»  National Review

September 25, 2000

   Attack of the Wealth-Eaters

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Reading Fernand Braudel's The Wheels of Commerce recently, I was struck by how oddly dated its many, many references to "capitalism" now seem. I don't mean to be unfair to M. Braudel: the subtitle of his book (published in 1979) is, after all, Civilization and Capitalism, 15th-18th Century, and he is striving to describe and explain a phenomenon for which "capitalism" is as good a name as any. It's just that "capitalism" is a word we no longer feel much inclined to use. It's the same with "socialism." With the end of the Cold War, these words have come to seem quaint, like "dirigible" or "nylon." No doubt (we feel) the things they name are still around in one form or another; but we choose not to think of them as we once did, as important features to be differentiated out from the general mess of experience, worthy of our concentrated attention. We have moved on. We are all capitalists now, aren't we?

Well, no. The war against economic liberty has indeed changed its nature, but it is as intense as ever. Rather like the Western Front in World War One, it has matured from dramatic movements by great armies (Revolution! Liberation! Welfare State!) to slow attrition: forays by small units probing for weakness, sapping beneath the enemy lines, steady remorseless shelling. It is still a war, though, to be won or lost. Capitalism needs a sturdy defense, and it should come from the Republican party in the present election.

There are different styles of capitalism in different nations, and I don't see any need to defend anything but our own native variety. In his book The Myth of the Robber Barons, Burton Folsom makes a key distinction between market entrepreneurs, who build better mousetraps, and political entrepreneurs, who persuade governments to grant them licenses and subsidies so that they can dominate the mousetrap business. As Folsom points out — and as Bill Gates has recently learned — above the level of petty commerce, any entrepreneur requires some minimum of political skills; yet the distinction is still a good one, and points up the differences in the way capitalism is practiced in various nations. In Asia, for example, every entrepreneur operating above the street-trader level is a political entrepreneur, if not an actual politician; in South America, he is not infrequently a gangster to boot. In France, he had better have been to the right university; in Germany, he must solicit and maintain the approval of existing business leaders. The United States is uniquely hospitable to the true market entrepreneur, not requiring him to possess any particular political, social or educational qualifications at all. This is the nation that has come closest to uncoupling the relationship between power and money. The thing can never be done completely, of course; I say only that we have come closest.

This openness, this ease of access to entrepreneurial success, is one of the antibodies that have kept the United States immune from doctrinaire socialism. When the path to wealth is so unobstructed, people feel less resentful of the wealthy, since wealth is a condition that they or their children can reasonably aspire to. Americans living outside the everyday world of wages and profits sometimes do not grasp this. Following the success of his Sergeant Bilko TV show, in which he played a U.S. Army noncom with a gift for gaming the system, the late Phil Silvers tried a new format. He launched a show in which he was a factory foreman, for ever scheming to outwit his boss. The show was a massive flop because, as Silvers ruefully conceded in his autobiography, Americans regard the owner of a factory as an underdog, struggling for success against obstreperous unions and economic factors beyond his control. They did not care to see an entrepreneur made a fool of by his employees. And this was in 1963, when only one in ten of Americans owned any stocks. Today half of us do; are we less sympathetic to private enterprise now?

This immunity from the socialist virus has kept American capitalism relatively pure, with less political control, less regulation, less interference from politicians. A mainland-Chinese businessman recently explained to me how things go nowadays in the Middle Kingdom: "So long as your business is below a certain size, you're pretty much left alone. But when you get big enough to attract the attention of the authorities, they soon come knocking on your door with their hands out. Like flies to meat they come!" While not entirely free of this form of parasitism — the relationship between Tyson Foods and a certain governor of Arkansas comes to mind — the economic scene in America is freer than in any other significant nation.

Because American capitalism is relatively pure, it is exceptionally successful. I do not need to advertise the tremendous economic might of this country, or the fact that this wealth is entirely a product of private enterprise. General Electric, the most profitable company in the world, is American. So are four and a half of the five biggest companies by revenue: GM, Wal-Mart, Exxon Mobil, Ford, DaimlerChrysler (this last is half German). Now, I would not claim that these are all paragons of entrepreneurial vigor. I have spent much of my adult life working in the offices of large corporations, and I am well aware that bureaucratic sclerosis is by no means a phenomenon found only in the public sector. Still, all these companies are subject to the disciplines of the market; all understand that they must struggle constantly against their internal inefficiencies; and all depend ultimately for their revenues on an appreciation of what people want, at a price people are willing to pay. Furthermore, all understand that with success comes noblesse oblige; all devote some part of their profits to pro bono efforts in education, the arts and social improvement.

The relative purity of American capitalism also has some negative consequences, notably inequality. But Americans tolerate what inequality they have with remarkably little grumbling, understanding, at some level, that it is the price they must pay for their extraordinary liberties and opportunities. There is less class resentment here than anywhere else on earth. There is a market — an electoral market, I mean — for class warfare in the United States, but not a large one, certainly not one that can be turned into a mass movement.

And so the enemy probes, and saps, and shells. Here is Al Gore accepting his party's nomination in Los Angeles last month:

So often, powerful forces and powerful interests stand in your way … I've been there in the fight against the big polluters … It's just wrong to have life and death decisions made by bean-counters at HMOs who don't have a license to pactice medicine … Big tobacco, big oil, the big polluters, the pharmaceutical companies, the HMOs. Sometimes you have to be willing to stand up and say no …

This is, as the Vice President probably knows, an appeal to economic illiteracy. Big oil? When I buy a gallon of gas, 5 to 7 cents of what I pay ends up as profits to the oil company. (Local and federal taxes, by contrast, average 48 cents.) If "big oil" were ordered to reduce its profit margins to zero, would I notice the difference? "Big polluters": the degree of pollution people are willing to endure in return for economic progress differs from place to place. In the third world it is very high indeed; in Texas it is higher than in Vermont. Are the people no longer to have any say in this matter? Are all differences of opinion between our states  — each of which has its own legislature, elected by universal suffrage  — to be annihilated by federal action? Where in our Constitution is such action authorized?

And those "bean-counters at HMOs": are decisions about medical treatment to be taken without any input from accountants? If my doctor recommends that I undergo a $2 million medical procedure, am I to have that procedure by right, regardless of my, or my insurer's, ability to pay? No doubt the laws of supply and demand seem particularly callous in the context of health care; but health care involves payment for goods and services and cannot be insulated from economic reality. Attempts to so insulate it get you something like Britain's National Health Service, with its years-long waiting lists for quite ordinary procedures, and its hospitals run for the benefit not of patients nor even of doctors, but of truculent porters' unions.

What Gore is doing here is probing — picking on industries against which public indignation can easily be turned, then bringing them down like stags pursued by baying hounds. "Big tobacco" already knows all about this; the firearms industry is beginning to find out. It would be some consolation to think that these picking-off expeditions will end with industries whose products can cause harm; but that would be to underestimate the ingenuity of the Left. Getting an inch then demanding a yard is something they are awfully good at. The campaign to encourage a proper and decent tolerance towards homosexuals became, in the twinkling of an eye, a movement to teach the techniques of sodomy to nine-year-olds in public schools. Just so, the demonizing of private enterprise will not end with manufacturers of cigarettes and guns. Powerful forces and powerful interests stand in your way … Translation: your life could be better, fairer, easier, healthier if only those "forces" and "interests" were not sucking up the wealth of the country for themselves. Beneath the veneer of humility and compassion, behind the perfunctory gesture of respect for the private sector ("that drives our economic growth") is our old pal Socialism. Al Gore again: "The power should be in your hands. The future should belong to everyone in this land." Cue Woody Guthrie.

In Congress the Corps of Engineers is busily sapping away. Sen. Tom Harkin's "Fair Pay Act" and Sen. Tom Daschle's "Paycheck Fairness Act" are naked, unapologetic attempts to bring back wage controls, a thing not seriously attempted in this country since World War Two. It is unlikely that either measure will become law in this Congress; but the fact that such things are being proposed at all, and are getting the support of panjandrums like Sen. Ted Kennedy, shows how far the Left now believes it can go. (Clinton has in fact gone further: At an interview with the Seattle press last fall, on the opening day of the WTO meeting, he called for a global minimum wage.)

Meanwhile, behind these legislative tunnelers, the artillery is laying down a steady barrage: the trial lawyers, tirelessly seeking out every vulnerability in every business sector, the regulators and "diversity" ideologues — the David Kesslers and Bill Lann Lees — the environmentalists and NIMBY irregulars, the Hollywood air-heads. Like flies to meat they come. And they all come equipped with seductive arguments: You don't like pollution, do you? But the end of all their schemes, if realized, will not be a cleaner society, or a fairer or healthier one, or a more efficient one. It will be a society orientalized, in which businesspeople will know that the larger part of their time and energy must be given over to currying political favor, a society in which, as the Chinese say, "The rulers can burn whole mountains, but the common people dare not light a lantern."

How should Republicans counterattack? How best to speak out for economic freedom against those who wish to destroy it? How best to offer an unashamed defense of American capitalism? The starting point must some some ground of faith that most citizens understand, or can easily be reminded of, the thing that Phil Silvers did not know: that running a business, small or large, is a desperate daily fight for survival, for market share, for incremental increases in productivity and share value. Time spent dealing with regulators, lawyers, tax-gatherers and rent-seekers is time taken away from that fight. Advancing from that ground, Republicans can:

Economic liberty is not a side-effect of our social system; it is the foundation of it. Private enterprise is only private property at large. As Calvin Coolidge pointed out: "Ultimately, property rights and personal rights are the same thing." Most Americans know this in their hearts; the great economic success of their country proves it to them. It is up to us, the party of capitalism, to remind them of it.