The Assault on Free Enterprise

The recent Finance Bill of Mr. James Callaghan, Britain’s Chancellor of the Exchequer, is perhaps the most dangerous of a long and continued series of assaults upon the free enterprise system in that nation. The fact that freedom is similarly threatened in the United States and elsewhere  gives universal importance to the alarm sounded from London by the Institute of Directors representing more than 40,000 British businessmen.

Britain lives by free enterprise. It is the whole basis of our way of life. Even those who openly abuse and deride free enterprise admit that four-fifths of the nation’s business should stay outside the net of nationalisation.

Now there are ominous signs of the free enterprise system being eaten away without the country’s citizens being aware of it. Indeed the most alarming thing about the latest and most dangerous assault on free enterprise is that so many people are not really alarmed.

They seem not to have noticed the cracks in the ice, the plume of smoke from the volcano, the shift­ing of the landslide; or if they have seen it, they dismiss what’s happening as something remote. "It doesn’t affect me personally, so why should I worry?"

By the time you have finished reading this booklet, we believe that we will have shown how it does affect everyone personally, why it’s not just the concern of the nation’s businessmen, but is in truth everyone’s business.

Mr. Callaghan’s Finance Bill is the sharpest and most open warning yet. It will cut deep and has shocked a lot of people, ordinary people who saw themselves a mile away from this sort of issue. But, make no mistake: the subtle proc­ess had already been going on for some time before Mr. Callaghan got to his feet on Budget Day. He made no secret of the fact that his measures were not a "once for all" burst of radicalism. Far from it. They are meant as the first in a long series of anti-business restric­tions.

Capital, says the Chancellor in effect, is the enemy. Let us beat it to its knees. And in doing just that, he cuts off industry’s raw material. For without capital, the free enterprise system must wither. The wall is breached. The State walks in.

An assault on capital is an as­sault on the means whereby busi­nesses grow. It is an assault on the reasons why businesses grow. The assault on capital takes shape for all to see if they have a mind to do so. Look at the facts.

Hard to Raise Capital

The government makes it in­creasingly tough for the business­man to get new capital. It’s not only practically difficult. It’s al­most socially indecent. Savage and steeply progressive tax rates on individuals and on companies—and a political bias which favours the spenders rather than the savers — make it impossible to build up reserves. Robbed of reserves, the market dies. The businessman may recall from his school days the task of Sisyphus, one of the Titans who was condemned to roll up a hill a stone of ever-increas­ing weight; the businessman has this dubious advantage over Si­syphus—he knows he can’t win.

But the assault doesn’t stop there. It’s almost as difficult today to keep capital in a business as it is to accumulate it. Compared with the new Capital Gains Tax, death duties were a mild imposition, a feather touch compared with a full-blooded lash. The Capital Gains Tax makes no allowance for inflation. It is thus a recurrent capital levy, that once-for-all tax Sir Stafford Cripps, the spiritual forebear of Mr. Callaghan, im­posed in 1948. Of course, it will mean the end of the small busi­ness during the owner’s working life-time. (When Mr. Heath made this point in the Commons debate on the Finance Bill a voice from the Labour benches called, "And a very good thing, too.")

What is the ultimate source of new capital? The answer is—prof­its. And now, deliberately, profits are being buffeted from every di­rection: by taxes piled on taxes, by compulsory contributions, by forced levies, by any amount of cost increases coming directly from government decision. Knock the profits, and you knock the system by which they are made. It’s all very simple.

Investors, too, find themselves in the front line. The government institutes a vindictive tax policy —"unearned income" is an attrac­tive catchword for those with neither the wits nor the thrift to acquire it. This shrinks the pos­sible return on the investment stake and has now dimmed even the hope of capital gains. Inves­tors are rebuffed no less by the Corporation Tax whose clear pur­pose is to cripple their chances of a share in profits.

How Long?

What’s the total of this dismal arithmetic? At every stage suc­cess is penalised, ambition curbed, and enterprise stillborn. The re­markable thing is that business activity and investment should, so far, have withstood this brutal as­sault as well as they have. But there is a limit to the punishment they can take. From now on, the effects will increasingly be felt. New businesses, new investment, new enterprises will dwindle. They must. For the seed-corn is being eaten.

Does all this matter? Well, of course it matters to the business community. But in fact, it matters very much to all those who abhor the prospect of an omnipotent state, all those who want to live their own lives.

Let’s get the record straight here—it’s unlikely that anyone else will. What we call the free enter­prise system is not just another economic theory, an "ism" in the same breath as Marxism or so­cialism: it is freedom. Without economic freedom, without the freedom to save and spend, to ac­cumulate and invest and inherit, without the freedom to misspend (for we need no-one to tell us whether we are spending our own money wisely or not), personal freedom disappears.

Destroy free enterprise and we will forfeit the right to make up our own minds: the final sacrifice. If nobody has any capital, if no­body can launch an enterprise without the state’s approval, then the rape of free enterprise is com­plete. This means the death war­rant for any man with the enter­prise and guts to start his own business.

No businessman is stupid enough to believe that in a period of rapid technological change and huge capital requirements there aren’t problems to be solved: big problems, social and structural. They demand consideration. They can be solved. But the last people to solve them are governments and their economic advisers who either because they just don’t un­derstand the problems, or are swayed by political doctrines, are out to sabotage the whole system.

That’s the situation. It’s ex­tremely dangerous. If the social­ists have their way, Britain will get less and less investment, less and less accumulation of capital, fewer rewards for efficiency, a rapidly dwindling number of pioneers and merchant adventur­ers. There’ll be no more Nuffields. Least of all can the business com­munity afford to ignore what is happening or dismiss it as "mere politics." But the peril goes deep­er — it strikes at us all. The peril, make no mistake about it, threatens our way of life, it threatens our future prosperity, it threatens our freedom — yours and mine.

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The Misfortunes of Intervention

All the misfortunes that our beautiful France has been experi­encing have to be ascribed to "ideology," to that cloudy metaphysics which goes ingeniously seeking first causes and would ground legislation of the peoples upon them instead of adapting laws to what we know of the human heart and the lessons of history. Such errors could only lead to a regime of men of blood and have in fact done so. Who cajoled the people by thrusting upon it a sov­ereignty it was unable to exercise? Who destroyed the sacredness of the laws and respect for the laws by basing them not on the sacred principles of justice, on the nature of things and the nature of civil justice, but simply on the will of an assembly made up of individuals who are strangers to any knowledge of law, whether civil, administrative, political, or military? When a man is called upon to reorganize a state, he must follow principles that are forever in conflict. The advantages and disadvantages of the dif­ferent systems of legislation have to be sought in history.

From Napoleon’s reply to the Council of State at its session of December 20, 1812.