 percent of GDP. By 1980 it was 30 percent. Today it is 36 percent. According to Congressional Budget Office projections, by 2038 it will be 50 percent.

Most Americans know something is wrong — which is why 81 percent are dissatisfied with the way the nation is being governed, according to a 2011 Gallup poll. But they rarely notice the discrepancy between their free-enterprise values and the statism they are getting.

What’s the solution? How do we help them understand that unless they actively choose free enterprise, they will ultimately get big government? Some people say they need to hear a more forceful argument than ever before about the material superiority of free enterprise over the alternatives. In other words, capitalism’s advocates need to yell louder that free enterprise makes us richer than statism. Master the numbers, make some snazzy PowerPoint  charts, show Americans the watertight evidence on fiscal consolidation, and the light bulbs will finally go on.

But that strategy doesn’t work. Data-laden material arguments for free enterprise have been tried again and again. They have failed to stem the tide of big government.

There’s only one kind of argument that will shake people awake: a moral one.

A lot of people are reluctant to talk about morals, or to make a moral case for anything in politics and policy. We’re willing to talk about principles, perhaps. Values, maybe. But morals? Even for many conservatives, morality evokes unpleasant memories of the “culture wars” of the 1990s. As a result, many who believe in free enterprise steer clear of all moral arguments.

This is a mistake and a missed opportunity. A great deal of research shows that all people demand a system that is morally legitimate, not just efficient. Research in fields from neuroscience to social psychology has shown that moral arguments are more powerful and persuasive, and are processed by the brain more quickly, than material arguments. That, in a nutshell, is why your bulletproof argument about the national debt will always lose when pitted against a an anecdote about a family living in a dumpster because their welfare benefits were taken away.

#page#So here’s the question: What makes people regard an economic system as moral?

One answer comes from University of Virginia social psychologist Jonathan Haidt, author of the best-selling book The Righteous Mind: Why Good People Are Divided by Politics and Religion. Through extensive surveys and sophisticated statistical analysis, Haidt has found that the perceived moral legitimacy of a person or system depends in no small part on an issue conservatives generally try to steer clear of: fairness.

Indeed, fairness seems like a sure loser for conservatives, which is why they tend to avoid the idea. Some dismiss it as hopelessly subjective, even childish. Even Saint Milton (Friedman) argued that “‘fairness’ is not an objectively determined concept. . . . ‘Fairness,’ like ‘needs,’ is in the eye of the beholder.”

President Obama is so sure that conservatives will scatter at the first mention of fairness that he brandishes the term like a magic talisman.

In his 2012 State of the Union address, he used the term “fair” or “fairness” seven times. He used it 14 times in his Osawatomie, Kansas, speech a month earlier.

Here is an example, from an address at the University of Michigan in January of this year. “When it comes to paying our fair share, I believe we should follow the Buffett rule: If you make more than $1 million a year . . . then you should pay a tax rate of at least 30 percent. On the other hand, if you decide to go into a less lucrative profession, if you decide to become a teacher, . . . if you decide to go into public service, if you decide to go into a helping profession, if you make less than $250,000 a year — which 98 percent of Americans do — then your taxes shouldn’t go up.”

There are several legitimate objections to this plan. In America today, the top 5 percent of earners pay 59 percent of federal income taxes while earning 35 percent of the income. If this is not fair yet, when will it be? When the top 5 percent pay 75 percent? One hundred percent? In addition, one might bridle at the president’s use of the expression “helping profession” to exclude business, as if creating private-sector jobs didn’t help others.

But the biggest objection should be to the president’s implicit definition of fairness. The Left today believes in redistributive fairness, in which economic rewards are made more nearly equal, and it considers income inequality to be inherently unfair. An alternative definition — a superior one, in my view — is meritocratic fairness, in which reward is attached to merit. This second definition defines forced equality as unfair because, as Aristotle pointed out, the worst form of inequality is to try to make unequal things equal.

Which definition do most Americans believe is correct? Social surveys again provide evidence of the answer.

For example, the 2006 World Values Survey, which polled a large sample of Americans, asked respondents to consider this scenario: “Imagine two secretaries, of the same age, doing practically the same job. One finds out that the other earns considerably more than she does. The better paid secretary, however, is quicker, more efficient and more reliable at her job. In your opinion, is it fair or not fair that one secretary is paid more than the other?” To this question, 89 percent answered that it was fair to pay the better secretary more, while 11 percent said it was unfair.

This result is typical. For the overwhelming majority of Americans, fairness means rewarding merit, not spreading the wealth around. This is consistent, of course, with America’s founding ideals. In his first inaugural address, Thomas Jefferson laid out his vision of “a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”

Most of our ancestors weren’t as eloquent as Jefferson, but their actions spoke even louder than his words. If you are descended from immigrants, ask yourself: Why did they come to America? To find a fairer system of forced income redistribution? Unlikely. Rather, they came in search of a system that would reward their hard work, innovation, and ambition.

#page#Those who dispute the president’s argument for redistributive fairness need to understand that the issue at hand is not a disagreement over the tax code. It is a clash of visions about America. Is the United States, while imperfect, still an opportunity society where merit is rewarded? Or is our system simply gamed to heap unearned riches on the 1 percent?

If the former, then the president’s definition of fairness is wrong and should be vigorously rebutted — not with arguments about the efficiency of capitalism, but with arguments about the fairness of the free-enterprise system. And conservatives should work for an even better opportunity society and even fairer — more moral — policies.

They should denounce the policies of the current welfare state not just as inefficient, but as unfair and immoral. A tax code riddled with special deals for crony corporations is unfair. It is unfair to bail out companies and individuals who made bad decisions and took foolish risks. There is nothing fair about the fact that bureaucrats get better pay and benefits than private-sector workers. Most unfair of all is the theft we are perpetrating on future generations with our ruinous national debt.

Still, the biggest challenge is not to beat the hard political Left on the issue of fairness. It is to resolve the Santa-state paradox, which finds citizens claiming to want small, restrained government but welcoming virtually any public spending on offer. We must somehow persuade our friends and neighbors to resist the allure of welfare-state growth. Moral arguments about fairness are the only chance we have to meet this daunting challenge.

As the early self-help icon Dale Carnegie instructed his readers in How to Win Friends and Influence People, one must “appeal to the nobler motives” of others. Conservatives, unfortunately, have done just the opposite.

Privately, conservatives are guided by lofty ideals on economic questions. While they generally accept the need for a safety net, they celebrate capitalism because they believe that succeeding on merit, being able to rise out of poverty through hard work and virtue, and having control over one’s life are essential to happiness and fulfillment. But in public debate, they often fall back on capitalism’s superiority to other systems solely in terms of productivity and economic efficiency.

This dogged reliance on material arguments is a gift to statists. It allows them to paint free-enterprise advocates as selfish and motivated only by money. Average Americans are thus faced with two lousy choices in the current policy debates: the moral Left versus the materialistic Right. The public, or a substantial part of it, hears a heartfelt redistributionist argument and knows it leads to the type of failed public policies that are all around us today. But sometimes it feels like the alternative comes from amoral conservatives who were raised by wolves and don’t understand basic decency.

No wonder the general public is paralyzed into inaction, even when dissatisfaction with government is at an all-time high. There just doesn’t seem to be a good alternative to the “statist quo,” and as a result the country is slipping toward a system that few people actually like. Most Americans, for instance, seem to intuitively understand the urgent need for entitlement reform. But do you seriously expect Grandma to sit idly by and let free-marketeers fiddle with her Medicare so her great-grandkids can get a slightly better mortgage rate? Not a chance — at least, not without a moral reason (and good policies to back it up).

Will an appeal to the nobler motives work? Will voters agree to stop stealing from their children, even at significant cost to themselves? The truth is, we don’t really know. What we do know is that the old appeals do not work — and have never worked. Conservatives fist-bump about winning elections, but meanwhile America is on a path to being a country whose citizens work six months of every year just to pay for a government they don’t want or need. Securing the future of the nation is worth more to each of us than a few short-term government benefits. To get off the path to social democracy or long-term austerity, we must rededicate ourselves to what our Founders struggled to give us and what the culture of free enterprise has brought us. In so doing, we will bequeath it to future generations.

– Mr. Brooks is president of the American Enterprise Institute and author of the new book The Road to Freedom: How to Win the Fight for Free Enterprise (Basic Books).

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