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When Republican Eric Hovde announced his candidacy to challenge Tammy Baldwin, two-term U.S. Senator from Wisconsin, he included in his opening speech a standard party message: he’s in favor of “freedom.” But what does that mean to voters?
This version of freedom is not an invocation of the sacred oath to defend the nation’s Constitution against “all enemies foreign and domestic.” Nor is it a reference to FDR’s Four Freedoms, nor the freedoms set forth in the Bill of Rights. No: this “conservative” rhetorical flourish means freedom from government, especially business regulation and personal and corporate income taxes. In support of this conception of freedom is a standard list of objectives: limited government, smaller government, individualism, free markets, balanced budget, lower taxes, less regulation. In other words, get the government off the back of the private sector profit-seekers.
The problem with this recitation is that market capitalism requires the proper mix of a strong public sector in support of the private sector. Neither the public nor the private sector work well on their own. The hard work of legislative public policy is to determine how best to design and implement the complementarity of these sectors. Without that hard work, that reflexive “standard list” is mere sloganeering. Candidates for office should be required by reporters, pundits, and debate moderators to explain the proper role of government in support of the private sector and how to obtain it.
Alleviating Scarcity
The purpose of any economy is to alleviate “scarcity” —meaning nature’s limits on resources. Scarcity imposes constraints on human activity and even survival. Accordingly, economic freedom increases when the people enjoy increased command over resources, usually summarized as the increased ability to pay for goods and services. Often government intervention is needed to provide for and enhance economic freedom. For example, the Affordable Care Act has set a record of 45 million people enrolled, most of whom would not have the freedom afforded by health insurance without the Act.
Market economies enhance economic freedom when important pre-conditions are present, primarily competition. Competition coordinates incentives to induce profit-seekers to enhance economic freedom although that is not part of their intent.
Markets alleviate scarcity by providing a decentralized coordination of the billions of personal and business decisions that are made every day. But when the pre-conditions for markets are not present, complex tasks must be performed by government—national defense, highway construction and repair, water/sewer systems and a host of other combined federal, state and local government responsibilities.
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Chips and Science
Consider two episodes in which government intervened in the workings of the economy: the Chips and Science Act to stabilize the U.S. market for microchips and Operation Warp Speed that accelerated the production of the vaccine to fight Covid-19. In each case the question becomes “Did economic freedom rise or fall as the government intervened?”
These days nearly all goods of any complexity require semiconductor microchips—not only computers but also dishwashers, washing machines, automobiles and any devices festooned with the word “smart,” such as televisions and telephones. Microchips are essential in regulating the flow of electricity across the “smart” grid. Prior to the pandemic, the manufacture of microchips was concentrated in mainland China and Taiwan, a natural outcome of market forces that tend to place mass production in low-cost locations.
To reduce the risk of the collapse of the international chip market due to the pandemic (or perhaps hostile government shut-down of chip exports during periods of international conflict), to free the nation from such risks, the Biden administration established the Chips and Science Act to invest $52.7 billion to encourage chips manufacturers to expand mass production of microchips within the United States.
Operation Warp Speed
Before new drugs are allowed to be used by U.S. citizens, they must pass the food and drug administration tests for safety and efficacy. Ordinarily, the process of testing/approval precedes mass production/distribution. However, when in early 2020 the pandemic threatened to kill millions of people, Operation Warp Speed was designed to test and manufacturesimultaneously. This gambit resulted in hundreds of millions of doses produced and stored by the time the mRNA vaccines passed the tests for FDA approval. (Had they failed the tests, those units would have been destroyed.) Because the vaccine was available, distribution—shots in arms—could began in the first months of the Biden administration. This government intervention made the population safer and willing to return to work, boosting the economy and increasing the income and wealth of the nation, raising economic freedom substantially.
As these two examples exhibit, “economic freedom” is derived from the proper mix of private and public sector activity. Voters should demand that candidates for office demonstrate an understanding of this basic economic principle.
