Marco Rubio said that,
"Americans chose a free enterprise system designed to provide equality of opportunity, not compel equality of results. And that is why this is only place in the world where you can open up a business in the spare bedroom of your home."
The free enterprise system and Americans' desire for the least amount of government regulation is woven into the fabric of our country's history. The free enterprise movement started in the 1700s, when many individuals were restricted from starting and owning their own business if they did not have the permission of the government. Americans wanted to own their own businesses without government restrictions. They did not want the government to tell them how to run their business or with whom to trade. However, government regulation can also be a good thing. Americans at times have looked to the government to break up or regulate companies that have gotten too large and therefore exercised monopoly power. They have relied on the government to address matters that the private sector ignores, from education to protecting the environment. The appropriate role of government in the economy is an issue about which many Americans differ. To ensure the continuation of the free enterprise system, Americans should always dream big to create new innovations, allow the laws of supply and demand to regulate the free market, and work to minimize government regulation of commerce. However, as we will see, there are times in which government regulation is required to ensure the proper functioning of our free enterprise system.
To determine how to ensure free enterprise in the future, it will be useful to look to the past to see how free enterprise first developed in this country. The Boston Tea Party was part of the effort to protect the free enterprise system. After victory in the French and Indian War, King George III and his government taxed American citizens as a way to recoup the expenses of fighting the war. They tried to re-establish control over colonial governments and took several actions including the Stamp Act (1765) and the Townsend Acts (1767). As a result of trying to enforce these acts through armed force, the Boston Massacre occurred in 1770. Britain was regulating trade, so the colonists were being taxed for tea, stamps, paper, playing cards, etc. The free enterprise system was being restricted by these laws, which were forced upon the American people by Englishmen who had limited understanding of the true situation in the colonies.
A laissez-faire system is a system in which the government has no control over individuals’ economic or business decisions. In the late 1800s, monopolies arose. These were giant companies that dictated how much everything would cost. The Sherman Antitrust Act of 1890 was meant to limit the growth of monopolies. Throughout history the interstate commerce clause of the Constitution has been debated in the courts. These court cases found that government could only regulate interstate trade, not activities that occurred within a state which had no effect beyond its borders. Landmark cases include Knight (1895), Swift & Co (1905), Schenck (1919), Curtiss-Wright (1936), and other court cases. Other aspects of the free enterprise system that have been disputed in the courts include regulating working conditions (Lochner v. New York), the establishment of minimum wages (Adkins v. Children's Hospital 1923), and the constitutionality of Franklin Roosevelt's famous New Deal (Schechter v. US, 1935).
There are many different categories of innovations. Some innovations are instrumental, that is, they relate to the invention of objects. Surgery, anesthetics, vaccines, genetic screening, and antibiotics are the utmost instrumental innovations because they protected lives, prolong average lifespan, and significantly upgraded the quality of life. Property ownership, internet, containerized shipping, and money transformed our lifestyle. Free markets, capital markets, printing, and limited liability would foster the amplifier effect of modern economics. Small businesses have been big innovators. This is evidence that it is good for businesses to be small and nimble. Governmental regulation is necessary to help small businesses compete against giant monopolies. Small businesses are valuable innovators because they push forward towards the unknown. The willingness to accept the risk of failure sets these entrepreneurs, inventors and explorers apart from everyone else. The lessons learned and rewards gained are often huge and they provide more opportunities to our society. Steve Jobs, one of the world’s most famous innovators, declared,
“Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently – they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius. Because the ones who are crazy enough to think that they can change the world, are the ones who do.”
Small companies need government regulation to protect them from monopolies. I believe regulation is appropriate in some cases and to some degree depending on the business and situation.
Although it is true that government regulation is needed to prevent monopolies and help small business compete, overall, it is best to allow the laws of supply and demand to regulate the free market. Thoreau’s philosophy that “that government is best which governs least,” although written for a different age and with different purposes in mind, has much to recommend it in today’s hyper competitive economy. Regulations are intended to regulate behaviors; to prohibit some and encourage others. There are indeed cases where this is necessary, but a fundamental problem remains: How do we know if the regulation is causing more good than harm, or more harm than good? The answer is we often do not know because the benefits are hard to quantify. This is one of the dangers of regulation. To this must be added the tendency of businessmen to try and “capture” the regulators to turn regulations into a tool for competitive advantage. Surely, this results in a form of “legalized almost-monopoly” as harmful as Standard Oil was in its day. Where do we turn for answers to this problem?
The problems that even well meaning regulations can cause show the advantages of a deregulated free market. The market itself sends every business and every consumer immediate signals of what each is doing right or wrong, in terms of prices, availability, and all of the other measures of commercial success. Economists generally feel that free markets are the best way to organize economic activity: “Competitive markets, while not perfect, are typically the most effective institutions for allocating scarce resources effectively. Deregulations, privatization, and regulatory reform initiatives have generally (though not always) benefited the U.S. economy by lowering costs, enhancing rates of innovation, matching consumer preferences and product quality, and creating more efficient price structures" (Deregulation, AEI, Joskow …). Studies have shown that: “In general, the more restrictive a government is in regulating an economy, the lower the growth rate. In the 1990s, the US economy grew at an average rate of 4.3%, while Germany, France, and Italy, which has [sic] a much higher rate of regulation, grew at 2.0%. The United States and Great Britain started the process of removing many regulations in the 1970s while the three European countries have been relatively stagnant" (apathetic voter.com regulation/deregulation). This shows that more government regulation is not always the answer, even in a part of the economy that is highly regulated.
It is even possible to minimize government regulation of commerce in sectors of the economy that are usually regulated. Electricity generation and distribution is normally controlled at the state level because of the nature of this industry. However, some states have successfully deregulated their electricity markets. Texas did this and found that “Restructuring promotes the grown of newer, more efficient electricity technologies and business models, which increases and differentiates the supply of power in the electricity grid” (Deregulation Done Right, AEI, ...). This shows that more government regulation is not always the answer, even in a part of the economy that highly regulated.
Works Cited
"American Enterprise Institute." Deregulation Done Right. Web. 13 May 2012. <http://www.aei.org/print/deregulation-done-right>.
"American Enterprise Institute." Deregulation. Web. 13 May 2012. <http://www.aei.org/book/economics/deregulation-book/>.
"The Boston Tea Party, 1773." The Boston Tea Party, 1773. Web. 13 May 2012. <http://www.eyewitnesstohistory.com/teaparty.htm>.
"A Brief History of Innovation." Inc.com. Web. 13 May 2012. <http://www.inc.com/magazine/20021001/24702.html>.
Cooper, Rich. "The Essential Ingredient for Innovation." Uschamber. Web. 12 May 2012. <http://ncf.uschamber.com/sites/default/files/Forward-Thoughts.pdf>.
"History's Greatest Innovations." History's Greatest Innovations. Web. 13 May 2012. <http://images.businessweek.com/ss/07/02/0216_innovations/index_01.htm>.
"How Deregulation Spurs Growth." How Deregulation Spurs Growth. Web. 13 May 2012. <http://www.nber.org/digest/sep03/w9560.html>.
"The Non-Orwellian View of American History." By Thomas E. Woods, Jr. Web. 13 May 2012. <http://www.lewrockwell.com/woods/woods117.html>.
PBS. PBS. Web. 13 May 2012. <http://www.pbs.org/wnet/supremecourt/capitalism/landmark_knight.html>.
"Regulationvs. Deregulation." Regulation vs. Deregulation. Web. 13 May 2012. <http://www.apatheticvoter.com/RegulationDeregulation.htm>.
"Supply and Demand." ThinkQuest. Oracle Foundation. Web. 13 May 2012. <http://library.thinkquest.org/03oct/00921/supplyanddemand.htm>.
"The Untold Story of 'Green' Entrepreneurs- HBS Working Knowledge." Web. 13 May 2012. <http://hbswk.hbs.edu/item/6561.html>.
"Americans chose a free enterprise system designed to provide equality of opportunity, not compel equality of results. And that is why this is only place in the world where you can open up a business in the spare bedroom of your home."
The free enterprise system and Americans' desire for the least amount of government regulation is woven into the fabric of our country's history. The free enterprise movement started in the 1700s, when many individuals were restricted from starting and owning their own business if they did not have the permission of the government. Americans wanted to own their own businesses without government restrictions. They did not want the government to tell them how to run their business or with whom to trade. However, government regulation can also be a good thing. Americans at times have looked to the government to break up or regulate companies that have gotten too large and therefore exercised monopoly power. They have relied on the government to address matters that the private sector ignores, from education to protecting the environment. The appropriate role of government in the economy is an issue about which many Americans differ. To ensure the continuation of the free enterprise system, Americans should always dream big to create new innovations, allow the laws of supply and demand to regulate the free market, and work to minimize government regulation of commerce. However, as we will see, there are times in which government regulation is required to ensure the proper functioning of our free enterprise system.
To determine how to ensure free enterprise in the future, it will be useful to look to the past to see how free enterprise first developed in this country. The Boston Tea Party was part of the effort to protect the free enterprise system. After victory in the French and Indian War, King George III and his government taxed American citizens as a way to recoup the expenses of fighting the war. They tried to re-establish control over colonial governments and took several actions including the Stamp Act (1765) and the Townsend Acts (1767). As a result of trying to enforce these acts through armed force, the Boston Massacre occurred in 1770. Britain was regulating trade, so the colonists were being taxed for tea, stamps, paper, playing cards, etc. The free enterprise system was being restricted by these laws, which were forced upon the American people by Englishmen who had limited understanding of the true situation in the colonies.
A laissez-faire system is a system in which the government has no control over individuals’ economic or business decisions. In the late 1800s, monopolies arose. These were giant companies that dictated how much everything would cost. The Sherman Antitrust Act of 1890 was meant to limit the growth of monopolies. Throughout history the interstate commerce clause of the Constitution has been debated in the courts. These court cases found that government could only regulate interstate trade, not activities that occurred within a state which had no effect beyond its borders. Landmark cases include Knight (1895), Swift & Co (1905), Schenck (1919), Curtiss-Wright (1936), and other court cases. Other aspects of the free enterprise system that have been disputed in the courts include regulating working conditions (Lochner v. New York), the establishment of minimum wages (Adkins v. Children's Hospital 1923), and the constitutionality of Franklin Roosevelt's famous New Deal (Schechter v. US, 1935).
There are many different categories of innovations. Some innovations are instrumental, that is, they relate to the invention of objects. Surgery, anesthetics, vaccines, genetic screening, and antibiotics are the utmost instrumental innovations because they protected lives, prolong average lifespan, and significantly upgraded the quality of life. Property ownership, internet, containerized shipping, and money transformed our lifestyle. Free markets, capital markets, printing, and limited liability would foster the amplifier effect of modern economics. Small businesses have been big innovators. This is evidence that it is good for businesses to be small and nimble. Governmental regulation is necessary to help small businesses compete against giant monopolies. Small businesses are valuable innovators because they push forward towards the unknown. The willingness to accept the risk of failure sets these entrepreneurs, inventors and explorers apart from everyone else. The lessons learned and rewards gained are often huge and they provide more opportunities to our society. Steve Jobs, one of the world’s most famous innovators, declared,
“Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently – they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius. Because the ones who are crazy enough to think that they can change the world, are the ones who do.”
Small companies need government regulation to protect them from monopolies. I believe regulation is appropriate in some cases and to some degree depending on the business and situation.
Although it is true that government regulation is needed to prevent monopolies and help small business compete, overall, it is best to allow the laws of supply and demand to regulate the free market. Thoreau’s philosophy that “that government is best which governs least,” although written for a different age and with different purposes in mind, has much to recommend it in today’s hyper competitive economy. Regulations are intended to regulate behaviors; to prohibit some and encourage others. There are indeed cases where this is necessary, but a fundamental problem remains: How do we know if the regulation is causing more good than harm, or more harm than good? The answer is we often do not know because the benefits are hard to quantify. This is one of the dangers of regulation. To this must be added the tendency of businessmen to try and “capture” the regulators to turn regulations into a tool for competitive advantage. Surely, this results in a form of “legalized almost-monopoly” as harmful as Standard Oil was in its day. Where do we turn for answers to this problem?
The problems that even well meaning regulations can cause show the advantages of a deregulated free market. The market itself sends every business and every consumer immediate signals of what each is doing right or wrong, in terms of prices, availability, and all of the other measures of commercial success. Economists generally feel that free markets are the best way to organize economic activity: “Competitive markets, while not perfect, are typically the most effective institutions for allocating scarce resources effectively. Deregulations, privatization, and regulatory reform initiatives have generally (though not always) benefited the U.S. economy by lowering costs, enhancing rates of innovation, matching consumer preferences and product quality, and creating more efficient price structures" (Deregulation, AEI, Joskow …). Studies have shown that: “In general, the more restrictive a government is in regulating an economy, the lower the growth rate. In the 1990s, the US economy grew at an average rate of 4.3%, while Germany, France, and Italy, which has [sic] a much higher rate of regulation, grew at 2.0%. The United States and Great Britain started the process of removing many regulations in the 1970s while the three European countries have been relatively stagnant" (apathetic voter.com regulation/deregulation). This shows that more government regulation is not always the answer, even in a part of the economy that is highly regulated.
It is even possible to minimize government regulation of commerce in sectors of the economy that are usually regulated. Electricity generation and distribution is normally controlled at the state level because of the nature of this industry. However, some states have successfully deregulated their electricity markets. Texas did this and found that “Restructuring promotes the grown of newer, more efficient electricity technologies and business models, which increases and differentiates the supply of power in the electricity grid” (Deregulation Done Right, AEI, ...). This shows that more government regulation is not always the answer, even in a part of the economy that highly regulated.
Works Cited
"American Enterprise Institute." Deregulation Done Right. Web. 13 May 2012. <http://www.aei.org/print/deregulation-done-right>.
"American Enterprise Institute." Deregulation. Web. 13 May 2012. <http://www.aei.org/book/economics/deregulation-book/>.
"The Boston Tea Party, 1773." The Boston Tea Party, 1773. Web. 13 May 2012. <http://www.eyewitnesstohistory.com/teaparty.htm>.
"A Brief History of Innovation." Inc.com. Web. 13 May 2012. <http://www.inc.com/magazine/20021001/24702.html>.
Cooper, Rich. "The Essential Ingredient for Innovation." Uschamber. Web. 12 May 2012. <http://ncf.uschamber.com/sites/default/files/Forward-Thoughts.pdf>.
"History's Greatest Innovations." History's Greatest Innovations. Web. 13 May 2012. <http://images.businessweek.com/ss/07/02/0216_innovations/index_01.htm>.
"How Deregulation Spurs Growth." How Deregulation Spurs Growth. Web. 13 May 2012. <http://www.nber.org/digest/sep03/w9560.html>.
"The Non-Orwellian View of American History." By Thomas E. Woods, Jr. Web. 13 May 2012. <http://www.lewrockwell.com/woods/woods117.html>.
PBS. PBS. Web. 13 May 2012. <http://www.pbs.org/wnet/supremecourt/capitalism/landmark_knight.html>.
"Regulationvs. Deregulation." Regulation vs. Deregulation. Web. 13 May 2012. <http://www.apatheticvoter.com/RegulationDeregulation.htm>.
"Supply and Demand." ThinkQuest. Oracle Foundation. Web. 13 May 2012. <http://library.thinkquest.org/03oct/00921/supplyanddemand.htm>.
"The Untold Story of 'Green' Entrepreneurs- HBS Working Knowledge." Web. 13 May 2012. <http://hbswk.hbs.edu/item/6561.html>.
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