The Chamber

Steve Forbes: On a Crusade for Free Enterprise
An Interview With Steve Forbes

Free Enterprise: What inspired your latest book, How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy.

Steve Forbes: It began before the economic crisis hit. It was very clear that a lot of people did not have an understanding of what free markets are and what they are not. So we [my co-author Elizabeth Ames and I] decided to do a book in a very conversational style, as if you were talking about free enterprise and capitalism with your kids or mom and dad around the dinner table.

FE: Why do you think capitalism is under attack?

SF: There’s a lot of misunderstanding and mistrust out there that is very corrosive and leads to bad policies. There’s a lack of appreciation of the miracle of free markets. In that sense, we’re like a fish in water. A fish doesn’t know it’s swimming in water; it’s just all around it.

FE: In your book, you say that capitalism is the “most moral and humane economic system.” What do you mean by that?

SF: Just because it involves money does not make it immoral. In fact, it is a moral system precisely because you succeed only by providing a product or service that someone else wants. It’s a mutual transaction. This is the one system that forces you to pay attention to others. It brings about circles of collaboration and cooperation without anyone realizing how intricate it is. And it works because no one is in charge.

FE: How do you respond to those who say, “Capitalism and free markets caused the economic crisis”?

SF: Widespread economic crises—both historically and the current one—are caused by government policy errors. They are not some sudden failure of free markets, yet free markets always get the bad rap. The government brought about this crisis. The Federal Reserve printed too much money and kept interest rates artificially low. That creates a commodities bubble. With inflation and hoarding of resources, money floods through the economy, and certain industries get a disproportionate share. In the 1970s, it was energy and agriculture; this time, it was housing.

FE: What role, if any, should government play in a free market system?

SF: In addition to providing security from external threats and internal disorder, the prime role of government is to create an atmosphere where free markets can flourish and blossom—rule of law, sensible tax code, protection of private property. When government goes beyond those basic roles, it starts to really distort the economy, and government cannot do things as well as markets can. Markets are people. Even when government invests in things like infrastructure, it often doesn’t do it with the productivity, efficiency, innovation, and adaptability that you get from private parties.

FE: What can the administration do to help create jobs?

SF: If the president wants to create real jobs, how about a strong and stable dollar? A weak dollar encourages speculation in commodities and currencies; it hurts productive investment in business creation and expansion. How about removing uncertainty on taxes? How about not raising taxes?

FE: Do you think giving businesses a tax credit for hiring would help create jobs?

SF: That kind of targeted thing raises other questions, because what’s a new job? Is it something you were going to do anyway, and now you get to pocket some extra money for doing it? Instead of [government] trying to micromanage the market, why not create the environment for entrepreneurs to figure out what jobs to create? If they have confidence that the rules aren’t going to be changed on them, that they aren’t going to be hauled before Congress, or have to face some crazy legislation, they will take risks and jobs will be created.

FE: What can business owners do to get through this difficult economic period?

SF: They can’t do it alone. One of the messages they have to hammer home to their representatives in Congress and to the White House is, Give us the tools and we’ll do the job. By tools, I mean don’t hit us with onerous new taxes, don’t nationalize our health care, don’t force unionization down our throats, and don’t violate our property rights. Reduce the tax rates so that there is incentive to take risks. Also, although it’s easy to say and extremely difficult to do, look for opportunity. Because of the convulsions of the last two years, people are looking at products and services in a very different way. The old brands don’t immediately hold them the way they used to. The situation is fluid, so new players can emerge. You might be able to do things that weren’t possible two to three years ago.

FE: Who are your free enterprise heroes?

SF: On the political side, people like Ronald Reagan and Margaret Thatcher. Both turned around countries that were headed for trouble. Times and circumstances change, but the principles of progress do not.
In terms of the marketplace, there are any number of heroes. Henry Ford turned a toy for the rich into something a working person could afford. Howard Schultz at Starbucks. Whoever thought you could take something as common as coffee, which everyone can make and everyone sells and, voila, make a faux European coffeehouse with consistency in the system. Also, Ray Kroc of McDonalds. He hits his home run in the toughest business in the world in his late 50s, when other people are thinking of retirement.
A more recent one is Kevin Plank of Under Armour. He was just a kid playing football who noticed during practice that you sweat, and he got the bright idea for a T-shirt that absorbs the sweat. The Marxists should like that one—he made his money off the sweat of other people.

FE: Do you think you’ll ever run for president again?

SF: No, I’m an agitator now [laughing].

Originally published March 2010. Reprinted by permission, uschamber.com, March 2010.
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