Many people in India today believe that free enterprise, unchecked and unrestricted by any State control, will lead to anarchy and disorder. This wrong notion arises from a misconception about the term ‘free enterprise.’
Logically, there can be no anarchy; there can only be various orders. The difference between free enterprise and socialism or communism is not that the former is disorderly while the latter are given to order but a difference between patterns of economy. Under free enterprise, there is absence of an authority to establish and regulate the hierarchy of needs and wants and the proportion of each for the individual while under communism all wants of the individual are dictated by a central, supreme authority.
Thus those libertarians who defend free enterprise are not in the pay of capitalists but in the pay of their own conscience. The libertarian believes that liberty is the sine qua non to progress, that progress is impossible without freedom. Liberty is defined as the faculty and possibility of making a choice. This implies a double-ness; for, freedom is both social and individual. The faculty to choose is a personal quality and calls for individual development. Whereas the possibility to exercise choice depends upon social conditions and environment. Free enterprise is the only guarantee of the widest possible choice.
Free enterprise does not mean a repeal of all laws for all laws are by no means necessarily a narrowing of freedom. Certain laws are necessary for the maintenance of justice and prevention of crime. The method of free enterprise is that of democratic legislation; it seeks to minimise injustice through legislation and not through political intervention. Thus, for example, evils like the various monopolies can only be eradicated by a proper reform of legislation, not by nationalisation.
Furthermore, free enterprise is the only system that guarantees a maximum of productivity and hence the greatest good of the greatest number. Capital in a capitalistic society is the tool used for production. Since any socialist State which owns all the tools will have to pay interest on its bonds, it boils down to a question of State capitalism versus Private capitalism. For, the capitalist payment or profit is really payment for the use of tools. Now, so far no State has been devised which will use the tools to a greater productivity. Why then concentrate all the capital into the hands of the politicians and create the greatest and the most tyrannical monopoly that ever existed?
From irrational inclinations comes also the vilification of profits. Profits and morality have nothing to do with each other. Profits are bad only when they are not enough; profits are the wealth of a nation. The more the profits, the more the prosperity.
All abuses against profits arise out of a misconception and ignorance of the nature of economic processes. Some profits are no doubt improper; but these are due to monopolies.
Even Government enterprises cannot afford to neglect profits. The test of any enterprise is ultimately profits, except in the case of social and public works. Maurice Zinkin writes in Development for Free Asia: “All Asian planning, therefore, should make profit the centre of its attention. Yet so deep is the aversion to the idea of profit. . .that none of the plans which have been prepared, not even the lengthy and detailed Indian First Five-Year Plan, discusses profit at all. The question the planners ask in Asia is not ‘How can the national income (which, it must be remembered, is purely a measure of satisfaction in terms of money, and takes no account of the relative moral value of those satisfactions) be increased the most at the least cost?’ Instead they begin from a whole series of different premises and build upon them. They argue that wealth comes from industrialisation; so they create uneconomic industries and bolster them with protection. They accept that national safety requires a high degree of autarchy; so they build up defence industries and automobile industries which run expensively because their production is too small.
“They consider that the handicraftsman represents certain social values it is important to preserve; so they keep him in existence by subsidies. They worry about their balance of payments; so they lend money to shipping companies at uneconomically low rates of interest, or talk of synthetic petrol plants. They have the political pressures on their Ministers to consider; so they spread schemes evenly over the country and give equal attention to backward areas. They share the intelligentsia’s suspicion of the businessman and faith in the State; so they crib and cabin the businessman at every turn and extend the State’s sphere constantly, though the State is short of entrepreneurial and managerial talent, and its size gives it a bias towards the long-term low-return scheme rather than the short-term high-return scheme.”
Rational economic thinking cannot afford to be dictated by personal whims and ideological quackery. To brush aside capitalism as evil or to decree profits is to neglect one’s own interests. For capitalism is the bed-rock of all economic progress. Socialism is a parasite. British socialism is all the while sustained on American capitalism.
Libertarianism which seeks to retain capitalism while curing it of monopoly has always been fighting. In the anti-mercantilist epoch, its champion was Adam Smith. In the anti-conservative epoch, John Stuart Mill stood out as its defender.
Today is the anti-socialist era. Libertarianism is fighting; dedicated with all its power and love of liberty. It does not matter whether it wins in the political sphere. What matters is not political parties but ideas.
This essay is part of a series from the Indian Liberals archive, a project of the Centre for Civil Society. It is excerpted from The Indian Libertarian Journal, with the essay originally titled: “Independence Day-looking before and after,” published on 15 August 1957. The edition was released on the 10th anniversary of the Indian Independence. The original version can be accessed here.