And Freedom for All ...

Book Reviews

In Support of Free Enterprise
by The Chamber of Commerce and Industry of Western Australia
2001, 35 pages, free (while stocks last)

In 1776, Adam Smith observed that "people of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in conspiracy against the public or in some contrivance to raise prices".  Since then, the Guilds have become Chambers of This and That, where people of the same trade meet to conspire in contrivances to raise prices -- most often and most simply by suborning the legislators.  Otherwise, little has changed.  Therefore, I can but wonder what Smith would have made of the WA Chamber of Commerce and Industry publication, In Support of Free Enterprise, that advocates a genuinely free market, without a hint that I can detect of special pleading.

The Chamber sets out to demonstrate the link between "a free market economy underpinned by law and respect for property rights" and "a high quality of life in all senses of the term".  Industry lobbies that advocate "private enterprise" are two-pence a dozen but those that really support "free enterprise" are more difficult to find.  Although every trade depends for its existence on a market economy, each would like to enjoy the advantage of higher prices at everyone else's cost.  Those who will defend the system, like volunteer soldiers who in war-time choose not to leave the task to the other fellow, deserve some respect.

If Australia should get these issues wrong, we stand to pay a very big price -- maybe even lose the next war.  This document is therefore worth the couple of hours it takes to read it.  The risk that the reader faces is, of course, the old one that he might be inspired to do something noble such as admitting publicly that his own privileges are not strictly justified.  On the up side, unless he is unusually well informed, he will be relieved of some misconceptions that have been thrust upon him by other vested interests.

During the last quarter of the twentieth century, governments relaxed their control over what their citizens produced, consumed and exchanged.  As competition replaced command in the several economies, the flow of goods, capital, people and ideas between them increased several fold.  The trend became known as "globalisation" and living standards and life expectancies -- especially in Asia -- increased enormously.

Since the mid-1980s, Australia participated in this trend more energetically and more consistently than most nations but, since we came off a higher base, the proportionate improvement in our living standards was less than in many poorer nations.  Nevertheless, during the '90s our living standards ceased to decline relative to other developed nations, unemployment rates fell by one third, we enjoyed 37 successive quarters of growth and we shrugged off the so-called "Asian crisis".  At the end of the century, a dispassionate observer might have expected us to be rather happy little Vegemites, but dispassionate observers are almost as rare as industry lobbies that eschew special pleading.  Instead, we are complaining noisily about the processes that had got us as near to a material Utopia as we had ever been and we are voting in droves for minor parties.

The phenomenon is not peculiar to Australia.  Noise may be a poor reflection of numbers;  nevertheless it is enough to worry those who believe that globalisation, economic rationalism, competition policy, free trade and privatisation are not only the way to prosperity but also the best hope of avoiding war.  It is not just that we want the capacity to maintain a strong defence force for Australia:  we want the international exchange and absence of xenophobic fear and misconception that will allow it never to be used.  The policy trend has slowed -- in Australia's case to a trickle -- but has as yet suffered only a few reversals.  The rhetoric has, however, changed markedly.  The backlash has not been an accident of nature.  While its shock troops have been Anarchists, Trotskyites and their like, and its line regiments the NGOs, churches and their like, its planning, organisation and motivation have come from those who lost their privileges, mainly the unions and protected industries.  (See Jarol B. Manheim).

The counter-thrust for the hearts and minds of voters has not been accidental either.  It is the considered response of people such as those in the Western Australian Chamber of Commerce and Industry.  Since the time of the anti-conscription and anti-apartheid protests, economic liberals have left the streets to the other side.  Instead they fight with words.  In Support of Free Enterprise is one of the very best forays in this counter-counter-attack of which I know.  It would not have been sufficient to demonstrate that free enterprise is good at producing wealth if it could not also have been shown that it produced wealth for those who had least.  The Chamber is signally careful to judge free enterprise by criteria from which its opponents dare not dissociate themselves.  The level of real GDP in the advanced countries has risen at an increasing rate since 1970 to be 2.5 times greater today.  That is impressive but it is modest compared with the 4.4 fold increase in the developing economies.  Having improved at a faster rate than the developed countries since World War II, these economies sharply improved their rate of improvement around 1990.  In 1969–71, a third of the world's population was undernourished;  today the proportion is still a horrible 6 per cent but let us not deny the fact of improvement, lest we overlook the cause.  Such data, and others such as improvements in literacy, life expectancy and even travel opportunity, are difficult to refute.

Opponents of globalisation and economic rationalism have therefore tended to concentrate on the unknown future.  Here The Chamber admits as much uncertainty as this quote implies:

We cannot absolutely prove that those are in error who tell us that society has reached a turning point, that we have seen our best days.  But so said all who came before us, and with just as much apparent reason ... On what principle is it that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?

The words are those of Thomas Macaulay, the Whig politician, essayist and historian in 1830.  Fortunately, Britain at that point still had over half a century of relatively free markets and very satisfactory (on the comparison with all history to that point) economic growth ahead.  May we be as fortunate!

Whether to reassure us or to frighten us, In Support of Free Enterprise includes a little table prepared by the Club of Rome in 1972 that predicted the years in which the world's supplies of selected minerals would be exhausted.  Copper, gold, lead, mercury, natural gas, petroleum, silver and tin were all to run out between 1981 and 1994.  They will never run out and will run short only if we regulate the price!

The document addresses some popular misconceptions.  An extraordinary (to me) 83 per cent of Newspoll respondents believed that "the rich are getting richer while the poor are getting poorer".  In fact, the rich, poor and middle are all getting richer and both extremes are getting richer faster than the middle.  Jobs have not become less secure since globalisation.  In fact, job mobility has declined very slightly.

Non-economists find the fact that trade benefits both parties so counter-intuitive that they don't accept either theory or inter-country comparisons.  The document's authors found a new twist to this old argument.

If an embargo is indeed an effective punishment, which denies the embargoed country the benefits of free trade, why should we deny those same benefits to countries we wish to help?

They go on to question the morality of banning the import of products made in poor countries.  Quoting UNICEF:

Child workers, mostly girls, were summarily dismissed from garment factories.  A study sponsored by international organisations took the unusual step of tracing some of these children to see what happened to them after dismissal.  Some were found working in more hazardous situations, in unsafe workshops where they were paid less, or in prostitution.

The WA Chamber of Commerce and Industry traces the link between economic and political freedom and between both and life expectancy.  People live 20 years longer in the 20 per cent of the most free nations than in the 20 per cent of the least free.  The size of the disparity may surprise, but not its tendency, surely.  It shows the link between government regulation and corruption -- the "permit raj" of India, crony capitalism in Indonesia and WA Inc in Australia.  The last word to The Chamber:

A free market system founded on individual choice ensures that we alone suffer the consequences of our follies and that we do not suffer the consequences of others.  It is a damage limitation system which recognises human imperfectability.

Amen.