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January 28, 2005

Economic Opportunities are Waning
by Hans F. Sennholz

Most Americans still believe that their country offers more opportunities for economic success and advancement than any other country on earth. They are convinced that American society is basically free and meritorious which judges everyone according to his individual ability and rewards him for his accomplishments.

This view undoubtedly reflects the early history of the country when few economic laws and regulations encumbered economic activity and many European immigrants managed to rise from rags to riches. It envisions genuine economic freedom in which the most productive and creative members of society climb to positions of affluence and eminence. But does it actually describe economic and social conditions today or does it merely echo old notions and convictions?

Unequal ability, whether innate or acquired, tends to lead to great differences in personal income and social position in every kind of economic system and social order. In a market order, men and women who render valuable services to consumers are rewarded accordingly; others with lesser ability and diligence who render mediocre services earn and receive less. Consumers are the judges who determine and allocate the rewards. They select the producers who serve them best and therefore rise on the ladder of wealth and position. But they may also demote producers or their heirs who no longer serve them satisfactorily.

Ours is an age of persistent political supervision and intervention that encompass nearly every aspect of economic life. Countless economic laws and regulations and onerous taxation muffle the calls and orders of consumers but magnify the wishes of legislators and regulators. A dense thicket of statutory obstacles renders it ever more difficult to climb the ladder of success by way of market service but facilitates success on the route of political connection. Few poor people have political connection which would allow them to find their way through the thicket, and few budding entrepreneurs have the means to confront a bureaucracy set on maintaining the status quo. It takes a large legal staff of Wal*Mart or Sears Roebuck to challenge the economic edict of a local regulator; it may take many years of wrangling and many thousands of dollars in legal expense to obtain a license for business expansion. Strapped beginners need not apply.

Academic analyses now show that it is increasingly difficult to rise from rags to riches. Some studies reveal, for instance, that fewer and fewer families in the bottom fifth of the population (as ranked by income and social status) can make it up the ladder. Nearly 70 percent remain either at the same level or even do worse than their forebears; similarly, many in the second-poorest fifth stay put in their class. While all such studies readily agree on growing social immobility, they may differ on the causes of such a development. Some may hint at a business plutocracy which is said to exercise its influence on public affairs. Others yet believe that the education system as it developed in recent decades is increasingly stratified by social classes. Poor children attend poor schools while the students from the richest socio-economic class attend the country's top colleges. They are at Harvard, Princeton, Yale, and Duke.

This writer is inclined to fault the new economic order known by various labels such as the New Deal, the Great Society, and other Democratic and Republican Deals. They signaled the sway of popular notions of social conflict and the beginning of social legislation. Guided by a motley of economic ideologies that originated in the Old World, some members of the political elite readily adopted various versions of the exploitation doctrine according to which government needs to protect labor from the greed and power of capitalists. Others embraced the notions of Historicism and Institutionalism according to which production now is exceeding necessities. Ruthless exploiters use the property rights, seizing the surplus and living in leisure. Self-interest clashes with the common good, and money-making motives prevail over service intention and design. Both doctrines meant to reduce the inequality of incomes and levels of living; both actually buttressed the thicket and increased social immobility.

Despite the rising barriers of economic regulations and taxation, innate ability and will power still may attain individual success and advancement by way of higher education. With the help of much state and federal aid, talented young men and women of limited means may find their way through college and graduate school and enter the professions. There are multibillion-dollar federal grants to elementary and secondary education of students with special needs. There are financial assistance and guaranteed student loan programs, direct support for students in health-related research and studies, and federal aid for developing institutions such as Howard University and Gallaudet College. All state governments spend a lion's share of their tax revenue on higher education.

It cannot be surprising that some talented youths manage to advance from poor beginnings to well-to-do professions. Naturally, most of them are forever beholden to all manifestations of the welfare state and amenable to government largess. Ignorant and incurious in matters of industry, trade, and commerce, they are ever suspicious of the motives and actions of businessmen. The old welfare states of Europe, such as France, Germany and Italy, are well anchored in the professions that are fed and fostered by government.

When compared with those welfare states, this country still may offer more opportunities for economic success and advancement; but the underbrush of laws and regulations gradually is reducing those opportunities.

Hans F. Sennholz
www.sennholz.com

Copyright © 2002-2007 Hans F. Sennholz

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