The free-enterprise system is under grave threat both here in the United States and abroad. As free-market capitalism collides with state-led economic development in large developing countries such as China, India, Russia and Brazil, and governments systematically distort their markets to secure an advantage in global competition, we need to ask ourselves how can we best secure free trade and free markets — in other words, the essence of the free-enterprise system both here and around the world.
Government distortion is damaging not only to the U.S. economy, but the world economy by sucking trillions of dollars out of it, and leading directly to higher unemployment rates.
In the United States, the role of government in the economy has jumped to the top of the national discussion, thanks to the Tea Party. This group has highlighted that there is a profound difference between those who believe in the free-enterprise system with all its benefits arising from economic liberty, and those who believe that the government should have a stronger role to play in the economy.
On the other hand, many of the Occupy Wall Street group’s policy prescriptions are drawn from a zero-sum worldview where, if someone is rich, it is because they have taken from someone who is poor, and therefore the rich must have their property taken away in order for equality to prevail.
In this worldview, government’s role is to level the playing field and rein in the rapacious edges of free-market capitalism.
Surprisingly, the Republican candidates for the 2012 presidential election have markedly different positions on this issue. While most of them would say that free trade and free markets are good, many fall into the trap of believing that enhanced trade alone will inevitably lead to free markets inside borders in other countries.
But the reality is that some countries are systematically distorting their markets to benefit their own preferred national champions. To stand idly by would be to fiddle while the free-enterprise system burns.
For these reasons, former Massachusetts Gov. Mitt Romney has been rightly strident on this issue with respect to China. Romney appears to understand that the U.S. woefully lacks the tools to deal with this new threat, and by advocating those tools is in the best position to secure the ultimate result that the Tea Party craves — economic liberty at home and abroad, and the preservation of the free-enterprise system itself.
His proposal for a Reagan Economic Zone coupled with real disciplines on market distortions in China is precisely the combination of carrot and stick that the U.S. and, more broadly, the world needs to secure economic liberty and free enterprise. No other candidate has shown such a detailed and comprehensive approach.
The reality is that “creative destruction” is a powerful engine of growth, but fragile in the teeth of coercive government power. The battle between the forces arrayed on the side of economic freedom and those on the side of government distortions is always a brutal one.
These battles posit a clear choice. You are with one side or the other. There is no fence straddling here, whether you are in the private or public sector.
What you choose to do in your private or public life advances one or the other of these forces. This is the yardstick by which any of the candidates on the Republican side should be judged.
They must walk the walk as well as talk the talk.
Shanker Singham is chairman of the International Roundtable on Trade and Competition Policy and a partner in the Washington office of global law firm Squire Sanders. Ricardo Ernst is a professor in the McDonough School of Business at Georgetown University.
