Free enterprise is the American Way
North Carolina is one of our country’s economic powerhouses. Blessed with a favorable business climate and a creative, hard-working population, our state is home to many thriving companies that export goods and services all over the world.
Trade is integral to our economy. Most North Carolinians, like most Americans, generally favor free trade. But a sizable minority do not — and they tend to care more about trade policy than the average voter does, as do special-interest groups seeking government protection. That’s how we end up saddled with costly tariffs (i.e. taxes) and regulations.
In his well-timed new book The Next American Economy, Samuel Gregg seeks to explain this dynamic and how best to respond to it. He both explicates and updates Adam Smith’s classic work The Wealth of Nations, which famously argued that the true source of a country’s prosperity isn’t its natural resources or stock of precious metals. It’s the productive capacity of the people — and the strength of the public and private institutions that encourage and channel it.
Like The Wealth of Nations, Gregg’s new book is no economics textbook. It’s a work of political economy. Both legs of that discipline get a strenuous workout here.
The economic case for free enterprise is solid. It drives innovation, which in turn drives growth. It boosts our standard of living both by increasing our opportunities to employ our labor effectively and by driving down the cost of goods and services we consume.
As the scope of enterprise extends beyond national borders, these benefits broaden and deepen. American companies and workers gain new export markets. American households gain new consumer options and pocket significant savings from lower prices. Yes, some domestic industries prove unequal to the challenge and must retool to stay competitive. Some find that impossible and go under. But the direct and indirect costs of protecting them from competition are far greater than any gains for society as a whole. So the best way to help such displaced workers is to foster a robust market for education, training, and employment opportunities elsewhere so they can be gainfully reemployed.
All true — and woefully insufficient as a case for free enterprise, Gregg argues. The political side of the equation deserves more attention. “Americans are not simply economic beings,” he writes, “and America is more than an economy.”
You typically hear critics of free enterprise make that point, right before they propose high tariffs, central planning, or other big-government policies intended to ameliorate what they see as the ill effects of robust international trade, inadequate public investment, and unregulated capitalism.
To respond effectively to these critics’ diagnoses and prescribed remedies, Gregg recommends we draw deeply from the intellectual well of the American experiment itself. When George Washington, Alexander Hamilton, James Madison, and other Founders helped establish our new country and then defended the resulting political and civic institutions in works such as The Federalist Papers, the republican vision they articulated was that of “a great, a respectable, and a commercial nation,” as Washington put it in a 1788 letter.
In their wisdom, the Founders implemented a huge common market across the original American states, then extended it westward as the country grew. They also advocated and gradually implemented a broader system of trade with the rest of the Americas, Europe, and the Far East. Their goal wasn’t simply to enrich a few planters, manufacturers, and merchants. It was to build, as Washington explained in his Farewell Address, “a free, enlightened, and at no distant period, a great nation.”
If there is any hope of defending limited government and free enterprise in America against their many adversaries, it lies in reminding Americans that it’s not just our national prosperity but our national power and character that are at stake.
Gregg urges us to embrace “a political economy characterized by hope” and a cheery confidence in “the American way of liberty and virtue.” Need a hope-and-confidence booster shot? Read The Next American Economy.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history.