That some should be rich shows that others may become rich,” said Abraham Lincoln, “and hence, is just encouragement to industry and enterprise.” Barack Obama has made it quite clear he wants to be seen as Lincoln’s heir. But in this instance, he is an heir in open rebellion. He is promising a range of policy initiatives that will have the effect of closing off new pathways to wealth, to the detriment not only of our economy but of our national life as well.
It’s a matter of some debate among economists whether the private generation of wealth is a necessary precondition for providing the means for a decent prosperity that can be shared by all. Clearly, there are and always have been societies throughout the world in which a small class of wealthy families controls the wealth of their nation or region and does little or nothing to spread it around. In those cases, usually in economies that maintain aspects of feudalism or that run along mercantilist lines, the rules of the marketplace are rigged in their favor.
But what of economies organized along market principles, like ours? These are a very different matter. Milton Friedman and his intellectual forebears in the Austrian School famously argued that free-market capitalism, in which people engage in largely ungoverned commercial activity that places them in active competition with each other, produces maximal prosperity for all levels of society in the aggregate.
This argument has always struck many people as a counterintuitive leap of faith, and yet over the past 30 years it has become the dominant economic view across the globe. After years in which the term “capitalism” was treated almost as a pejorative and the “free market” conjured up images of plutocrats and sweatshops, it became an axiom that “markets work.” China changed its financial course and set loose the fastest-growing economy in the history of the world when its post-Mao leader, Deng Xiaoping, declared, “To be rich is glorious”—a startling declaration for a Communist regime. In the United States in the 1990s, the party that had historically stood against the idea that the market should be left to work on its own was led by a President who not only embraced the idea of the free market but evangelized for it.
Click here to read the rest of this article from the June issue of COMMENTARY.