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Free Market Capitalism the Future of Democracy in America

November 21, 2011

When industrialized countries in the West became fully developed they developed systemic problems. Individually these problems can be resolved by the electoral process. Taken as a whole, only the creative destruction of free market capitalism will assure the survival of an America that celebrates personal freedom, individual initiative, and entrepreneurial risk.

Today bureaucracy and regulatory overreach have overwhelmed individual initiative, developed inequities between those whose wealth affords them access to investments in new businesses and a middle class not permitted to risk personal savings in non-registered securities. American healthcare has failed to respond to market demands and has become, like higher education, beyond the reach of wage earners. American higher education, designed for the education of 1920s and 1930s era elites, has been blocked from adopting new technologies. And even America’s national defense Establishment has become sclerotic with bureaucracy.

In private sector manufacturing, General Motors is one of the best examples of a company that lived beyond its time, became torn between labor unions that diverted capital away from productive use and the organization men who made it to upper management in GM’s bureaucracy by going along to get along.

The American administrative state is now the biggest burden on the economy and bypasses elected decision makers through “negotiated rulemaking.” Social welfare programs like Social security, instituted more than three quarters of a century ago, now harm income producers, especially the young, by tethering their retirement contributions to a system of redistribution. What wage earners put into the Social Security system will equal less than they take out and most young people understand that there won’t be any “take out” when they retire.

Taken separately each problem can be reformed by will of the electorate. Taken altogether, no single Presidential Administration can hope to make even a dent.

Thankfully, there are market solutions to these systemic problems. Higher education can shift to Internet distance learning instruction offered by leaner institutions servicing remedial students and those entering the first two years of college. Existing residential colleges and universities can adjust by becoming specialized senior institutions that enroll only those who survive the first two years of undergraduate education.

Even American healthcare can become market oriented by allowing a national marketplace of competitive health insurance programs to develop.

The disparity between the wealthy and the middle classes can be altered by abolishing restrictions by which only “accredited investors,” those with $1 million in net assets, may invest in non-registered securities. That would shift investments of the middle class away from publicly traded securities and into business startups, some with a shot at becoming large companies. Starbucks, AOL and Apple are three examples that middle class citizens might have invested in, but for the restrictions that limit their investments to publicly traded securities.

That is why the clamor against big government from Tea Party activists, social, political and economic conservatives is not really “conservative.” The “conservatives” are in the encampments of the Occupy Wall Street movement, the Democratic Party, universities, employees of municipalities, the states and the federal government, labor unions, the councils of RINO Republicans and all those other places where folks congregate who are comfortable with the current system of bureaucratic status quo.

Some think that we must wait for the next election, or the one after that, before we see real change But, the truly radical solutions that are required to break up these monopolies of power and commercial cartels, educate the American people for self reliance, wean them from dependency on “the state,” and free them to reform how America works already exist in the ideas and animal spirits of American entrepreneurs.

That explains why the Obama Administration is doing its best to stifle entrepreneurship.

Higher education is a perfect example: In the early 1980s, John Sperling, a radical leftist who despised what American higher education had become, fought the education Establishment to create the University of Phoenix. Phoenix, by dint of Sperling’s hard work and determination, cut the time it takes to earn a college degree and lowered tuition costs by operating from leased office space. Without country club accoutrements, Phoenix offered a quick degree for working students who went to school at night. “Night school,” thanks to John Sperling, became desirable and not the place where failures ended up.

Today the University of Phoenix services hundreds of thousands of ambitious students and inspires others to create similar institutions—some solely online. The Obama Administration’s education policies, however, are designed by a New Class of educated elites who despise the profit motive. And they are determined to stop the creative destruction of traditional higher education by for-profit distance learning institutions through new regulations that protect these institutions from competition from new entrants into the education marketplace.

Across the front of systemic issues affecting our advanced industrialized society market forces threaten established institutions, and in each instance opponents of change have used the political process to protect their interests. Fortunately, the United States can no longer solve its systemic problems by more government spending. Some programs and entire government agencies and regulations have to be cut back in order to free market forces to solve society’s problems. Whether or not free market capitalism is allowed to free these forces of creative destruction will determine whether America experiences economic growth or slides into economic stagnation and, ultimately, the serfdom of a bureaucratically administered welfare state.

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