This is the Fundamental Philosophy Underlying a Free Enterprise/Market Economy (AKA, Capitalism)
Forty years ago I commissioned this sculpture and wrote this short pamphlet to explain:
Free Enterprise: Freedom’s Final Frontier
It is a short read (8 minutes) and is located on our website here. The opening paragraph reads:
“We are, and of right ought to be, free. We are the possessors of our own life and it is this ownership of our being which gives us a right to be free- free to pursue our own ends for our own sake, and free to keep the fruits of our labor, whatever they may be. This, then, is the cornerstone and fundamental justification of the free enterprise economic system. Individual freedom and the free enterprise system are inexorably interdependent. If you lose either, you lose them both.”
It was true then, it is true today, and it will always be true. And it is simply a statement of the underlying philosophy for an economic system that believes the individual is supreme. This is ‘natural law’ so aptly described by John Locke in his classic work, Two Treatises of Government. We have the right to our life and property and what we earn. We expect others to respect our rights. If our rights are to be respected, then it holds true that other people’s rights must be respected as well. That is the hallmark of a ‘civilized society’. We are free to do as we please in a civilized world, so long as we do not violate the rights of others. This is the basis for the quote noted above.
The alternate economic system is Socialism, which holds the fundamental belief that the State is supreme. The individual is subservient to the state as opposed to the state being subservient to the individual. When the state is supreme, individual incentives are destroyed. Without individual incentives people have little motivation to innovate, create and generate value, and so there is little progress and eventually the system fails.
Most of the Western world does believe that the individual is supreme. When political systems are structured to reflect this belief, and we have freedom, we are incentivized to work and improve our lives. This was discussed in No Spin # 167, The Iron Law of Economics. This philosophy and the economic system that flows from it has led to the greatest improvement in our standard of living and works for the betterment of mankind.
Socialism is predicated on the state controlling people and the economy, embracing the ideal that ‘from each according to their ability, to each according to their need’. This robs individuals of their rights and destroys their incentive to create value. It does not work, and has never worked. Any objective examination of history or current world examples will prove this. There are no examples where this economic system has worked for the betterment of mankind.
“We are not entitled, we must earn”. This is a core belief in a free enterprise system, as expressed in the pamphlet. Since we are free to earn and keep our earnings, we are motivated to improve our lot – and as a by-product, everybody in such a society is better off. This is simply human nature at work.
BOTTOM LINE
Psychology 101 tells us all we need to know. We will do what we perceive to be in our best interest.
In a free enterprise/market economy we are free to keep the fruits of our labor. That provides the incentives for us to work to benefit ourselves and our family. This works well because we only benefit when we produce products that others want and will buy. This results in a growing economy for all.
In a socialist economy people get a ‘communal’ share of output regardless of effort. Since we get the same regardless of effort, there is the negative incentive to do as little as possible. This has never worked and will never work because the incentives are backwards.
This is illustrated perfectly by the story of what happened to the Pilgrims after they arrived in America and tried their initial experiment with communal farming. Take 2 minutes to read what happened to them in an article I wrote several years ago at this link: FREE ENTERPRISE/MARKET SYSTEM, SOCIALISM.
LEARN ECONOMICS, THEN VOTE SMART
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