Culture

Capitalism vs. Free Enterprise

October 10th, 2011 // 11:18 am @ Oliver DeMille

The New Culture War

During the Cold War, people came to equate the three ideas of democracy, capitalism and free enterprise.

This made sense at some level, since the whole world seemed inescapably divided into authoritarian, totalitarian, socialist and communist nations on the one hand and democratic, capitalistic and free enterprise nations on the other.

In the decades since the Berlin Wall fell, as CNN’s Fareed Zakaria has pointed out, there has been a growing divide between the nations emphasizing democracy and those focused on capitalism.

The differences between these two groups are both interesting and significant to world events.

But an even more nuanced and impactful division is the difference between capitalism and free enterprise.

I wrote about this in my book FreedomShift, but it is a point of great magnitude in our current society and bears repeating.

Unfortunately, very few people have considered the differences.

Most still equate capitalism and free enterprise, even in the post-Cold War era.

This is a weighty mistake with a high potential for negative ramifications in the 21^st Century.

A simple defining of terms points out the crucial importance of the distinction between these two brands of economics.

To summarize: capitalism gives special government-supported benefits to capital and those with capital (wealthy individuals, families and business entities).

This is the opposite of socialism, which promotes special government-supported benefits to those without capital—the proletariat, as Karl Marx put it.

In contrast to both capitalism and socialism, free enterprise establishes good laws and government policies that treat the rich, middle and poor the same.

Some people may believe that this is the system we live under in the United States today—that the law treats all the same.

Such an assumption is incorrect.

The U.S. commercial code has numerous laws which are written specifically to treat people differently based on their wealth.

For example, it is illegal for those with less than a certain amount of wealth to be offered many of the best investment opportunities.

Only those with a high net worth (the levels and amounts are set by law) are able to invest in such offerings.

This naturally benefits the wealthy to the detriment of wage earners.

This system is called capitalism, and it is a bad system—better than socialism or communism, to be sure, but not nearly as good as free enterprise.

In a free enterprise system, the law would allow all people to take part in any investments.

The law would be the same for all.

If this seems abstract, try starting a business in your local area.

In fact, start two.

Let the local zoning commissions, city council and other regulating agencies know that you are starting a business, that it will employ you and nine employees, and then keep track of what fees you must pay and how many hoops you must jump through.

Have your agent announce to the same agencies that a separate company, a big corporation, is bringing in a large enterprise that will employ 4,000 people (or, in a more urban setting, 24,000 people)—all of whom will pay taxes to the local area and bring growth and prestige.

Then simply sit back and watch how the two businesses are treated.

In most places in the United States, one will face an amazing amount of red tape, meetings, filings and obstacles—the other will likely be courted and given waivers, tax breaks, benefits and publicity.

Add up the cost to government of each, and two things will likely surprise you: 1) how much you will have to spend to set up a small business, and 2) how much the government will be willing to spend to court the large business.

Of course, I don’t really suggest that anyone announce such a fake business.

But imagine, theoretically, what would happen if you did.

Our current mentality in government is to treat big business better than small business.

This is the natural model in a capitalist system.

Capital gets special benefits.

In free enterprise, in contrast, the costs and obstacles would be identical for the two businesses.

In free enterprise, the operative words are “free” and “enterprise.”

Note that American business and ownership stayed mostly small—with most people owning family farms or small businesses—until the 1960s.

It was debt (often promoted by government) which wiped out the farming culture that dominated the South and Midwest, and the rise of big corporations over family-owned businesses came after the U.S. commercial code was changed by law to a capitalist rather than a free enterprise model.

If we altered today’s laws at all levels so that government entities treated all businesses and citizens the same, regardless of their level of capital, the natural result would be the spread of more small businesses.

Note that nearly all major growth in America’s economy since 1985 has come from small business.

Today, small businesses are struggling under a veritable “mountain” of regulatory red tape—the result is economic downturn.

And, while some in government hold an anti-business attitude, even many of those ostensibly promoting pro-business policies are more aligned with Wall Street corporations than the needs of small business.

Capitalism, sometimes called “Corporatism”, is not the same thing as free enterprise.

Both are certainly preferable to socialism or communism, but free enterprise is considerably more conducive to freedom and widespread prosperity than capitalism.

History has proven the following: 1) Under capitalism, the divide between rich and poor naturally increases; 2) In a free enterprise system, the prosperity, freedom and dignity of nearly everyone in the society inevitably rises.

Alexander Solzhenitsyn pointed out that while modern American capitalism was clearly better than Russia’s twentieth-century communism or Europe’s contemporary attempts at socialism, the U.S. implementation of capitalism left much to be desired.

For example, he noted, under American capitalism the question of, “is it right?” became less important to many people and companies than, “is it legal?”

Likewise, the culture of capitalism frequently asks, “is it profitable?” before (or instead of) asking, “is it good?”

American capitalism, Solzhenitsyn said, created a nation more materialistic than spiritual, more interested in superficial success than genuine human progress.

Note that Solzhenitsyn was adamantly anti-communist and anti-socialist.

But he also found capitalism lacking.

In every particular, however, Solzhenitsyn’s criticisms of capitalism don’t apply to the free enterprise model of economics. When the law treats all people and businesses the same—regardless of their size, connections, power or wealth—an interesting consequence occurs.

Put succinctly:

• In socialism the government ignores, downplays and literally abuses prosperity and freedom to the point that both are lost for nearly everyone.

• Under capitalism, the laws promote the wealth and license of a few above the freedom and prosperity of all, with the cultural result of valuing attainment of wealth above almost everything—including virtue, compassion, and the liberty of all.

• In free enterprise, the laws treat everyone the same, thereby incentivizing freedom, prosperity and enterprise (as long as such enterprise doesn’t violate the inalienable rights of others). The application of this model is rare in human history, but the results when it has been applied are nothing less than spectacular (see Ancient Israel, Athens, the vales period of Switzerland, the Saracens, the Anglo-Saxons, and the United States—which by 1944 had 6% of the world’s population and produced over half of its goods and services).

The lesson?

Freedom works.

Enterprise works.

And the outcome when the two are combined is breathtaking.

We are capable of so much more than we’ve accomplished so far, and free enterprise is the most powerful economic system yet to be tried by mankind.

Isn’t it time for an end to the outdated debate about socialism versus capitalism and a national return to the free enterprise system which made America great?

During its first century-and-a-half of application, free enterprise brought us major wealth, a standard of living for most citizens that rivals or surpasses the lifestyles of history’s royals, world power, major technological and medical advancements, and the end of slavery.

It also brought the repudiation of racism, male dominance, religious persecution and a host of other ills that have existed for millennia.

With all these areas of progress, imagine what we could do if we re-adopted the free enterprise values and culture in our time.

Laws that give special benefits to wealth and capital while withholding such opportunities from the rest can never bring the progress, advances, freedom and prosperity that free enterprise will.

It’s time for a change, and the first step is for all of us to start using the phrase “free enterprise” a lot more.

We need to study it, think about it, discuss and debate its various applications, and make it a household topic rather than an obscure economic reference.

The future of America is inextricably linked with the future of free enterprise.

We will sink or swim exactly as it does, whether we realize it or not.

Isn’t it time to admit this reality and make it the leading topic in our national dialogue?

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Oliver DeMille is the co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

He is the co-author of New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Business &Community &Culture &Current Events &Economics &Entrepreneurship &Featured &Government &History

Definitions That Matter, II

September 26th, 2011 // 10:49 am @ Oliver DeMille

As I have said before, one mark of ruling classes in society is the understanding of nuanced definitions. In American society, the original design was for the regular people to be the rulers.

Here are some words that need to be closely considered, understood and discussed by the regular people who care about freedom:

• Administration
• Aggression
• Allegiance
• Alliances
• Amendments
• Aristocracy
• Authority
• Balances
• Banks
• Borrowing
• Business
• Centralization
• Character
• Checks
• Citizenship
• Civil Rights
• Classes
• Common Law
• Communism
• Community
• Consent
• Constituent
• Constitution
• Contracts
• Courts
• Culture
• Currency
• Defense
• Democracy
• Diplomacy
• Duty
• Economy
• Election
• Empire
• Equality
• Ethics
• Executive
• Faction
• Fallacy
• Fallibility
• Family
• Farming
• Federal
• Feudalism
• Fiscal Policy
• Force
• Foreign Policy
• Forms of Government
• Freedom
• Good
• Goods
• Guilds
• Human Nature
• Independence
• Independents
• Individuality
• Investment
• Judgment
• Judiciary
• Jury
• Jury of the Vicinage
• Justice
• Law
• Leadership
• Legislature
• Leisure
• Liberal Arts
• Liberal Education
• Liberty
• Limited Government
• Local Government
• Loyal Opposition
• Mercantilism
• Mixed Government
• Modernity
• Monarchy
• Monetary Policy
• Natural Law
• Oligarchy
• Optimism
• Ownership
• Political Economy
• Political Parties
• Politics
• Popular Sovereignty
• Positive Law
• Powers
• Pragmatism
• Precedent
• Principle
• Private Property
• Profit
• Progress
• Propaganda
• Prosperity
• Providence
• Public Office
• Public Opinion
• Public Policy
• Public Virtue
• Realism
• Reason
• Representation
• Representatives
• Republic
• Rights
• Savings
• Separation of Powers
• Slavery
• Social Contract
• Socialism
• Society
• Taxation
• Tyranny
• Utilitarianism
• Wealth
• Wisdom

Category : Aristocracy &Blog &Citizenship &Constitution &Culture &Economics &Education &Featured &Leadership &Liberty &Mini-Factories

On Reason, II

September 26th, 2011 // 3:51 am @ Oliver DeMille

Aquinas held that angels are intellectual beings because they know all things, while men are merely rational beings because they know little and therefore must figure things out.

Descartes and Locke differentiate between intuition and reason by arguing that intuition can be believed without demonstration while reason requires that we demonstrate every step of our thinking.

Since each person must reason out each answer on his own to really use reason, the fact that others have outlined their thinking at every step makes reason easier to follow and to expand upon than intuition. Also, the argument goes, reason can be used to analyze and test intuition, while the opposite is seldom true.

The Bible discounted this view, comparing the rationalist “goats” with the more obedient and intuitive “sheep.” In much of Western culture, the term “sheep” became a negative name given to those who refuse to think things through.

Religious icon Aquinas, who certainly cannot be accused of not thinking things through,[i] argued that those who trust God’s full knowledge more than man’s limited knowledge are in fact more rational than those who believe in man’s abilities.

Ultimately, Aristotle taught, all demonstration rests on certain indemonstrable truths. Human rationalism can extend our understanding, as can science, but it cannot prove or disprove every detail.

However, rationalism is based on the assumption that there are truths in the universe, and that the use of our minds can help us learn these truths. In fact, modernism is based on this same concept.

For example, if there are no universal truths then math, logic and the scientific method are all flawed and useless. All of these depend on the ability to discover and detect truths that are out there.

Reason is the most democratic thinking method to date because it holds that each individual person can use it without depending on experts or elites.

In fact, it is how the regular people can analyze and test the words and assurances of the experts and elites. The other major methods of arriving at truth—from science, math and logic to theology, aestheticism and credentialism—depend on the assurances of experts.

Jefferson goes as far as saying that the people are bound by duty to use reason as they oversee government. The committee of founders which approved The Declaration of Independence agreed with this assessment.

A free people is a deep-thinking, well-read, independent-thinking people.

Category : Aristocracy &Blog &Citizenship &Culture &Education &Generations &Government &History &Leadership &Liberty &Science

On Reason

September 23rd, 2011 // 3:16 am @ Oliver DeMille

In the American founding era, most of the leading thinkers were rationalists. This means that they believed in reason as a top method of determining truth.

Note that the general concept of reason has changed since then. When most people think of reason today, they tend to mix it with the ideas of logic, science and determinism. In the American colonial and early republican era, this was not the case.

The term “science” was often used to mean general thinking and the idea of learning, and in this sense it coincided with the rational perspective. But today’s technical science, based on a general consensus of experts along with the empirical use of the scientific method, is quite the opposite of the rationalist viewpoint.

And logic, which is actually a branch of mathematics (rather than philosophy), is very different than reason.

Reason, in the original sense, is the use of one’s own mind to test and analyze the words of the experts, the ancients, and all authority.

In the founding generation, reason was a check and balance on the smug groupthink[i] of the upper classes and elites. Most of the leading founders usually used the term “right reason” rather than simple “reason,” since this first phrase carried the connotation that all right-thinking people would come to the same conclusions if they had the benefit of adequate information.

In this view, no king, priest, aristocrat or expert can rely simply on some claim to a “divine right” of expertise to be correct—each individual citizen can test everything said by the elites simply by taking the time to obtain all needed information and then think it through.

Forrest McDonald wrote in the introduction to Empire and Nation, a collection of writings by American founders John Dickinson and Richard Henry Lee:

“In the historical view, men have such rights as they have won over the years; in the rationalist view, men are born with certain rights, whether they are honored in a particular society or not.”

Using reason, leading American founder John Dickinson wrote:

“Ought not the people therefore to watch? to search into causes? to investigate designs? And have they not a right of JUDGING from the evidence before them, on no slighter points than their liberty and happiness?”[ii]

It is always up to the people to maintain their freedom, and one of the first steps is to think—independently as they see fit—regardless of the assurances, promises and statistics of experts and elites.

Throughout history, the experts have nearly always worked for the elites, and the regular people have held reason as their first line of defense. When the regular people put expertise, tradition, authority or official promises above their own reason, they have always lost their freedoms and prosperity.

Dickinson put it this way:

“Indeed, nations, in general, are not apt to think until they feel; and therefore nations in general have lost their liberty.”[iii]

Category : Blog &Citizenship &Culture &Education &Featured &History &Liberty &Science

Review of Don Peck’s “Can the Middle Class be Saved?”

August 29th, 2011 // 2:00 pm @ Oliver DeMille

This article in The Atlantic by Don Peck is a must-read for those who are interested in the future of American freedom and prosperity. Highlights from the article include:

• The United States is “now composed of two distinct groups: the rich and the rest. And for the purposes of investment decisions, the second group” doesn’t matter.
• The new name for this state of society, coined by three analysts at Citigroup, is “plutonomy.”
•  “A 2010 Pew study showed that the typical middle-class family had lost 23 percent of its wealth since the recession began, versus just 12 percent in the upper class.”
• The lifestyles of non-professional college graduates now more closely resemble those of high-school dropouts than of the professional class.
• The meritocracy is increasingly only a meritocracy of the upper classes.
• “Among the more pernicious aspects of the meritocracy is the equation of merit with test-taking success.”
• “For the most part, these same forces have been a boon, so far, to Americans who have a good education and exceptional creative talents or analytic skills.”
• Most Americans don’t want the middle class to disappear or continue to shrink, and such a development would certainly bring a drastic change to the people-based freedom that has characterized the historical successes of the United States.
• These trends, and the growing divide between the rich and the rest, are increasing the longer the economy remains sluggish.

Peck gives a number of suggestions for improving this situation, including:

• Increasing the funding for effective job training and education.
• “Removing bureaucratic obstacles to innovation is as important as pushing more public funds toward it.”
• Changing our public policy to accelerate innovation.
• Significantly improving our schools.
• Creating clear paths of training and skilled work for those who don’t go to college.
• Altering current immigration policy to allow more “creative, highly skilled immigrants” to come to the U.S. more easily.

Whether or not you agree with Peck’s recommendations, one reality is clear: The success of these things ultimately depends on incentivizing entrepreneurship, innovation, creativity and economic growth.

By spurring significant economic growth, we will directly and indirectly address most of our national economic problems.

On the other hand, if government policies continue to thwart major innovation and growth, little can be done.

Peck makes a case for higher taxes, but hardly mentions that Washington has a serious spending problem.

Democrats typically argue for tax hikes, while Republicans now mostly champion spending cuts.

Most Independents, in contrast, would likely support both—as long as the tax hikes on the professional class were used not to increase or maintain federal spending but rather to directly help put America’s financial house back in order.

Whatever your view on this debate, it is a discussion desperately needed right now.

Too much of the rhetoric on this topic is just that—two sides deeply entrenched and firmly committed to one view only.

We need fresh ideas and inspiring leadership to move beyond this gridlock.

With all this said, Peck’s article is mandatory reading. Every American should think about its main points.

Most will find things to disagree with, perhaps, but the dialogue is needed.

If the middle class is to survive and thrive, it must increase its role of deeply considering, thinking about and making its views felt on important economic and other national issues.

Freedom only works when involved citizens of all socio-economic levels actively participate in such important national discussions.

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Oliver DeMille is the co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

He is the co-author of New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Aristocracy &Book Reviews &Community &Culture &Current Events &Economics &Family &Featured &Statesmanship