The Road to Freedom Page 2

  In the last days of 2010, few people had ever heard of Mohamed Bouazizi. He was just a twenty-six-year-old street vendor in the Tunisian town of Sidi Bouzid who sold vegetables, as he had done since the age of ten. Each day, he would buy vegetables at the supermarket, load them into his wooden cart, and push the cart two kilometers to the city where he would sell them to passersby.15

  The local people knew and liked Bouazizi because, despite his own poverty, he gave free vegetables to families who were even poorer than his own. The trouble he had was with the police, who made his life miserable. They constantly harassed and bullied him—regularly confiscating his produce and scales, humiliating him in public, and fining him for various arbitrary offenses against the bureaucratic codes that governed commercial life in Tunisia.

  On December 17, 2010, a policewoman stopped Bouazizi on his way to the market—par for the course for the past sixteen years of his life. She demanded that he give her his scale. On this day, for some reason, Bouazizi decided he had had enough—and he refused. Shocked by his insubordination, the police officer slapped him and called in reinforcements who pushed him to the ground. In a show of raw power intended to crush his will, they took away not just his scale but all his merchandise as well.

  Bouazizi walked to the city hall and asked to meet with an official for recourse. He was denied even a meeting. What came next shocked the world. Bouazizi went to a local store, bought a can of paint thinner, and returned to the street in front of city hall. He soaked himself in fuel and set himself on fire. He died eighteen days later.

  The fire that burned Bouazizi to death ignited the Tunisian revolution. Tunisians rose up against the police, the kleptocratic bureaucrats, and the president who had given them license to crush honest men like Bouazizi. Within a month, they had scattered the police and arrested the president.

  The story of Mohamed Bouazizi is not primarily economic; it is moral. Bouazizi didn’t set himself on fire because he wanted to make more money. He did so to make a point about his right to live his life and take care of his family, free from arbitrary harassment. The Tunisian people rose up in moral revolt. The policewoman, the government officials of Tunisia, and their corrupt president were morally degenerate, and revolution was what they deserved. Although the initial dispute was over commerce, it was not money that inspired the uprising. Indeed, the rebels’ slogan was “dignity before bread!”

  Around the world, it is the moral case, not an economic one, that leads people to take risks for freedom. The collapse of the Soviet Union was not due to the arms race or ruinous economic planning, as many in the West believe. It was the outcome of a moral belief that swept through the population and eventually penetrated the Soviet leadership itself. Premier Mikhail Gorbachev declared glasnost (openness) and democratization to be the foundation of his perestroika (restructuring) of Soviet society. “A new moral atmosphere is taking shape in the country,” he declared. “A reappraisal of values and their creative rethinking is under way.” For Gorbachev, this was not a pragmatic policy to maximize incomes and outputs; he called it his “moral position.”16

  In American politics and public policy, the same has always held true. Advances in the cause of freedom and free enterprise—while less dramatic than the collapse of communism—have succeeded when advocates have made a compelling moral case for it.

  Consider the Reagan revolution of the 1980s. Ronald Reagan came into office with a landslide victory over Jimmy Carter in 1980, after Carter’s deeply unpopular handling of virtually all areas of policy, from economics to national defense. Central to Reagan’s victory was his celebration of free enterprise as a moral system— not simply a financial one. In his words, “The responsibility of freedom presses us towards higher knowledge and, I believe, moral and spiritual greatness. Through lower taxes and smaller government, government has its ways of freeing people’s spirits. But only we, each of us, can let the spirit soar against our own individual standards. Excellence is what makes freedom ring.”17

  In the 1990s, welfare reform was likewise achieved through moral argument. The American welfare system had expanded enormously in the post–World War II period, largely directing financial and other support to fatherless families in poverty. Critics of the system argued that in addition to costing taxpayers hundreds of millions of dollars a year, generations of Americans were alienated from the workforce as a result.18 Whole classes defined themselves as claimants on the U.S. government, and millions were consigned to squalid government housing and dignity-stripping income programs. Welfare programs created a permanent underclass: the unemployed received unearned support, lost job skills (or never acquired them), and thus became unable to gain stable employment, making them chronically, miserably, reliant on state aid.

  Hundreds of years before, Thomas Jefferson cautioned that “dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition.”19 Even Franklin Roosevelt had warned in his 1935 State of the Union address that “continued dependence on [government support] induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”20

  With Jefferson’s and Roosevelt’s moral admonitions forgotten, the American welfare system grew and grew throughout the 1970s. Many leaders complained that it was a colossal waste of money, but their complaints were insufficient to make any meaningful change.

  What finally changed the system was an influential book, entitled Losing Ground, by social scientist Charles Murray. Published in 1984, Losing Ground made the argument that the problem with the welfare system was not primarily an economic one. The problem was moral. The welfare policies of the 1960s changed the rules of the game for poor people, making it rational in the short term to behave in ways that would ensure poverty and dependency in the long term. “The most troubling aspect of social policy toward the poor,” Murray wrote, “is not how much it costs, but what it has bought.”21

  Welfare had two pernicious effects, according to Murray. First, the system effectively held people in miserable conditions, harming those it was supposed to help. This was immoral and had to stop. Second, by holding people in this condition, the system created dependency on the state, stripping people of the dignity that comes from earning their own way. Once again, this was immoral because it hurt the recipients themselves.

  Such arguments were radical in the mid-1980s. It took more than ten years—as major policy reforms always tend to take—but the moral case for welfare reform ultimately won the day and was even embraced by a Democratic president. During the Clinton administration, legislation was crafted to reduce the extent to which people could become dependent on the system. It did so by imposing time limits on how long people could receive support and requiring them to work to receive benefits. Welfare reform was signed into law in 1996.22

  Welfare reform was a resounding success. According to the U.S. government, it helped to move 4.7 million Americans from welfare dependency to self-sufficiency within three years of enactment, and the welfare caseload declined by 54 percent between 1996 and 2004.23 Even more importantly, there is evidence that it improved the lives of those who moved off welfare as a result. A new economic study using the General Social Survey shows that single mothers—despite lost leisure time and increased stress from finding child care and performing household duties while working—were significantly happier about their lives after reforms led them into the workforce.24

  The point to remember here is this: Welfare reform was not passed when welfare became too expensive, but only when the moral case had been made that welfare was destroying the lives of the most vulnerable among us.

  •••

  THIS BOOK IS my attempt to make the moral case for free enterprise and then apply that case to the leading policy issues of our day. If you have always believed free enterprise is the best system for America and are looking for the right a
rguments to win the debate, you will find those arguments in this book. And if you’re not so sure free enterprise is the best answer for America, then I hope I might persuade you—as I have been persuaded.

  I did not grow up committed to the free enterprise system—rather the opposite, in fact. I was raised in Seattle, one of the most progressive cities in America, in a family of artists and academics. No one in my world voted for Ronald Reagan. I had no friends or family who worked in business. I believed what most everybody in my world assumed to be true: that capitalism was a bit of a sham to benefit rich people, and the best way to get a better, fairer country was to raise taxes, increase government services, and redistribute more income.

  I am a believer in free enterprise today only because of the studies I pursued starting in my twenties. I didn’t go to a fancy university; I didn’t even make it to college until I was twenty-eight years old and, then, only by correspondence courses at night. In a way, I got lucky; I didn’t have to fit into any progressive campus social life, or impress any radical professors. I just had a stack of books on economics and a lot of data about the real world to study after I came home from work each day.

  As I began to question my old views, some around me reacted with alarm. At one point when I was around age thirty, my mother took me aside and said, “Arthur, I need you to tell me the truth. . . . Have you been voting for Republicans?”

  In truth, there had been no Road-to-Damascus political conversion experience, just a slow realization that what I thought I knew—about how to help the poor, about what made America different from other nations, and what gave people the best set of opportunities for their lives—didn’t hold up to the evidence.

  So I am not just a conservative ideologue or reflexive supporter of big business. In fact, I share the concerns of many on the left that freedom and opportunity are imperiled by corporate cronies, who inevitably are linked to the government through special deals and inside access. In this book, I’ll argue that Washington’s auto industry bailouts and its “Cash for Clunkers” program (handing out government grants to buy cars) are opposite sides of the same coin. Misbehavior on Wall Street was spawned by the predatory government-sponsored enterprises that started the housing crisis. Find me an opportunistic politician chumming the political waters with tax loopholes, and I’ll show you a corporate shark.

  I believe that if we want a better future, liberated from statism and corporate cronyism, the answer is the system that removes these shackles: free enterprise. In this book you will see why I have come to believe free enterprise is a beautiful, noble system—so revolutionary in an imperfect world—that rewards aspiration instead of envy. It must be protected and strengthened for the sake of our self-realization, for a fairer society, and for the poor and vulnerable—not just because it is the best system to make us richer, but because it is the most moral system that allows us to flourish as people.

  2

  A SYSTEM THAT ALLOWS US TO EARN OUR SUCCESS

  When I was a college professor, I used to teach a course called “Social Entrepreneurship” for students studying nonprofit management. Every year, graduates would ask me for career advice. For many, the choice was between trying to start their own nonprofits and landing a safe job in the management of an existing nonprofit. I told them honestly that they were in for a lot of poverty if they started their own enterprise, but generally advised them to go for it anyway. I knew they would be much happier if they did.

  Entrepreneurs of all types rate their well-being higher than any other professional group in America, according to years of polling by the Gallup organization.1 Why are they so happy? It’s not because they’re making more money than everyone else; they aren’t. According to the employment website careerbuilder.com in 2011, small business owners actually make 19 percent less money per year than government managers (and that’s ignoring the huge benefits advantage that government workers have over their private-sector counterparts).2 Nor are entrepreneurs happy because they’re working less than other people. Forty-nine percent of the self-employed clock more than forty-four hours per week, versus 39 percent of all workers.3

  So entrepreneurs work more and make less money than others. But they’re happier people. What’s their secret? In this chapter, I’ll answer this question. It turns out to be the secret to everyone’s happiness as well, regardless of whether or not they run their own businesses. I’ll offer proof that money itself brings little joy to life, but that the free enterprise system brings what all people truly crave: earned success. That is what I believe the Founders meant by the pursuit of happiness.

  THESE DAYS, many scholars around the world are studying happiness. It may sound like a squishy topic, but it turns out there is a lot of good evidence on who is happy and who isn’t.

  We’ll look at that in a minute. But first, let’s discuss what people think will make them happy. At one point, I explored this question, albeit informally. I asked everybody I met—on planes, at parties, wherever—what was the one thing that would make them happier that very day. Some of the responses were funny; a few of them were unprintable.

  A surprising number of people mentioned something about money. I say “surprising,” because we’re all supposed to know that money doesn’t buy happiness. Yet a lot of people, including those who are financially comfortable, feel that a little more money would improve their happiness. Is this true? The answer, according to the research on the subject, is not so simple.

  One study on money and happiness examines different countries. Are citizens in rich countries happier than those in poorer countries, on average? In 1974, University of Pennsylvania economist Richard Easterlin studied this question and concluded that people in rich countries are generally not happier than people in poorer ones.4 The exceptions to this rule are desperately poor nations in areas like sub-Saharan Africa that are characterized by starvation and disease. But for countries above the level of subsistence—and especially rich, developed countries—money brings little extra happiness. This finding is known as the Easterlin Paradox.5

  Looking at data for the United States over several decades, then, we shouldn’t be too shocked to see that people have gotten a lot richer, but not much happier, on average. In 1972, about 30 percent of Americans told the General Social Survey they were very happy. The average American at that time earned about $25,000 a year, in 2004 dollars. By 2004, the average income had increased to $38,000 (a 50 percent increase in real income).6 All income groups, from rich to poor, saw substantial income increases. Yet the percentage of very happy Americans stayed virtually unchanged, at 31 percent.

  The story is the same in other developed countries. In Japan, real average income was six times higher in 1991 than in 1958. During the post–World War II period, Japan converted at historically unprecedented speed from a poor nation into one of the world’s richest. Yet average Japanese happiness didn’t change at all over this period.7

  Maybe the problem is that these increases in average income are too gradual to stimulate happiness. It makes sense to me that three percent income increases, year after year, wouldn’t give people a big reason to say they are happier about their lives. But perhaps sudden, huge income increases would do the trick. After all, that’s what people think when they imagine getting rich overnight.

  Figure 2.1. While average income in America has risen over the decades, average happiness has not. (Source: James A. Davis, Tom W. Smith, and Peter V. Marsden, General Social Surveys, 1972–2004 [Storrs, Conn.: The Roper Center for Public Opinion Research, University of Connecticut, 2004].)

  Have you ever played the party game where people say what they would do if they won the lottery? The answers are usually predictable, but provide a bit of insight into each person’s character and dreams. Some people say they’d travel more or change jobs; others say they would buy things. When men are trying to impress women, they sometimes say, “I’d start a foundation.” (Sure they would.)

  Whatever they want to do with the
money, people always say good things would result if they hit the lottery and that their lives would get better. I’ve never heard anybody say, “If I won the jackpot, I’d make some horrible life choices including marrying somebody who doesn’t love me. Next, I’d buy a bunch of things I don’t really want. Then, I’d start an ugly alcoholic downward spiral.”

  But, in fact, the latter scenario is closer to what actually happens when people hit the jackpot. A study by researchers at the University of Michigan looked at major lottery winners, people who won millions and millions of dollars all at once.8 The researchers wanted to see how much happier the winners were after they had struck it rich.

  The results were depressing. While the winners experienced an immediate happiness boost right after winning, it didn’t last. Within a few months, their happiness levels receded to where they had been before winning. As time passed, they found they were actually worse off in happiness than before they had won. The novelty of buying new things wore off. Meanwhile, the small, simple things in life (such as talking to friends or going for a walk) were less pleasurable than they had been in the old days.

  One reason money doesn’t buy happiness is that people adapt to new economic circumstances incredibly quickly. Maybe you’ve noticed that you get the most enjoyment from a pay raise the day you find out about it, even more than when you get to spend it, and much more than you will a year after it has become a regular part of your paycheck. Economic gains and losses give pleasure or pain when they happen, but the effect rapidly wears off. People are excellent at perceiving changes to their surroundings or circumstances; they’re not so good at sustaining any special sensation from the status quo.