With Mitt Romney’s sweep of Tuesday’s primaries, he will almost certainly be President Barack Obama’s Republican opponent in November. Romney has vowed to make the economy the chief issue against Obama, and he is sure to portray the president as an enemy of free enterprise in order to draw a contrast with himself. How fit is Romney’s claim to be a champion of economic freedom?
The former Massachusetts governor and private-equity capitalist speaks often about free enterprise and the need for government to let entrepreneurship pull the economy out of its current doldrums. This sort of rhetoric is common for Republicans, who then proceed to violate economic freedom.
President George W. Bush, in a weird Orwellian manner, took this contradiction to its final stage of absurdity when he said during the 2008 financial debacle, “I’ve abandoned free market principles to save the free market system.” For Bush, the free-market system apparently is not constituted by free-market principles. But if that’s the case, what is the system constituted by?
Republicans may not typically speak so bluntly, but to most of them “the free-market system” isn’t a set of principles; rather it is an emotional slogan to be spoken, especially as an election approaches. It’s a way of saying, “Vote for us because the other guys aren’t good Americans like we are.”
Romney likes to say, “We are only inches away from ceasing to be a free market economy.” But that must mean we now have — and have had — a free-market economy. Does he really mean that? If so, does he agree with Bush that free-market principles were “abandoned” with the bank bailouts like TARP (which Romney favored) and the GM and Chrysler rescues?
Another implication of his position is that the free market was responsible for the housing and financial debacle. We’re not likely to hear Romney say this — it would concede too much to Obama — but it’s logically implied by Romney’s remarks.
This position diverges from what free-market advocates think happened. The essential story is this: Low-interest-rate money from the Federal Reserve, aggressive government policies to increase homeownership — even among people with bad credit histories or low incomes (or both) — and additional government intervention combined to create an unsustainable bubble in the housing industry, which in turn helped increase the fragility of the financial sector. Dubious mortgages became the foundation of widely held securities and derivatives, facilitated by government-sponsored enterprises — Fannie Mae and Freddie Mac — and a government-licensed rating cartel. Then the bubble burst.
Does Romney give even a hint that he understands this? If so, he wouldn’t be talking as though the free market currently exists and as though we still have it to lose.
Beyond that, Romney expresses his orientation toward political economy when he says, “Washington has to become an ally of business, not the opposition of business.” A free-market advocate would know this doesn’t exhaust the alternatives. Government should be neither an ally nor an opponent of business, because both imply interference with private property and free exchange.
This may be harder to see in the case of a business-government alliance. One need only remember that we live in a world of scarcity. If government helps one industry or firm, it must do so by channeling scarce resources away from other uses. This disables the process by which entrepreneurs attempt to devote resources to purposes most favored by consumers. It’s a form of government privilege, which many businessmen are all too happy to receive — at the expense of others. There is a world of difference between being pro-market and being pro-business — a distinction that apparently escapes Romney.
Of course, Obama could honestly say he agrees with Romney’s statement about business and government. He too believes government should be business’s ally. Just ask Jeffrey Immelt of General Electric, who chairs his Council on Jobs and Competitiveness, and Jim McNerney of Boeing (and formerly of GE), who chairs the President’s Export Council. Romney and Obama’s differences over the precise mix of government and business decision-making power should not fool anyone into thinking they have a fundamental disagreement.
Once again, the presidential election will present an echo, not a choice.