Free Enterprise - America's
Harmful Illusion
By Terrell E. Arnold

Any time now we can expect another major American enterprise to go down in flames as a result of executive greed and corruption. But of course, we should not leave out greedy shareholder expectations. Many journalists are saying that Enron and Worldcom, Harken, Halliburton, and a growing list of other candidates are only the tip of an economic failure iceberg the potential size of Antarctica. When the truth is known, that may be the case for highly visible pieces of the American system, but it will not be true for all of it, not even most of it. The reasons are deeply imbedded in American practices, even though we often seem deeply confused about what those practices are.
For thirty years I served in the US Department of State as an officer with broad responsibilities for explaining and carrying out American economic and financial policies and protecting American business interests abroad. In places such as Cairo, Calcutta, Colombo, Manila, and Sao Paulo, and in the Department of State itself, I dealt with many issues involving the actions and interactions of business and government. In every respect, the American system was, and still is, the top of the heap. But in dealing with foreign and American businesses abroad, as well as in conducting relations with foreign governments, the biggest single hurdle to navigation was not what Americans actually did, but what they said and thought they did. Enormous confusion arose in foreign media, government officials bridled, and foreign businessmen gloated over the thought as we tried persistently and innocently to export "free enterprise.
The simple truth of the matter, as I tried to explain when confronted, is that we never have had a system of free enterprise. From the beginning our founding fathers created and we evolved a system of private enterprise regulated by government. Putting aside actual wars, including the Cold War, which had at root pretty fundamental economic differences of view, our national tug of war between government and business always has been between government regulation in the public interest versus unbridled business self-interest. It still is today.
Over the years one side or the other has waxed or waned. Journalists today are fond of recalling the trust busting successes of Teddy Roosevelt, because in that epoch the regulators achieved the upper hand where sharp business practices were concerned. However, we have witnessed several decades of the reverse. On one hand, we have seen a persistent questioning, mostly by ideologues, of the need for and value of government regulation, nay even of government itself, and on the other hand, we are now witnessing a virtual collapse of business ethics under the onslaught of greed and unseemly profit opportunities. Ironically, business has brought itself to this lowly state by co-opting the regulators and cozening them into the notion that regulation is unnecessary, business actually can regulate itself. If you believe that today, wooden nickels have a great future.
The costs of this cozy union are still growing. We may or may not see strong legislation to regulate business and accounting practices before this Congress adjourns for the Summer. If we get useful legislation, hopefully it will grow out of recognition that proper regulation of business activities is essential to the growth and stability of our society. We can do without Enron style business malpractice, the systematic robbery of small investors, unregulated electric power supplies, unregulated and about to collapse civil airlines, road-busting coal trucker habits in West Virginia, the rape of forests in the Northwest, and a number of failing processes that we all know are the proper subjects of public oversight.
In the end, however, we cannot do without the initiative and the wit that make American enterprise a global leader. Thus, we need a balance that serves to protect the public interest while giving enterprises room to grow and prosper. To get this done, it is in our best interest to act without illusions or ideological visions of what our system is. We have a well-established system of private enterprise regulated by government. That system works. Recent failures show what happens when we put that system aside. Our challenge is how to achieve and sustain proper regulation. The lessons of recent years and months make it plain that we cannot afford unregulated, that is "free" enterprise.


This Site Served by TheHostPros