Whatever Happened to Free Enterprise? by Ronald Reagan

Whatever Happened to Free Enterprise?

by Ronald Reagan, Fortieth President of the United States

The following is excerpted from a speech delivered on November 10, 1977, on the Hillsdale College campus as part of the Ludwig von Mises Lecture Series. Originally published in Imprimis in January 1978, the speech was reprinted in Educating for Liberty: The Best of Imprimis, 1972-2002 (Hillsdale College Press, 2002).

Government, by going outside its proper province, has caused many, if not most, of the problems that vex us.

How much are we to blame for what has happened? Beginning with the traumatic experience of the Great Depression, we the people have turned more and more to government for answers that government has neither the right nor the capacity to provide. Unfortunately, government as an institution always tends to increase in size and power, and so government attempted to provide the answers.

The result is a fourth branch of government added to the traditional three of executive, legislative and judicial: a vast federal bureaucracy that is now being imitated in too many states and too many cities, a bureaucracy of enormous power which determines policy to a greater extent than any of us realize, very possibly to a greater extent than our own elected representatives. And it can’t be removed from office by our votes.

More than anything else, a new political economic mythology, widely believed by too many people, has increased government’s ability to interfere as it does in the marketplace. Profit is a dirty word, blamed for most of our social ills. In the interest of something called consumerism, free enterprise is becoming far less free. Property rights are being reduced, and even eliminated, in the name of environmental protection. It is time that a voice be raised on behalf of the 73 million independent wage earners in this country, pointing out that profit, property rights, and freedom are inseparable, and you cannot have the third unless you continue to be entitled to the first two.

Even many of us who believe in free enterprise have fallen into the habit of saying when something goes wrong: “There ought to be a law.” Sometimes I think there ought to be a law against saying that there ought to be a law.In spite of all the evidence that points to the free market as the most efficient system, we continue down a road that is bearing out the prophecy of Tocqueville, a Frenchman who came here 130 years ago. He was attracted by the miracle that was America. Think of it: Our country was only 70 years old and already we had achieved such a miraculous living standard, such productivity and prosperity, that the rest of the world was amazed. So he came here and he looked at everything he could see in our country, trying to find the secret of our success, and then went back and wrote a book about it. Even then, 130 years ago, he saw signs prompting him to warn us that if we weren’t constantly on the guard, we would find ourselves covered by a network of regulations controlling every activity. He said if that came to pass we would one day find ourselves a nation of timid animals with government the shepherd.

It all comes down to this basic premise: If you lose your economic freedom, you lose your political freedom and, in fact, all freedom. Freedom is something that cannot be passed on genetically. It is never more than one generation away from extinction. Every generation has to learn how to protect and defend it. Once freedom is gone, it is gone for a long, long time. Already, too many of us, particularly those in business and industry, have chosen to switch rather than fight.

We should take inventory and see how many things we can do ourselves that we have come to believe only a government can do.

The most dangerous myth is that business can be made to pay a larger share of taxes, thus relieving the individual. Politicians preaching this are either deliberately dishonest or economically illiterate, and either one should scare us. Business doesn’t pay taxes, and who better than business could make this message known? Only people pay taxes, and people pay as consumers every tax that is assessed against a business. Passing along their tax costs is the only way businesses can make a profit and stay in operation.

The federal government has used its taxing power to redistribute earnings to achieve a variety of social reforms. Politicians love those indirect business taxes, because it hides the cost of government. During the New Deal days, an undersecretary of the treasury wrote a book in which he said that taxes can serve a higher purpose than just raising revenue. He said they could be an instrument of social and economic control to redistribute wealth and income and to penalize industries and economic groups. We need to put an end to that kind of thinking.

To win this battle against Big Government, we must communicate with each other. We must support the doctor in his fight against socialized medicine, the oil industry in its fight against crippling controls and repressive taxes, and the farmer, who hurts more than most because of government harassment and rule-changing in the middle of the game. All of these issues concern each one of us, regardless of what our trade or profession may be. Corporate America must begin to realize that it has allies in the independent businessmen and women, the shopkeepers, the craftsmen, the farmers and the professions. All these men and women are organized in a great variety of ways, but right now we only talk in our own organizations about our own problems. What we need is a liaison between these organizations to realize how much strength we as a people still have if we will use that strength.

We have had enough of sideline kibitzers telling us the system they themselves have disrupted with their social tinkering can be improved or saved if we will only have more of that tinkering or even government planning and management. They play fast and loose with a system that for 200 years made us the light of the world and the refuge for people all over the world who yearn to breathe free. It is time we recognized that the system, no matter what our problems are, has never failed us once. Every time we have failed the system, usually by lacking faith in it, usually by saying that we have to change and do something else. A Supreme Court Justice has said the time has come, is indeed long overdue, for the wisdom, ingenuity, and resources of American business to be marshaled against those who would destroy it.

What specifically should be done? The first essential for the businessman is to confront the problem as a primary responsibility of corporate management. It has been said that history is the patter of silken slippers descending the stairs and the thunder of hobnail boots coming up. Back through the years we have seen people fleeing the thunder of those boots to seek refuge in this land. Now too many of them have seen the signs, signs that were ignored in their homeland before the end came, appearing here. They wonder if they will have to flee again. But they know there is no place to run to. Will we, before it is too late, use the vitality and the magic of the marketplace to save this way of life, or will we one day face our children, and our children’s children, when they ask us where we were and what we were doing on the day that freedom was lost?

Reprinted by permission from Imprimis, a publication of Hillsdale College.