Arthur Brooks and Ayn Rand on the Moral Case for Free Enterprise

Arthur Brooks, president of the conservative American Enterprise Institute, wants to help you, a stalwart supporter of the free enterprise system, to prevail in the coming Thanksgivings’ dinner table debates. Here’s how he thinks the debate will go if you’re ill-prepared:

You’ll say something intelligent about how it was never markets that caused all the pain in this country over the past four years, but rather the growing government and corporate cronies who gamed the system. Maybe you’ll throw in some facts about how realfree enterprise rewards entrepreneurs–the only true job creators—and how current leaders are actively hurting them with needless regulation and punitive, uncertain taxation. For color, you might throw in the fact that the U.S. corporate tax rate is now the highest in the OECD countries.

And then your liberal sister-in-law will stare at you. “You want to cut taxes for millionaires while working families lose their homes.” she’ll say. “I saw a little girl living in her car yesterday. That’s what free enterprise looks like.”

Guess what? You just lost the argument.

All the colorless, cold data in the world won’t overcome a moral/emotional appeal, Brooks says. So…

If you want to win the argument, you have one choice, and only one: You have to make your own moral case for free enterprise, right from the beginning. No data, no appeals to stats from the Congressional Budget Office. You can bring that stuff in later. When you first open your mouth, it better be to say what’s written on your heart about the country you love and the system that makes us strong and free.

Brooks’ claim that one must win the moral argument for free enterprise if one is going to win it at all recalls Ayn Rand, who wrote, “No social system (and no human institution or activity of any kind) can survive without a moral base.” Here’s one of Brooks’ model moral arguments:

“I want to help the little girl, and the poor all around the world as well. Since 1970, the world’s worst poverty—living on $1 a day or less—has fallen by 80%! Why? Was it the United Nations, U.S. foreign aid, or the World Bank that achieved this? Of course not. It was globalization, trade, and entrepreneurship. Welfare can lift up the poor a few at a time. Free enterprise is the only system that will lift them up by the billions, which is why every Good Samaritan must support it, at home and all around the globe.”

Brooks appeals directly to the welfare of the poor, suggesting that the moral case for free enterprise just is the case that free enterprise does more to improve the welfare of the least well-off. This seems to fit the mold of a “social justice” argument. According to Jason Brennan, a philosopher at Georgetown, social justice is

… a moral standard by which some people judge political and economic institutions. Advocates of social justice believe the moral justification of our institutions depends on how well these institutions serve the interests of the poor and least advantaged. The basic institutions of society must sufficiently benefit all, including the least advantaged and most vulnerable members of society.

I’ve not seen Brooks use the language of social justice. There’s good rhetorical reason for him to avoid it. First, conservative hero F.A. Hayek famously argued that the whole idea of social justice is hopelessly confused. Second, conservative hero Ayn Rand and her devotees aren’t having it. Here’s Yaron Brook, president of the Ayn Rand Institute, and Don Watkins complaining specifically about Arthur Brooks’ brand of moral argument:

The real battle for capitalism is the battle over the question: Is it moral to pursue our own happiness? If so, then why should we ever be forced to sacrifice for the needs of others? Is the moral call to sacrifice, which we’ve had drummed in our heads since childhood, right?

If you’re dying of suspense, the answer is: “No.” But it’s interesting that Rand, despite the vehemence of her rhetoric, seems to go out of her way to communicate that under capitalism, as she conceives of it, Brooks’ little homeless girl will do well. She writes:

The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve “the common good.” It is true that capitalism does—if that catch-phrase has any meaning—but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice. [Emphasis added.]

Capitalism achieves the common good, by the way. But it’s real justification is that capitalism is just, which Rand understands to mean, more or less, it gives people what they deserve. It’s telling, though, that the rhetorically fearless Rand in this instance gave into the rhetorical pressure to note that capitalism is justified on “altruist” common-good grounds. In Free-Market Fairness, John Tomasi points to some other similar Rand passages in his effort to show that even the most hard-headed of ethical egoists gives weight to “social justice” modes of justification. For example:

America’s skyscrapers were not built by public funds nor for a public purpose: they were built by the energy, initiative and wealth of private individuals for personal profit. And, instead of impoverishing the people, these skyscrapers, as they rose higher and higher, kept raising the people’s standard of living – including the inhabitants of the slums, who lead a life of luxury compared to the life of an ancient Egyptian slave or of a modern Soviet Socialist worker.

Or:

Capitalism, by its nature, entails a constant process of motion, growth and progress. It creates the optimum social conditions for man to respond to the challenges of nature in such a way as best to further his life. It operates to the benefit of all those who choose to be active in the productive process, whatever their level of ability.

This shouldn’t be so surprising, really. If you’re an egoist, the only relevant consideration is whether the system is good for you. Of course, you might have been born poor and without talent. If capitalism is to be justified to the less advantaged, it must be good for the less advantaged. And Rand thinks it is. She doesn’t put much weight on this, but she does put weight on it. 

Despite their differences, Arthur Brooks and Ayn Rand aren’t really so far apart. I think this is clearest in the fact that they both actively contrast capitalism, or the free enterprise system, with the welfare state. When Brooks writes that “Welfare can lift up the poor a few at a time. Free enterprise is the only system that will lift them up by the billions …” it is implied that we must choose one or the other. And here we have him saying this:

If we fail to make this moral case right now, you and I both know that we probably don’t have more than about 10 years left before we truly are a European-style social welfare state. And then it’s kind of all over for free enterprise.

Of course, Rand had nothing nice to say about the welfare state. This is representative:

Morally and economically, the welfare state creates an ever accelerating downward pull. Morally, the chance to satisfy demands by force spreads the demands wider and wider, with less and less pretense at justification. Economically, the forced demands of one group create hardships for all others, thus producing an inextricable mixture of actual victims and plain parasites. Since need, not achievement, is held as the criterion of rewards, the government necessarily keeps sacrificing the more productive groups to the less productive, gradually chaining the top level of the economy, then the next level, then the next. (How else are unachieved rewards to be provided?)

The problem with both Brooks’ and Rand’s claims is that they’re totally spurious. Both seem to have accepted a version of Hayek’s “road to serfdom” slippery slope argument. If this were true, then one would expect that it would be impossible for the world’s most generous welfare states to have “free enterprise” systems with high levels of economic freedom. But just compare OECD social spending as a % or GDP with the Heritage Foundation’s economic freedom ranking.

By this measure (looking specifically at the public spending portion of the bars), Denmark has the fourth largest welfare state in the OECD, while America’s public social spending is in the neighborhood of Israel’s, near the bottom, and is a bit less than that of Canada, Australia, and New Zealand, the other major Anglophone ex-British colonies.

But look here!

In terms of “economic freedom”, Canada, with its terrifying socialist health-care system has left America in the dust, as have Australia and New Zealand.  But even more damning to Rand and Brooks is that fact that the U.S. is in a statistical dead heat with Denmark, which has one of the world’s largest welfare states. Sweden’s is even larger, and comes 21st in economic freedom — well within the ranks of Heritage’s “mostly free” economies, with the U.S. 

The fact is, there is no clear trade-off between the size of a country’s welfare state and its level of economic freedom. Denmark’s free enterprise system is as free as ours, and Canada’s, New Zealand’s, and Australia’s are freer while also having more generous welfare states. One may heartily endorse Brooks’ moral argument for free enterprise while also endorsing the moral argument for the welfare state. Randians, on the other hand, have at their disposal other property-rights-based arguments against redistribution, even after the slippery-slope argument above has been refuted on empirical grounds. Still, the facts leave the force of those arguments greatly reduced.

Good luck with Thanksgiving dinner!