The Road to Freedom (11 page)

What's great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.
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Here's the bottom line: Capitalism and free enterprise have lifted everyone up. It is truly galling to see the 2011 Occupy Wall Street protesters demonstrate with signs that read, “We are
the 99%,” as if they were somehow treated unfairly by any objective world standard. These protesters, as privileged Americans, are part of the world's
1 percent
.

Some people live in a materialistic world of “keeping up with the Joneses,” and inequality is all they're worried about. In that case, then communism, authoritarianism, totalitarianism may be the best systems, because they keep almost everyone poor. But if quality of life matters to you, then you should support free enterprise unequivocally. It pulls millions of people out of poverty every year, increases their health and life expectancy, and gives them the possibility of something even greater.

In dealing with poverty here and around the world, welfare and foreign aid are a Band-Aid. Free enterprise is a cure.

FREE ENTERPRISE
has eradicated poverty all over the world for billions of people. But does that mean that free enterprise is a moral system—or simply that it happens to have beneficial effects? On the surface, free enterprise can seem like a pretty passive kind of virtue: I pursue my own self-interest, this creates value, and other people—especially poor people—reap the rewards of a more prosperous society. Is it possible that ethically neutral—or even selfish—behavior just happens to have happy side-effects in the case of free enterprise? Lots of people—even some who call themselves libertarians and conservatives—think that for society to get richer, it automatically must adopt Gordon Gekko's famous creed in the movie
Wall Street
: “Greed is good.”

The second charge that opponents of free enterprise levy against it is that it rewards rotten people. The more I work for myself, the argument goes, the more the free enterprise system enriches me personally. If I take time out to actively help others,
I sacrifice time that I could have spent further enriching myself (economists call this an
opportunity cost
). Therefore, the more I can keep the rewards of my own productivity, the less charitable I will tend to be. So, opponents say, capitalism naturally makes people rapacious.

A counterargument is that free enterprise actually makes people
more
virtuous. The line of reasoning here is more complex and requires a bit more concentration, but, in summary, is this: The free enterprise system requires a culture of optimism and trust to function correctly—a positive-sum, win-win mentality, and a desire for everyone to be better off. For many people, it produces more prosperity than they need to meet their daily requirements, a surplus that many will choose to direct to charitable purposes.
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Moreover, people who believe in free enterprise reject the idea that the government is responsible for solving all social problems. For this reason, people who believe in the free enterprise system are more likely than others to take responsibility for the neediest members of their communities.

So does free enterprise make people self-absorbed and morally corrupt? Or does it make people better, more socially responsible human beings? The data show unequivocally that the latter answer is correct.

THE UNITED STATES
is a very generous country. Seventy to eighty percent of American households donate money every year; the average household contributes more than $1,000 annually. About one-third of these charitable gifts go to religious causes to support churches, synagogues, and so on. The rest goes to secular activities, such as education, health, and social welfare. Also, money isn't all that Americans give: Between 50 and 60 percent of Americans
formally volunteer their time each year, giving an average of almost fifty hours.
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Charitable donations in America add up to approximately $300 billion annually. That's more than the entire GDP of countries like Finland, Portugal, and Peru.
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About three-quarters comes from private individuals, with the rest from corporations and foundations. No developed country approaches Americans' level of giving and volunteering. In 1995, Americans, gave three and a half times as much to causes and charities per capita as the French, seven times as much as the Germans, and fourteen times as much as the Italians. In 1998, Americans were 15 percentage points more likely to volunteer than the Dutch, 21 points more likely than the Swiss, and 32 points more likely than the Germans. These differences are not attributable to demographic characteristics such education, income, age, sex, or marital status.
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Americans are not charitable just because they're rich. True, the rich do give the most money. But remarkably, the working poor give a higher percentage of their income to charity than the wealthy and much more than the middle class.
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Charitable giving appears to be part of most Americans' DNA; it is not just the
noblesse oblige
of the wealthy few.

But perhaps the most remarkable fact about charity in America is how highly it correlates with ideology and beliefs about the role of government. People who believe in the free enterprise system simply give a lot more—both time and money—than people who don't. In a nutshell, people who believe in limited government privately give much more than their statist neighbors.

Consider attitudes about income inequality. In 1996, people who disagreed that “the government has a responsibility to reduce income inequality” gave, on average, four times as much money to charity each year as people who agreed that the government should equalize incomes more. People who disagreed
strongly
with greater forced redistribution gave eleven times more, on average, than those who agreed strongly.
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Figure 4.5
. People who agree that, “the government has a responsibility to reduce income inequality,” give far less privately to charity than those who disagree. (Source: 1996 General Social Survey. National Opinion Research Center, University of Chicago.)

This pattern of giving holds for nonmonetary charity as well. For example, in 1996, Americans who believed that the government has a responsibility to reduce income inequality were substantially less likely to volunteer their time than people who did not believe this. People who stated in 2002 that they thought the government was “spending too little money on welfare” were less likely than those saying the government is “spending too much money on welfare” to donate blood, give directions to someone on the street, or return extra change to a cashier. Ironically, they were less likely even to offer food or money to a homeless person.
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People who believe in redistribution are more likely to treat someone uncharitably in subtle ways. For example, they will be late for professional appointments. In one fascinating experiment, a team of researchers from Estonia, Morocco, and the United
States interviewed students in those three countries about their views on punctuality. They found that, regardless of the cultures in the study, people with collectivist views also have a more liberal view of what is acceptably late to arrive for a meeting.
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What explains these patterns? Redistributionists generally believe meaningful social action resides principally with the government. Individuals shouldn't have to give their money or time to help the less fortunate. That's the job of the state. Ralph Nader commented, “A society that has more justice is a society that needs less charity.”
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Instead of giving to charity, redistributionists vote for progressive policies and candidates who will increase the responsibilities of the government.

Is voting just a different way of giving to help others? Not quite. Voting for a candidate doesn't mean you are going to pay any more in taxes than your capitalist neighbor who votes differently than you do. It might make you feel unselfish—hey, I'm willing to raise my own taxes!—but it's only an expression of your views, not an actual sacrifice unless yours is the swing vote in a fifty-fifty election. Good intentions are not gifts, and by themselves, they don't help the poor.

In November 2011, a reporter from the
Daily Caller
revealed the redistributionist attitude in a series of interviews with progressive millionaires protesting on Capitol Hill in favor of higher tax rates for the wealthy. She offered each the opportunity to make a voluntary contribution to the U.S. Treasury through the website
Pay.gov
. None of the wealthy Americans were willing to donate a cent.
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While progressive politicians and the occupiers of Wall Street hurl invective at capitalists for their selfishness, the evidence proves that they're wrong. On average, people who support free enterprise over growing government are vastly more privately
generous than those who oppose it. They understand that the government can't fix all or even most ills, and that individuals and communities share the responsibility to take care of society's weakest members.

A CURIOUS FACT
about the link between charity and free enterprise is that giving rewards the giver. It really
is
better to give than to receive.

Prosperity and charity are strongly and positively related. It makes sense that higher income leads to more giving. But new research shows that giving actually stimulates personal prosperity. Analysis controlling for education, age, race, and all the other outside explanations for increases in giving and income revealed that a dollar donated to charity leads to approximately $3.75 in extra income to the giver.
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How can this be? The research suggests that private giving transforms people, even physiologically. It lowers their stress levels, for example. In one experiment, senior citizens were asked to give massages to babies, the idea being that they would do this nice thing with no expectation of a return. Afterward, the adults were found to have markedly lower stress hormone levels in their brains than beforehand.
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The implication is that if you are stressed, you should do something charitable for someone else.

Givers are more popular and more admired than nongivers, which should directly affect their prosperity. In one British university study, participants were given a sum of money and asked in front of others to choose whether to keep it for themselves or give it to a public fund.
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They were also told that everything in the public fund would be totaled, the amount of money doubled, and then the money would be divided equally among the participants.
In other words,
everyone
would benefit from an individual's public spiritedness, even the selfish people who decided to simply pocket their own cash.

The interesting part of the experiment came after the decisions were made about how to allocate the money. The participants then broke into small groups to choose a leader from among themselves. They did not know each other; all they knew was how the other participants had behaved during the giving experiment. In more than 80 percent of the cases, the groups selected as leader the individual who had placed the highest amount of money in the public fund. People see giving as a leadership quality.

These studies and many others suggest that giving can make people better off—even monetarily. What is true for individuals is also true for the country as a whole: Charity in America stimulates American economic growth. Per capita charity and per capita GDP in the United States have moved in tandem over the years, with the former increasing by 190 percent in real terms since 1954 and the latter by 150 percent. Evidence that the two forces stimulate each other comes from analysis of how past values of one variable affect future values of the other. This analysis shows that a 10 percent increase in charity per person provokes a 3 percent increase in GDP.

Put in dollar terms, $1 of private charity can increase GDP by about $19, an excellent rate of return (especially in these tough economic times).
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Indeed, charity is a much better kind of “stimulus” than government spending. Even the most liberal economists estimate a return to government spending of around $1.50 for every $1 spent, and many find it is actually less than a dollar.
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