Free Enterprise: a definition; E. Zarbin

Mr. Zarbin is an assistant city editor at the Arizona Republic in Phoenix, Arizona. 334 FREE ENTERPRISE: adefinition EARL ZARBIN I disagree with the definition. It says that private business should be regulated for two rea sons. The first of these is "to pro tect public interest" and the sec ond is to keep "the national econ omy in balance." What is meant by the "public interest"? If the public interest means that government should make its presence known so that robbers, thieves, burglars, and other cheats won't interfere with the peaceful activities of people as they go about their business, then I'm all for government. If the public interest means that government should bring about the peaceful settlement of con tractual disputes in a court sys tem, again I'm for government.

1973 FREE ENTERPRISE: A DEFINITION 335 But if it means, as it has come to mean, that government should determine the wages that should be paid workers, that government should determine the prices of goods and services, that govern ment should set profits, that gov ernment should create and enforce special favors for certain busi nesses, industries, and other groups, then I'm totally opposed to government involvement in the "public interest." Yet, that's what the public interest has come to mean today. The public interest now means whatever the men in power and authority want it to mean. One day in January it was in the pub lic interest to regulate almost all wages, prices, and profits; the next day it was in the public in terest to abandon almost all of these controls. Who can say what the politicians in Washington will decide is in the public interest to morrow? And four years from now, if the Democratic Party suc ceeds to the presidency, will the public interest be different than it is with a president from the Re publican Party?

The Freedom to Choose You'll notice, I 'hope, that the things I believe are in the public interest - protecting people from any who would steal from them and resolving disagreements in the courts - are intended to pre serve the freedom of everyone to act peaceably in his own behalf. On the other hand, the things of which I disapprove - govern ment regulation of wages, prices, and profits - interfere with the freedom of peaceful people to de cide their own business. Individ ual choices and judgments have been replaced by people in govern ment who think they are better able to make such decisions. Of course, I rej ect such notions, be cause no one is better able to de cide what is best for each of us than is the individual himself. The second reason why private business should be regulated, ac cording to Webster's definition, is to "keep the national economy in balance." By what authority was the Federal government given the job of keeping the national econ omy in balance? Is there some statement to this effect in the Constitution? Of course not. And what does "balance" mean? If the economy is in balance today, will it not be in balance tomorrow when a new set of politicians come to power?

Government has no more moral or legal authority to "keep the na tional economy in balance" than it has to act in the "public in terest," beyond protecting life, liberty, and property. Keeping the national economy in balance and 336 THE FREEMAN June determining the public interest, beyond protecting peaceable citi zens, are assumptions of author ity never intended for the Fed eral government by the men who founded this nation. So far as I am concerned, the intention of the Founding Fathers was to provide an opportunity for maximum individual freedom and enterprise through protecting l~fe, liberty, and property. It was left to each person to decide for him self how he was to use his free dom, the sole restraint being that he not harm anyone else. That, I assume, includes not polluting the air we breathe, the water we drink, or the food we eat. In a Competitive System? Now let's take a look at the first part of Webster's definition, that part which says that free enter prise is "freedom of private busi ness to organize and operate for profit in a competitive system ... "

I don't like the way that is stated. The use of the word "in" - lin a competitive system' - sug gests to me that someone specifi cally designed "a competitive sys tem" in which everyone must op erate. It can be said that the writers of the Constitution did es tablish "a competitive system" by their failure to give government a role in the organization of pro duction and the distribution of goods and services. But what I think the Constitution does, in stead, is to establish the condi tions for personal freedom - which includes economic freedom. The Constitution does not de cree the manner in which business is to be conducted. The Constitu tion does not decree a competitive system as such. Rather, the Con stitution allows the people to make their own choices about how they will employ their labor. And a competitive system evolved out of their freedom of choice to com pete with one another.

If the people wanted, it would have been their right, as it is to day, to organize their agricultural and tndustrial activities on a com munal basis. They need not have engaged in competition at all. They might have decided that being their brother's keeper - that di viding what they produced into equal shares for all, regardless of their efforts - is what they want ed. Some few of them even tried this, just as we have some few trying it today. But they tried it in freedom. They tried it as a matter of the right to decide for themselves. Those who decided against the communal existence had to accept the challenge of the only available alternative: compet ing in the market place against all others who go there. That's why I can't accept that 1973 FREE ENTERPRISE: A DEFINITION 337 free enterprise is "freedom of private business to organize and operate for profit in a competitive system . . ." If the people, in their freedom, had chosen not to compete, they didn't have to. If the people, in their freedom, had chosen to divide equally what they produced, the word profit might convey a meaning different than it does today. If the people, in their freedom, had chosen not to compete, we might think today more in terms of communal busi ness than of private business.

forced into Socialism Perhaps there are exceptions, but for most people I doubt that they voluntarily go into communal or socialist businesses. In coun tries like Russia, China, Cuba, and Czechoslovakia, the people are forced into socialist enterprises by their governments. If these peoples were given their freedom, I have no doubt that they would quickly return to private business and that the productivity of their nations would quicken. They would return to private business and competition, because this is the way of human nature. Given their freedom, people will work to improve their personal situations. In doing this, so long as what they do is peaceful, they cannot help at the same time improving the conditions of everyone else. Competition, or a competitive system, is the result of freedom; no government has to decree it. It evolves of its own accord in the nature of men and women and what they do when they feel se cure in their lives, their liberty, and their property.

Now I am ready to offer my own definition of free enterprise. I believe free enterprise is the name given to an economic sys tem that developed naturally out of the freedom of individuals to decide for themselves how to use their time and resources. In that economic system, the means of financing, designing, producing, exchanging, delivering, and serv icing products are always subject to change, with the character of any change depending solely upon the ingenuity of the owners of the means of production. In free en terprise, government's role should be limited to policing the market place. Entry into the market place should be unrestricted. Govern ment should not be in the busi ness of granting favors to any one, such as tax breaks, subsidies, tariffs, franchises, and monopo lies. A Hodgepodge of Intervention From what I have said, it should be very plain that we do not have free enterprise in these United States. Our economic sys338 THE FREEMAN June tern is a hodgepodge of govern ment rules and regulations which benefit some people at the expense of others.

If government regulates our economic life, there is nothing to prevent it from regulating every other area of our existence. Eco nomic activity, basically, consists of the things that people do to stay alive. Economic freedom means the right that each of us should have to decide how he is going to earn his daily bread. The only restriction, as I said before, is that one not interfere with the rights of others. If our economic system is not based on freedom, if we are re strained in our economic activities to what government directs or per mits us to do, then we are not free. If we criticize, government might one day cut off our job, or we might be sent to a mental in stitution for rehabilitation, or we might be sentenced to a slave-la bor camp. In these United States govern ment has come to control, through the passage of laws and through the decrees of various regulatory bodies, the economic decisions that should be left to the owners of private property. Besides this, through the power to tax, govern ment can destroy any business or enterprise.

The Press Is Vulnerable Freedom of the press is espe cially vulnerable.N 0 publisher can exist unless he is a successful businessman, or unless someone is subsidizing him. In either case, he can publish only as long as he pleases the people paying the bills. Free speech is more difficult to destroy or deny, because speech is just that. But press freedom de pends upon the printed word, which means paper, ink, and print ing presses. All of these are prod ucts of economic acti vity and, as a consequence, so is freedom of the press. If our economic system were based on freedom, which means free enterprise, we could be cer tain that we always would have freedom of the press. But if we persist in making government our master, the day will come when government will control us in ev erything except our private thoughts. I) IDEAS ON LIBERTY James Madison MEASURES are too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and over-bearing majority.

From The Federalist Papers #10 HENRY HAZLITT ____ FREE ENTERPRISE? NINE-TENTHS of what is written today on economic questions is either an implied or explicit at tack on capitalism. The attacks are occasionally answered. But none of the answers, even when they are heard, are ever accepted as conclusive. The attacks keep com ing, keep multiplying. You cannot pick up your daily newspaper with out encountering half a dozen. The sporadic answers are lost in the torrent of accusation. The charges or implied charges outnumber the rebuttals ten to one. What is wrong? Does capital ism, after all, have an indefens ible case? Have its champions been not only hopelessly outnumbered but hopelessly outargued? We can hardly think so if we re call only a few of the great minds that have undertaken the task of defense, directly or indirectly, in the past - Hume, Adam Smith, Ricardo, Malthus, Bastiat, Senior, Boehm-Bawerk, John Bates Clark; or of the fine minds that have un dertaken it in our day - Ludwig von Mises, F. A. Hayek, Milton Friedman, Murray Rothbard, Hans Sennholz, Israel Kirzner, David McCord Wright, and so many others.