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the absence of a national commitment to take the tough steps necessary to make
America more competitive-and the absence of a new consensus around the
appropriate role of government in the marketplace.
TO BUILD THAT consensus, we need to take a look at how our market system has
evolved over time. Calvin Coolidge once said that ôthe chief business of the
American people is business,ö and indeed, it would be hard to find a country
on earth thatÆs been more consistently hospitable to the logic of the
marketplace. Our Constitution places the ownership of private property at the
very heart of our system of liberty. Our religious traditions celebrate the
value of hard work and express the conviction that a virtuous life will result
in material reward. Rather than vilify the rich, we hold them up as role
models, and our mythology is steeped in stories of men on the make-the
immigrant who comes to this country with nothing and strikes it big, the young
man who heads West in search of his fortune. As Ted Turner famously said, in
America money is how we keep score.
The result of this business culture has been a prosperity thatÆs unmatched
in human history. It takes a trip overseas to fully appreciate just how good
Americans have it; even our poor take for granted goods and
services-electricity, clean water, indoor plumbing, telephones, televisions,
and household appliances-that are still unattainable for most of the world.
America may have been blessed with some of the planetÆs best real estate, but
clearly itÆs not just our natural resources that account for our economic
success. Our greatest asset has been our system of social organization, a
system that for generations has encouraged constant innovation, individual
initiative, and the efficient allocation of resources.
It should come as no surprise, then, that we have a tendency to take our
free-market system as a given, to assume that it flows naturally from the laws
of supply and demand and Adam SmithÆs invisible hand. And from this
assumption, itÆs not much of a leap to assume that any government intrusion
into the magical workings of the market-whether through taxation, regulation,
lawsuits, tariffs, labor protections, or spending on entitlements-necessarily
undermines private enterprise and inhibits economic growth. The bankruptcy of
communism and socialism as alternative means of economic organization has only
reinforced this assumption. In our standard economics textbooks and in our
modern political debates, laissez-faire is the default rule; anyone who would
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challenge it swims against the prevailing tide.
ItÆs useful to remind ourselves, then, that our free-market system is the
result neither of natural law nor of divine providence. Rather, it emerged
through a painful process of trial and error, a series of difficult choices
between efficiency and fairness, stability and change. And although the
benefits of our free-market system have mostly derived from the individual
efforts of generations of men and women pursuing their own vision of
happiness, in each and every period of great economic upheaval and transition
weÆve depended on government action to open up opportunity, encourage
competition, and make the market work better.
In broad outline, government action has taken three forms. First, government
has been called upon throughout our history to build the infrastructure, train
the workforce, and otherwise lay the foundations necessary for economic
growth. All the Founding Fathers recognized the connection between private
property and liberty, but it was Alexander Hamilton who also recognized the
vast potential of a national economy-one based not on AmericaÆs agrarian past
but on a commercial and industrial future. To realize this potential, Hamilton
argued, America needed a strong and active national government, and as
AmericaÆs first Treasury secretary he set about putting his ideas to work. He
nationalized the Revolutionary War debt, which not only stitched together the
economies of the individual states but helped spur a national system of credit
and fluid capital markets. He promoted policies-from strong patent laws to
high tariffs-to encourage American manufacturing, and proposed investment in
roads and bridges needed to move products to market.
Hamilton encountered fierce resistance from Thomas Jefferson, who feared
that a strong national government tied to wealthy commercial interests would
undermine his vision of an egalitarian democracy tied to the land. But
Hamilton understood that only through the liberation of capital from local
landed interests could America tap into its most powerful resource-namely the
energy and enterprise of the American people. This idea of social mobility
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