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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

A U.S. GRAND POLICY

October 10th, 2011 // 10:54 am @ Oliver DeMille

The Jobs Plan We Need

In the furor over the national debt, deficits, stimulus programs, the Obama Administration’s proposed jobs plan and the Republican responses, we are missing a simple reality.

America right now is in desperate need of a clear, simple, overarching Grand Policy.

The Grand Policy would look something like this:

• Every new proposal in government that in any way impacts business and/or the economy will be measured by its likelihood of incentivizing economic growth, increased investment, and higher levels of quality employment. Only proposals which effectively encourage these things will become law or policy. Period. No exceptions.

• That’s Phase I. Phase II is to comb through all regulations that were adopted during the last ten years that affect business or the economy and apply the same standard. Any laws and policies that don’t incentivize economic growth, increased investment and higher private-sector hiring will be revoked.

• Phase III will carefully analyze each of the cancelled policies and determine if any are validly good for the nation. Those that meet this test will be reconsidered by Congress.

Some might argue that such a re-evaluation of our economic and business policies would be unwieldy, costly and time-consuming.

But this line of reasoning actually supports the need for this Grand Policy.

The reason this re-evaluation would certainly be unwieldy, costly and time-consuming is that far too many regulations have been adopted during the past decade.

This fact is a major cause of our national economic problems.

To reiterate the point, implementing such a Grand Policy would definitely be unwieldy, costly and time-consuming, but not nearly as unwieldy, costly and time-consuming as leaving such policies in place and seeing increased economic downturn, continually high unemployment, lessened investment, and most likely an inflation problem in the near future.

As to the question of who will do this work, what could be a better use of Congress’s time than to reboot economic growth by encouraging investment, growth and the resulting jobs?

Until these things are addressed, do we really want Congress working on other things?

We’re going to pay their salaries and those of their staff anyway, so why not put them on productive projects like revitalizing the economy.

In short, we need a Grand Policy that incentivizes economic growth, increased investment and more private-sector hiring.

Every policy affecting business and the economy must encourage these things.

It really is that simple.

If government policy discourages growth, investment and hiring, the result is less growth, investment and hiring.

This is where we are right now.

America is at a fork in the road, so to speak. If we take the road that continues to de-incentivize growth, investment and hiring, we’ll get less growth, investment and hiring.

I apologize for using such repetitive and basic language, but for some reason Washington doesn’t seem to grasp this reality.

For example, increasing regulations and taxes on small businesses and small-business owners—America’s proven job creators—is going to discourage growth.

Obviously, the three phases listed above are too simplistic—there is more complexity to such a change than is outlined here.

But it’s a good place to start.

Whatever the intricacies and difficulties of change, we simply must take on a national project of incentivizing business growth, investment and private-sector hiring.

If not, our economic problems are just beginning.

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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 &Current Events &Economics &Featured &Government

Education Reform Won’t Work Anymore.

October 3rd, 2011 // 10:57 am @ Oliver DeMille

We Need a Transformation!

A Review of Ken Robinson’s Out of Our Minds: Learning to Be Creative

This is an excellent book. Here are some of Robinson’s main points:

We are living in a time of global change, whether we admit it or not.

“As the world spins faster and faster, organizations everywhere say they need people who can think creatively, communicate and work in teams: people who are flexible and quick to adapt. Too often they say they can’t find them. Why not?”

Young children think they are creative; most adults think they aren’t creative. What causes the change over time?

The truth is that our educational system does a lot of harm to some of our most needed abilities and qualities. “Some of the most successful people in the world did not do well at school…. Many succeeded only after they had recovered from their education.”

With education so vital to advanced post-industrial society, why is it that the legacy of education now seems to include a reduction in creativity, initiative and innovation in so many people? And what can be done about it?

Robinson addresses these questions head on:

“Current approaches to education and training are hobbled by assumptions about intelligence and creativity that have squandered the talents and stifled the creative confidence of untold numbers of people.”

I was interested to note that people haven’t lost their creativity or creative ability, just their “confidence” in these abilities. Many adults are also out of the habit of using their creativeness. In my view, the conveyor-belt model of learning has caused this result in the lives of most people.

Robinson:

“This waste stems partly from an obsession with certain types of academic ability [e.g. rote memorization, early academic success rather than lasting academic interest, etc.] and from a preoccupation with standardized testing. The waste of talent is not deliberate. Most educators have a deep commitment to helping students do their best….

“The waste of talent may not be deliberate but it is systemic. It is systemic, because public education is a system, and it is based on deep-seated assumptions that are no longer true.”

The challenge is that given this systemic, structural reality in our educational models, the time for reform is past. “The challenge now is to transform them.”

Robinson writes:

“As Thomas Friedman, author of the World is Flat, puts it, ‘Those who are waiting for this recession to end so someone can again hand them work could have a long wait…. Those who have the ability to imagine new services and new opportunities and new ways to recruit work…are the new Untouchables. Those with the imagination to invent smarter ways to do old jobs, energy-saving ways to provide new services, new ways to attract old customers or new ways to combine existing technologies will thrive….

“Our schools have a doubly hard task, not just improving reading, writing and arithmetic but entrepreneurship, innovation and creativity.’”

Top global business and public sector leaders “overwhelmingly agree,” Robinson notes, “that the single most important leadership competency for organizations to deal with [the] growing complexity is creativity.”

“All over the world, governments are pouring vast resources into education reform. In the process, policy makers typically narrow the curriculum to emphasize a small group of subjects, tie schools up in a culture of standardized testing and limit the discretion of educators to make professional judgments about how and what to teach. These reforms are typically stifling the very skills and qualities that are essential to meet the challenges we face: creativity, cultural understanding, communication, collaboration and problem solving.”

“The challenge now is to transform education systems into something better suited to the real needs of the 21^st century. At the heart of this transformation there has to be a radically different view of human intelligence and creativity.”

Robinson’s solutions:

• Increase access to education
• Change the way we educate
• Help students learn to ask more questions
• Promote a diversity of subjects, talents and interests
• Increase exposure to the arts and sciences
• Rethink disability as deep ability in something
• Personalize and individualize
• Help students become their best selves rather than emphasize fitting in
• Stop penalizing individuality
• Stop penalizing mistakes; promote mistakes as essential to the creative process and positive to learning
• Teach across the academic fields and remove barriers between topics of knowledge
• Officially make feelings as important to learning as thinking
• Make authenticity a key part of learning
• Stop acting as if life and learning are linear
• Restructure schools and businesses to encourage creativity
• Fund creativity, and give people time to be creative
• Allow each school to be unique
• Use new technologies to help individualize the education of each student
• Help the student be the primary creator of her own program
• Be creative and flexible with the schedule; great learning is the thing, not some list of rules, schedules and plans

This is a truly excellent list of educational transformations. This book is as important to America as Bloom’s Closing of the American Mind, Hirsch’s Cultural Literacy, or my own book A Thomas Jefferson Education—or at least it should be. Every educator, political official and parent should deeply consider how to apply the reforms it suggests. This is more than a great book, it is a necessary book.

If Robinson’s book has a weakness, it is that he gives too little attention to the role of teachers. He mentions how important teachers are, but in my opinion he doesn’t go far enough. The reality is that teachers are the lynchpin in all education and educational reforms. If you have a great teacher in the room with your student, you’ll watch the young person experience improved and eventually great education. If not, you won’t. It really is this simple.

Great teaching results in great learning, because great teachers inspire students to engage the act of getting a great education for themselves. Such education always increases creativity, innovation, imagination and initiative. Great teachers bring great education. Period. Even with all the changes listed above, without great teachers, very little real change will occur. With great teachers, however, such reforms will naturally catalyze a genuine transformation.

Maybe Robinson’s next book will be on how to be a great teacher. If we implement the suggestions he made in Out of Our Minds, even in our homes or a school where we have influence, we will be ready when such teachers come along.

Category : Blog &Education

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