(Originally Published in the Monadnock Ledger Transcript)
Our first columns discussed the privileges and responsibilities of freedom as they pertain to us as individuals. This time we will look at the importance of freedom to our economic prosperity.
America’s world leading economy is powered by the engine of free enterprise. In our system, anyone with a bright idea and a healthy ambition can start a business. Over the years, enterprising Americans have built many of the world’s great companies, and the creative process continues as entrepreneurial managers dream up new and better products and services. For our country as a whole, successful growing businesses generate employment, pay taxes and keep our economy competitive in the global arena. For business owners, success brings financial rewards and great personal pride.
Of course, starting and operating a business large or small requires capital and that’s where investors and lenders come in; without them, few businesses would ever get off the ground. Though it is fashionable right now in some quarters to vilify bankers and investors, the financial sector plays an indispensable role in keeping our economy functioning and growing. Current attempts to address flaws in the financial system must be undertaken carefully so as not to interfere with the parts that work well.
Everyone who starts a new business, and everyone who invests or lends to it, does so in the hope and expectation that it will succeed. But success is never guaranteed: competition, changes in consumer preferences, or bad management can sink companies new and old. The risks of business failure and investment loss are facts of life in the free enterprise system and trying to avoid them keeps managers and investors on their toes. While no one likes to see a business fail, especially the employees who will lose their jobs, it is a mistake for government to step in to “save” bankrupt companies. Bailouts distort the self-correcting functions of our system and create the impression that neither managers nor investors need worry too much about risk, because they will be rescued.
Likewise, creating employment through government programs is a false promise. Government jobs are paid for by taxing the private economy, whether through corporate or individual income taxes. Robbing Peter to pay Paul does not add value to the economy and in the end, as amply demonstrated by Greece, is unsustainable.
Government does have a role in promoting a healthy private economy and that is to maintain a regulatory and tax climate that encourages free enterprise and to avoid the temptation to try to control market functions. The heavier the hand of government regulation and the burden of taxes, the more difficult it is for companies to act nimbly in an intensely competitive global market place. In today’s world, both businesses and workers are highly mobile; they can and will migrate to those states or countries where the conditions are most conducive to their success.
Republicans have long been known as strong supporters of the free enterprise system that underpins our economic health. Sometimes Republican advocacy of free enterprise must be expressed as opposition to government policies and regulations that would hamstring the competitive advantages our private sector. Opponents may try to portray this negatively, especially now when the economy is in recession, but the Republican motive is to get the economy growing and keep it growing. Now is not the time to lose faith in the engine that has powered America’s preeminent prosperity; now is the time to step on the accelerator.
John M. Lord, Jr.
May 9, 2010