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The Interventionist State Should Not Be the Nation’s Business

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In 1966, a well-known business-affairs columnist of the time named Donald I. Rogers wrote a short book entitled The End of Free Enterprise. His theme was that the American business community had lost its way intellectually and ideologically. “What the business world needs is a decision about the principles it stands for,” Mr. Rogers argued. “It needs a credo, a manifesto, a set of guides and goals behind which harried and hard-working executives can rally. Lacking this,” W. Rogers warned, “the enterprise system will be whittled away by the voting strength of those who don’t understand it or who, understanding it, are opposed to it.”

One of the leading voices of the American business community is the United States Chamber of Commerce, with 185,000 member-organizations throughout the country. It is meant to present a point of view, it is said, that stands for a free, open and competitive economy. In the Chamber’s respected monthly magazine, Nation’s Business, economic trends and governments] policy are analyzed from what would generally be considered the “free-enterprise perspective.”

Yet, what exactly is the free-enterprise point of view that the Chamber of Commerce is espousing in the 1990s? The March 1992 cover article of Nation’s Business tells us. We are told that “[in meetings last fall in six cities nationwide, Chamber members, representing every facet of America's manufacturing and service economies, began the process of setting a positive, results-oriented legislative and regulatory agenda for solving the nation's short- and long-term economic problems." The recommendations resulting from these meetings were refined by the Chamber's policy committees and the Chamber's board of directors. Labeling its 1992 National Business Agenda, "Building the American Future," the Chamber presented its proposals to President Bush in February.

Unfortunately, the policy proposals and prescriptions of the U.S. Chamber of Commerce do not add up to a new credo or manifesto for the liberating of the free-enterprise system from the dead hand of state control. To the extent that concerns are expressed about the size and role of the state in economic affairs, the Chamber advocates various tinkering reforms, rather than repeal or abolition of these governmental intrusions into the marketplace. And, even worse, other parts of the program represent what the Italian economist Vilfredo Pareto once called "bourgeois socialism," i.e., the use of the interventionist state for the benefit of industrial and commercial interests at the expense of other members of society.

Under the heading "A New Foundation for Economic Growth," the Chamber advocates a one percent reduction in the Social Security payroll tax, governmental tax credits for research and development, a cut in the capital-gains tax, and no increases in personal and business taxes. The Chamber also calls for a moratorium on new regulations and for limits on the growth of entitlement program.

Under the heading "Human Dimension of Enterprise," the Chamber calls for an improvement in the quality of public education, federal standards for health care, and reasonableness in the enforcing of governmental worker-safety rules on the shop floor.

Under the heading "Launching New Technologies," the Chamber desires "lab-to-market cooperation among United States' business, government, and academic communities" for technological research into and for practical application of new production technologies.

Under the heading "Rebuilding America's Infrastructures the Chamber wants the government to manage more carefully its transportation resources so that roads and airports can be more efficiently provided by the state. The Chamber also wants the government to subsidize a high-speed network of high performance computers that would connect research centers around the country.

Under the heading "Environment and Natural Resources," the Chamber calls regulatory reforms to stimulate the domestic energy industry. The Chamber also calls for the government to establish "market-oriented" solutions to toxic and solid-waste problems on the basis of "consensus policy options" arrived at through negotiations among "representatives of business, government [and] public interest groups.”

Under the heading “Succeeding in International Markets,” the Chamber wants the government to assure “fair” trade between the U.S. and Japan and Western Europe. The Chamber also wants the government to increase funding for the Export-Import Bank, to stimulate state-subsidized business for American export firms in foreign countries receiving Ex-Im Bank loans.

Finally, under the heading “Making Government Responsive,” the Chamber advocates constitutional amendments for a balanced budget and a line-item veto. The Chamber also wants a streamlining of governmental procurement methods to increase sales to the state by American businesses. What are the policy assumptions underlying this “business agenda” for building the American future?

First, the state is to act in the “national interest” by manipulating the tax codes to induce patterns of consumption and investment, thereby creating a profitable investment climate for American business.

Second, the role of government in the economy is that of a partner with business — assisting in the selection and undertaking of various technological innovations, and managing trade with other nations for the benefit of American industry. Third, the state is to provide various goods and services, at subsidized costs, to the business community and the society at large, so as to provide American industry with education workers, efficient means of transportation and cheap methods of communication for enhanced business profitability.

And what am the political premises underling these policy assumptions? First, even if it is desirable to reverse the intrusion of the state in the economic affairs of the American citizenry, the system is unchangeable in that direction. The regulated economy and the interventionist state are the practical reality within which policy proposals must be constructed. All that we can realistically propose are reforms and revisions, i.e., tinkerings within the system in one direction or another. Second, since the state is going to intervene in and regulate the economy, then the goal of organizations like the U.S. Chamber of Commerce is to see to it that the interventions serve, rather than harm, the perceived interests of various segments of business community.

In The End of Free Enterprise, Donald Rogers reminded his readers, “We have not yet, as a nation, reached the pinnacles of freedom that our founding fathers meant us to inherit. They knew, as we must rediscover, that throughout the ages there have been those who, while crying ‘freedom’ the loudest, sought to limit it” What could be added to this statement is that dim are many of those who, while loudly insisting that they are defenders of “free enterprise,” often (and unintentionally) assist in destroying it.

And, unfortunately, national-business agendas like that of the U.S. Chamber of Commerce assist in doing just that — destroying the remnants of fire enterprise in America. When the tax code is manipulated to induce various types of investment activity, it is no longer the market determining the allocation and use of capital and other resources, but rather the state. When businesses increasingly become dependent upon government funds for research and development, it is the government that soon dictates how private businesses shall manage their investment affairs. When businesses lobby for subsidies for exports or protections against imports, their financial viabilities are increasingly dependent upon the changing winds of national politics and political favoritism. When business organizations call for “consensus politics” in dealing with the environment and pollution, private property and its use are soon made subservient to the needs of the “national interest,” as defined and enforced by those special-interest groups most astute and powerful in the game of consensus politics.

If the national agenda of the U.S. Chamber of Commerce is followed, rather than reaching those pinnacles of freedom envisioned for us by the Founding Fathers, the American economy will descend even further into the quagmire of interventionism, mercantilism and economic fascism. In the name of defending free enterprise and the market economy, free enterprise and ft market economy will be even more politically controlled.

An agenda for building the American future is desperately needed. But such an agenda must begin with the premise that economic freedom is inconsistent with any governmental intervention in and regulation of peaceful market relationships. And the only policy positions consistent with this premise are: repeal of all regulations, abolition of all interventions and controls, and, finally, a constitutional separation of government from the economy. The implementation of such an agenda, indeed, would be a legacy to our children worthy of the inheritance the Founding Fathers left for us.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).