While Arthur C. Brooks was Professor of Business and Government Policy at Syracuse University he wrote Who Really Cares and Gross National Happiness—books I’ve favorably reviewed in the past. Now he is president of the American Enterprise Institute for Public Policy Research and recently released The Battle: How the Fight Between FREE ENTERPRISE and BIG GOVERNMENT Will Shape America’s Future (New York: Basic Books, c. 2010), a brief treatise eminently worth pondering. In a profound way the book strongly reaffirms the message of the Liberty Bell—a phrase taken from Lev. 25:10—“proclaim liberty throughout the land.”
Though today’s “culture war” appears to be primarily economic and political it is actually quite philosophical, involving “a struggle between two competing visions of America’s future. In one, America will continue to be a unique and exceptional nation organized around the principles of free enterprise. In the other, America will move toward European-style statism grounded in expanding bureaucracies, increasing income redistribution, and government-controlled corporations. These competing visions are not reconcilable: We must choose” (p. 1). For himself, Brooks chooses free enterprise—“the system of values and laws that respects private property, encourages industry, celebrates liberty, limits government, and creates individual opportunity” (p. 3) that certainly characterized this nation in its formative years.
America’s founders, after all, waged a war of independence to escape onerous taxation. “Give me liberty or give me death,” said Patrick Henry. “‘They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety,’ declared Benjamin Franklin” (p. 3). Furthermore, said Thomas Jefferson: “‘To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it’” (p. 4). And James Madison asserted that “the ‘first object of government is the protection of different and unequal faculties of acquiring property’” (p. 104). Uniquely this “land of our fathers” has been a land of liberty—affording the freedom to live free from either tyrannical control or paternalistic care.
Attuned to this nation’s tradition, free enterprise retains widespread popular support. Brooks insists that at least 70 percent of the American people prefer free enterprise capitalism to various versions of centralized state socialism. The other 30 percent, however, form a powerful coalition “led by people who are smart, powerful, and strategic” (p. 13). They are the university professors and Hollywood celebrities, the journalists and judges—the “intellectual upper class: those in the top 5 percent of the population in income, who hold graduate degrees, and work in intellectual industries such as law, education, journalism, and entertainment” (p. 13). The 30 percent coalition emerged in FDR’s New Deal, and President “Obama wants to finish the job by turning it into a permanent ruling majority” (p. 66).
“America is a 70-30 nation in favor of free enterprise. Yet the 30 percent coalition is firmly in charge” (p. 27). The reason is simple: the financial crisis in 2008 enabled the elite minority (personified by Barack Obama) to take control of the country and orchestrate sweeping “change.” No expenditures were considered inordinate, and within two months “the U.S. government and the Federal Reserve had spent, lent, or pledged some $12.8 trillion of America’s future prosperity. It was an enormous amount, rivaling the value of everything produced in the U.S. economy in 2008” (p. 32). All this was demanded, Obama intoned, because the George Bush administration and Wall Street had failed to rightly regulate markets and curb capitalism’s excesses.
“Unfortunately for America,” Brooks says, “the Obama Narrative is wrong on every point” (p. 35). Government (not business) and politicians (not bankers) actually caused the 2008 financial crisis. “The government’s failure is most blatant in the implosion of Fannie Mae and Freddie Mac. Through these two government-sponsored enterprises (GSEs), politicians pulled off some of their most dramatic, and costly efforts at social engineering. At the same time, they enriched their political campaigns. And in the process, they perverted the most basic rules of the free enterprise system” (p. 36). The collapse of the housing market sparked the financial collapse, and the housing market collapsed because ideologues like Barney Frank and Chris Dodd “sparked the fire that burned down our financial system” (p. 41).
Trusting politicians such as Barney Frank to resolve the recession they helped cause is, of course, ludicrous. But the Obama Narrative insists we do precisely that—as was evident in the bill recently passed to regulate Wall Street. Still more: the president insists we can “spend our way out of this recession” and continually calls for bail-outs and subsidies of various sorts. Unfortunately, “attempts to shore up the economy with massive public spending have done little to improve matters and have served primarily to chain future generations with debt” (p. 55). Unemployment persists and the GDP stalls amidst profligate government spending!
Many big government devotees pursue their agenda fueled by faith that they are providing “happiness” for the masses. They imagine that we all crave equality, so giving everyone the same amount of money or entitlements or assets will make everyone equally happy. As philosophical materialists they fail to understand “that the secret to human flourishing is not money but earned success in life” (p. 71). Unearned income—welfare in various guises—is especially pernicious, almost guaranteeing unhappiness! Only “earned success”—often attained in non-monetary realms—satisfies the soul. This necessarily follows: “If money without earned success does not bring happiness, then redistributing money won’t make for a happier America” (p. 81). A truly good government, then, does not dole out goods but grants the freedom to pursue the happiness that only comes through earned success.
Unfortunately, Brooks acknowledges, advocates of free enterprise such as himself too often rely on strictly economic rather than ethical categories. But, he argues, though “we often use the language of commerce and business, what we really believe in is human flourishing and happiness. We must articulate a set of moral principles that set forth our fundamental values and principles” (p. 97). Importantly, this “is the first and most important of these moral principles: The purpose of free enterprise is human flourishing, not materialism” (p. 97). Added to this are four subsidiary principles: 2) seek equal opportunity, “not equality of income;” 3) promote prosperity rather than alleviate poverty; 4) celebrate America as “a gift to the world;” and 5) commit to ethical principles, “not political power” (p. 103). If such principles are clearly explained and vigorously defended, Brooks believes, the battle can be won.
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Angelo M. Codevilla, professor emeritus of international relations at Boston University, shares Brooks’ conviction that there is a “battle” raging in America that will determine the nation’s destiny. He discerns a class conflict dividing America, but it is not the one Marx envisioned; it is essentially moral rather than economic, spiritual rather than material. In The Ruling Class: How They Corrupted America and What We Can Do About It (New York: Beaufort Books, c. 2010) Codevilla sets forth “the massive fact that underlies all these issues and makes each a battlefield on which vie partisans of radically different Americas” (p. xv). The battling partisans are the Ruling Class and the Country Class, and they are waging a Kulturkampf involving marriage and family, sexual orientation and values, as well as political and economic questions.
The Ruling Class congealed as the 19th century closed, embracing Progressivism as its ideology, confident “that because man is a mere part of evolutionary nature, man could be improved, and that they, the most highly evolved of all, were the improvers” (p. 17). Professionals—educated experts—needed to orchestrate the development of the modern industrial state. Progressive leaders, generally upper class intellectuals such as Woodrow Wilson, “imagined themselves to be the world’s examples and the world’s reformers dreamed big dreams of establishing order, justice, and peace at home and abroad” (p. 17). They favored “making the world safe for democracy” abroad and social reform (e.g. a graduated income tax and women’s suffrage and prohibition) at home. Doing so, as Wilson recognized, meant the government must expand beyond the clear limits of the Constitution, envisioning a “‘living’ Constitution that does not so much restrict government as it confers ‘positive rights’—meaning charters of government power. Thus they slowly buried eighteenth-century words with twentieth-century practice” (p. 37).
With Franklin D. Roosevelt’s New Deal progressives gained firm control of the federal government and determined to further Wilson’s agenda and fundamentally change the nation. In short order, Codevilla declares: “The America described in civics books—in which no one could be convicted or fined except by a jury of his peers for having violated laws passed by elected representatives—started disappearing when the New Deal inaugurated today’s administrative state, in which bureaucrats make, enforce, and adjudicate nearly all the rules” (p. 41). Illustrating the culmination of this process was Speaker of the House Nancy Pelosi who, in 2010, when asked were the Constitution permits the federal government to “force every American to purchase health insurance . . . replied: ‘Are you kidding? Are you kidding?’ It’s no surprise, then, that lower court judges and bureaucrats take liberties with laws, regulations, and contracts” (p. 45).
Our Ruling Class (whether Republican or Democrat), Codevilla insists, “does not like the rest of America” (p. 25). Rather, they look down on ordinary folks. Certainly they pity—feel “compassion” for—their inferiors. But they find the masses too backward and ignorant and religious—too enamored of God and guns and heterosexuality—to know what’s really good for them. He cites an illuminating anecdote from Mikhail Gorbachev, who recalled “that in 1987, then-Vice President George H. W. Bush distanced himself from his own administration by telling Gorbachev, ‘Reagan is a conservative, an extreme conservative. All the dummies and blockheads are with him.’ This,” Codevilla concludes, “is all about a class of Americans distinguishing itself from its inferiors” (p. 25). These inferior folks need to be led (or coerced) by their betters through the mechanism of a strong, centralized government. Dexterously pulling the strings of power (as Aristotle feared would transpire in democracies), our rulers transfer “money or jobs or privileges—civic as well as economic”—to themselves and their favored special interest groups (p. 28). One aspect of this is the “crony capitalism” evident in the close alliance between politicians and financial institutions. A Republican administration rescued Bear Stearns in 2008 and a Democrat administration did the same for auto industry labor unions in 2009. “The regulators and the regulated become indistinguishable, and they prosper together because they have the power to restrict the public’s choices in ways that channel money to themselves and their political supporters” (p. 31).
Battling the Ruling Class is a Country Class that resents the “ever-higher taxes and expanding government, subsidizing political favorites, social engineering, approval of abortion, etc.” (p. 52). It’s distinguished by a commitment to “marriage, children, and religious practice” (p. 53). Individuals, not officials, should make decisions regarding what constitutes the good life, and churches, not bureaucracies, should determine ultimate truths. The Country Class believes in self-government and shares Thomas Jefferson’s notion that “good government” never takes “‘from the mouth of labor the bread it has earned’” (p. 69). Codevilla obviously sides with the Country Class and concludes his essay with practical suggestions regarding battle strategies—reducing taxes, returning schools to local control, restoring citizens to their rightful place in the republic, etc.
Though Codevilla’s essay blends jeremiad with manifesto, it makes clear some of the major issues in America and provides a helpful analysis of underlying aspects of our very real Kulturkampf. As the distinguished political author of The Almanac of American Politics, Michael Barone, says: “Angelo Codevilla puts into words what has been troubling an increasing number of Americans about our politics and our government. It’s a cri de coeur that needs to be read by anyone trying to understand what’s happening in public life in America today.”
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Whereas Anthony Codevilla and Arthur Brooks write for ordinary folks, a decade ago the celebrated Peruvian economist Hernando de Soto brought a related message to a more scholarly audience in The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, c. 2000). Prosperity obviously accompanies capitalistic economic systems, but these have only thrived in the West. Capitalism, despite well-intentioned efforts, doesn’t easily transplant. Since people work hard and save money everywhere, one wonders why this is so. “In this book,” he says, to answer the question, “I intend to demonstrate that the major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital” (p. 5). Capital is produced only when property rights are legally secured. Impoverished peoples have lots of “things, but they lack the process to represent their property and create capital. They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation” (pp. 6-7). They have lots of personal assets but not the representational system—formal property—necessary to exploit them. “Formal property,” de Soto says, “is more than a system for titling, recording and mapping assets—it is an instrument of thought, representing assets in such a way that people’s minds can work on them to generate surplus value. That is why formal property must be universally accessible: to bring everyone into one social contract where they can cooperate to raise society’s productivity” (p. 218).
To explain this situation de Soto explores the five “mysteries” of capital that structure his book. First there is “the mystery of missing information.” Allegedly impoverished people in Third World and formerly Communist countries are not, he insists, materially impoverished! “The poor have already taken control of vast quantities of real estate and production” (p. 30). They may live in shacks in dismal slums, but they have cell phones and TVs and state-of-the-art tools. This fact never appears in international agencies’ (or humanitarian and religious organizations’) reports (which continually stress distress) because it is not reported. It cannot be reported because these possessions have no legal standing, and the poor are forced to rely on informal ownership pacts and operate outside the law. “They have trillions of dollars in dead capital, but it is as if these were isolated ponds whose waters disappear into a sterile strip of sand, instead of forming a mighty mass of water that can be captured in one unified property system and given the form required to produce capital” (p. 210).
Secondly, there is “the mystery of capital.” Just as Ludwig Wittgenstein recognized that “the sense of the world must lie outside the world,” so too the meaning of capital is found outside the physical world in an immaterial, symbolic realm wherein people can “grasp with the mind values that human eyes could never see and to manipulate things that hands could never touch” (p. 63). Capital must be differentiated from money, which merely facilitates commerce. Capital comes when property, legally secured with written contracts, deeds etc., is used to creatively envision and develop resources. “The moment you focus your attention on the title of a house, for example, and not on the house itself, you have automatically stepped from the material world into the conceptual universe where capital lives” (p. 50).
Thirdly, de Soto deals with “the mystery of political awareness.” Around the world people are flocking from rural to urban areas, determined to prosper (whether illegally or legally) by entering the world marketplace. Unfortunately the legal structures in many countries hamper their entrepreneurial endeavors. Consequently, “people are spontaneously organizing themselves into separate, extralegal groups until government can provide them with one legal property system” (p. 73). Without the security of legal protection they are limited to a relatively small circle of trusted trading partners. Any significant division of labor and its resultant prosperity is denied them.
Fourthly, we should study “the missing lessons of U.S. history,” because 150 years ago the U.S. was a “Third World” country that rapidly developed and prospered. In the New World, particularly on the western frontier, many European systems (notably England’s common law) dissolved as squatters and settlers and miners and claims associations simply took and held desirable lands. “Squatters began inventing their own species of extralegal property titles known as ‘tomahawk rights,’ ‘cabin rights,’ and ‘corn rights’” (p. 116). In time these frontiersmen petitioned and pressured politicians to grant them suitable legal titles. Soon there developed a “legal innovation” known as “‘preemption’—a principle that would be the key to the integration of extralegal property arrangements in American law over the next two hundred years” (p. 120). During the 19th century, especially, laws were adapted to the peoples’ needs and the modern American system, strongly defending property rights, emerged. In de Soto’s judgment, “the American experience is very much like what is going on today in Third World and former communist countries: The official law has not been able to keep up with popular initiative, and government has lost control” (p. 149). When and if (and only when and if) property rights are secure, we can expect dynamic developments around the world.
So basically the poverty problem is a legal problem. Infinite amounts of “aid” (whether governmental or private) will hardly heal the endemic abscesses of poverty. “Without an integrated formal property system, a modern market economy is inconceivable” (p. 164). Equally important is the elimination of ponderous bureaucratic procedures and self-serving lawyers defending the status quo that severely limit the abilities of industrious individuals to build their own homes and launch small businesses. For example, in Lima, Peru it takes “728 bureaucratic steps” to “acquire legal title to a home” (p. 191)! To provide entree to the modern economy what’s needed is leaders such as Thomas Jefferson, who “increased the fungibility of property by abolishing, among other things, the practice of entail (not being able to transfer property outside the family)” (p. 188). Such leaders, de Soto emphasizes, must “do at least three specific things: take the perspective of the poor, co-opt the elite, and deal with the legal and technical bureaucracies that are the bell jar’s current custodians” (p. 190).
To Margaret Thatcher, “The Mystery of Capital has the potential to create a new, enormously beneficial revolution, for it addresses the single greatest source of failure in the Third World and the ex-communist countries—the lack of a rule of law that upholds private property and provides a framework for enterprise. It should be compulsory reading for all in charge of the ‘wealth of nations.’” She knew whereof she spoke, and little more needs saying to endorse this book.