FREE ENTERPRISE

Otago Daily Times, Issue 26350, 3 January 1947, Page 6

FREE ENTERPRISE

THE AMERICAN SPHERE INTERFERENCE FEARED “The rapid crumbling of war-time economic controls has brought the United States measurably closer to the end of the transition period, and closer to the point where major decisions must be made as to the sort of economic environment in which the American people are to live and work In years to come. The question of the relation of government to the economic life of the people,- which agitated the country—and, in fact, the whole civilised work—in the decade before the war, was temporarily pushed into the background by the compelling emergencies of war-time. That question must now be faced again,” states an article in The Guaranty Survey, a New York publication. “The question is, to what extent and in what ways will the Government attempt to regulate the economic activities and relations of the people, instead of leaving those activities and relations to be determined by natural economic forces, the article continued. “ The issue is often described as that of centralised control or planning as against free enterprise. There seems to be no danger that the American people will deliberately and consciously renounce their traditional devotion to economic freedom in the foreseeable future. The political groups that openly advocate such a course command little support. There does, however, seem to be a very real danger that the people may, through ignorance or carelessness, allow themselves to drift or be led by gradual stages into a position where they will have little or no choice in the matter. Scope of Control “Some strictly economic activities, such as the construction and maintenance of highways and the operation of the postal service, have dong been regarded as proper functions of government. The conservation of natural resources, the regulation of ‘natural’ monopolies, the prohibition of traffic in impure foods and drugs, and the prevention of false and misleading advertising are forms of regulation that sometimes involve serious problems of administration, but have not been found basically incompatible with a vigorous growth of free enterprise. The enforcement of competition through anti-trust laws is not only compatible, with, but essential to, free enterprise, since experience has shown that, in the absence of such enforcement, some divisions of industry and labour tend to resort to monopolistic practices. . . “The subsidising of domestic industry by import duties and the payment of direct subsidies to selected industries in the interests of national security or for other reasons are. in a more controversial field, but these practices, while they certainly are not without elements of danger, have been followed over long periods without crippling private enterprise as a whole. These, and many other forms of governmental regulation, have become accepted as permissible, and even proper encroachments on economic freedom. Recent years have brought new types of intervention that seem likely to remain. , ~ . “There are other recent trends that do appear incompatible with the effective functioning of private enterprise, and that must be reversed if its survival is to be assured. One of these is the exercise of monopolistic power by some sections of organised labour under governmental protection. Another is the enforcement of arbitrary minimum-wage rates. A third is the confiscatory taxation of individual and corporate incomes. A fourth is the tendency toward the assumption of governmental responsibility for the regulation of business activity, employment and prices, mainly through fiscal manipulations. These are by no means the only pre-sent-day tendencies that might be mentioned as representing threats to free enterprise, but they are probably the most dangerous at the moment. If they are allowed to continue, it is to be feared that industry will be unable to provide the volume of employment and the standard of living that it could provide in the proper environment and that it must provide if it is to fulfil its social responsibilities and remain free. Other Dangerous Trends “The effect of confiscatory taxes on large corporations and on individuals in the higher income brackets is to reduce the> profitableness of productive enterprise and hence to weaken the incentive to such enterprise. Corporations and individuals that invest their funds, particularly in the form of capital stock and other junior equities, assume serious risks. Possible earnings must be sufficient to warrant those risks. When tax rates on earnings approach- confiscatory levels, it ceases to be worth while to make many business investments that would be made under more favourable conditions. And a decline in business investment means a decrease in employment opportunities and a diminished amount of investment per wage-earner, with lower labour productivity and a lower standard of living.

“ The assumption by the Government of the primary responsibility for stabilisation of employment and prices is perhaps the most dangerous trend of all. Such a responsibility belongs to enterprise as a whole, and a government of limited powers is not equipped to discharge it. Governmental attempts at stabilisation can hardly avoid interfering with necessary readjustments, and such interference merely perpetuates the conditions that it is designed to remedy. The effort to perform an impossible task presents a continual series of almost irresistible temptations to bring one phase of enterprise after another under political control.

“The outstanding threats to the successful functioning of free enterprise in the United States during the post-war era comes from two directions. One of these is interference with the fluctuations that take place in free markets, which are the automatic regulators of a free enterprise system. The other is impairment of the opportunity for profits, which is the mainspring of the system. Unless these dangers are prevented, no amount of lip service to free enterprise will help to preserve it.”