Economy

An entrepreneurial economy—if you can keep it

December 17, 2020

Greg Forster, Ph.D.

Does America still want to have a free and growing entrepreneurial economy? Between the unprecedented growth of overt support for “socialism” on the left and equally illiberal desires for “economic nationalism” on the right, there doesn’t seem to be much love these days for the humdrum old idea of an economy built on respect for human rights and equality under the rule of law. But classical economic liberalism remains the only way to protect human dignity from unlimited political power, and the only question before us is whether we will relearn this fact the easy way or the hard way.

For now, it does appear that the growing attack on the liberal, entrepreneurial economy has not yet passed from the ideological stage to the policy stage. Under a presidential administration of the right, we have had four years of mostly illiberal nationalist rhetoric, but governance—especially in domestic policy—was largely unaffected. There has been no major move toward, for example, a European-style industrial policy that picks winners and losers in the marketplace. And early cabinet picks from the incoming administration are signaling that the illiberal socialist rhetoric of the left is also not going to be translated into governance any time soon.

Indeed, one of the most heartening developments of the 2020 election is that both sides seem to have been hurt at the ballot box by illiberal economic rhetoric. The strident, nationalistic noise of Donald Trump’s Twitter feed probably lost him more votes than it gained him. Meanwhile, except in the very bluest of blue districts, “socialism” was an unambiguous loser for Democrats up and down the ballot. Hispanic voters, for whom that word is more likely to conjure images of Cuba or Venezuela than Sweden or Denmark, demonstrated a special distaste for it.

However, that is no reason to dismiss the very real bipartisan threat to the liberal economy. Especially in our democratic republic, which is designed to prevent the mob rule of pure democracy, it’s not enough just to win at the ballot box every four years. Most of the real governing takes place between election years, and politicians know that voters don’t pay close attention to policy mechanics.

Just because a wrong idea or a dysfunctional policy loses votes doesn’t mean it won’t be implemented. It can even gain dominant control of the policy apparatus in the teeth of consistent voter opposition. Just ask an opponent of agriculture subsidies, or an advocate of school choice, or a pro-lifer.

Witness, for example, the outrageous new law in California that strips the citizens of that state of their right to do more than minimal amounts of work in the “gig economy.” Designed to pay off corrupt taxi cartels and other special interests by arbitrarily shutting down superior competitors such as Uber and Lyft, the law crippled thousands of freelance drivers, writers, musicians, designers, and other workers.

Uber and Lyft just got themselves exempted from the law by backing a statewide referendum on Election Day, but everyone else is stuck under its thumb. Now, the state is making exceptions for some types of workers, piecemeal, based on who has enough political power or connections to move the whims of the iron-fisted political rulers. Musicians got themselves exempted by buttering up the egos of legislators with celebrity prestige—an industry group sent a personalized gold record to the law’s lead sponsor. But as far as the political ruling class care, writers might as well just give up and die, and reduce the surplus population. How this arbitrary privilege differs from, say, Julius Caesar’s rule over the Roman plebs is a question we can leave to the philosophers.

The liberal economy that now needs defending begins with human rights, especially the right to control your own work. People can’t be free and have their human dignity respected if they don’t have ownership over their own work. To take that away from people is almost literally what slavery is. After the right to life itself, which of course is the necessary condition for all other rights, the right to control your own work is just about the most fundamental right there is; only the right to free speech and worship can claim to be equally basic.

If you think it all out, what you will find is that respecting people’s ownership—or stewardship, or control—over their own work also requires us to protect their rights to property, contract, and exchange. You don’t own your work if you don’t own the property that it creates, or if you’re not free to make binding contracts and exchange your property with others. Obviously, these rights are limited and regulated by such legitimate social needs as taxation and public safety, but living together in a free society where everyone’s rights are protected is the only reason such limits and regulations are “legitimate” in the first place.

Older, tradition-bound social orders saw property and contracts as privileges, subject to essentially unlimited political control. That’s why the whole human race barely scratched by in subsistence-level poverty, with dismally low life expectancy and abysmal standards of living, until the modern era. The liberal social order based on equality under the rule of law protects your right to property and exchange as the default, and limits those rights only in the name of living together in a society that protects everyone’s rights. That’s why we enjoy not only freedom and human dignity, but material abundance, health, and luxury that even the greatest of the ancient emperors could never dream of.

Have we, historically, lived up to our own moral principles in a consistent way, respecting everyone’s rights equally? No, alas—not even close. But the question that is really before us in the present social crisis is not whether we have historically lived up to the moral principles of our liberal social order. The question now is, should we strive toward ever-greater conformity to our historic liberal principles, whose influence has been so morally and materially beneficial? Or trash them in favor of the foolish enthusiasms of economic nationalism and socialism, which restore the old regime of unlimited political control over our lives—with all the moral and material poverty that creates?

This isn’t about traditional welfare programs. Since it first emerged, the liberal economy has always had some kind of public provision for the most needy. And there is plenty of room for debate over how much and what kind of help government is able to provide consistent with liberal principles.

The issue also is not whether there are real problems in the liberal economy. Modern economics is not a magic wand that makes all the ills of the human condition disappear. It even creates some unique challenges of its own. The transition from the old, tradition-bound order to the new world of equality under the rule of law creates a lot of painful disruption. People lamenting the loss of their old ways of life, in places where the old economic arrangements are no longer sustainable, are not wrong to be upset. Important social institutions like families and churches have not yet found a stable way to move forward in the new, dynamic social environment that is created when we respect everyone’s rights equally. Where we can find sound approaches—in public policy or private action—to help mitigate those disruptions, we should pursue that.

The basic issue here is whether we’re going to begin with a robust moral commitment to equal respect for human rights under the rule of law—rights to work, property, contract, and exchange—and then negotiate at the margins over such issues as taxes, public safety, welfare, and social stability. Or if we’re going to let politicians arbitrarily strip people of their rights, on a whim, like they’re Roman emperors sitting on their gold thrones (or California legislators hanging gold records on their office walls). Whether the justification is nationalism or socialism, that’s not right, and it’s not hard to see the social and humanitarian disaster it would create.