The system of limited government provided opportunities for individuals to "do their own thing". This led to the growth of private enterprise and development. Freedom provided opportunity for initiative and action leading to the great developments which took mankind from the age of the horse and buggy to travelling in space in the lifetime of one individual the one hundred years from 1870 to 1970 has seen more change and development than had taken place through the entire period of man's inhabitance of this planet. There is a close connection between levels of freedom and development, or lack of it. There is a connection between development and small government and distribution of private power in a society which values individual responsibility — both the last two words are equally important.
Capitalism is a misleading word — placing capital as basic to economic freedom. What economic freedom provides in the context of the rule of law is opportunity for innovation, initiative, risk taking, entrepreneurship and competition which cumulatively lead to progress and development, which substantially outweigh the costs.
Private property forms the backbone of the western democratic system. Its central purpose is twofold: firstly, civil liberty (the right to pursue one's own interests, and lead one's life as one chooses within the bounds of the laws of the land) and, secondly, political freedom. These are both a direct function of the existence of private property. To the extent which government controls property, it controls people. Without private enterprise, people become totally dependent on the government for their livelihood and their autonomy to choose their own occupation vanishes. As private property declines, governmental power increases. As the governing bodies obtain more power, they do so at the expense of the individual and the government's reliance on those individuals for its growing power becomes less and less, until it is merely responsible to itself. Foremost, without private property, the people lose their own power to check and oppose the government, should the need arise and, in particular, in instances when government officials are found to be corrupt. In short, without private property, democracy will remain but a fraudulent myth.
The alternative to private property is government property — a simple but neglected truth.
To the extent that government controls property, it controls individuals. There is little scope for individual freedom where the State owns all property and where all are employed by the State. There is an inverse relationship between, on the one hand, the power of government and, on the other hand, the growth of private property, democracy, western political and civil liberties and economic development. This has been effectively and statistically demonstrated by Paul Johnson in his book, A History of the Modern World.
Williams supports this analysis:
It is arguable that the destruction of mercantilism, the industrial revolution, and the emergence of an essentially market economy, did more for the poorest, in material terms, than did some 1,800 years of preaching about charity. It is so easy to forget that life for the masses was, under mercantilism, nasty, brutish, and short. London and Paris were cursed with recurrent famine; indeed life expectancy at birth in France was, in 1800, 24 for males and 27 for females. In 1780 over 80 per cent of families in France spent 90 per cent of their income simply on bread. Yet in one century the very nature of poverty was transformed. The working populace in Britain quadrupled, and real per capita disposable income doubled between 1800 and 1850, and doubled again between 1850 and 1900. A sixteenfold increase in wealth and services is hardly adequately dealt with simply by sighing over the fiction of Dickens and Zola — or of Marx and Engels, for that matter. ( — J K Williams,The Christian and the State, Sydney (1983) pp 18-19)
Most of the benefits of western technology and capitalism have endured primarily to the benefit of the less privileged sections of the community. Poverty and injustice, which critics make much of, exist and will exist in any human society. Jesus Christ said, "the poor you will always have with you". However, the perspective which radical and not so radical reformers overlook is the extent of the change that took place under freedom.
The successes of private enterprise are succinctly explained by Milton and Rose Friedman, Free to Choose, Melbourne (1980) pp 147-148:
In the past century a myth has grown up that free market capitalism increases such inequalities, that it is a system under which the rich exploit the poor.
Nothing could be further from the truth. Wherever the free market has been permitted to operate, wherever anything approaching equality of opportunity has existed, the ordinary man has been able to attain levels of living never dreamed of before. Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those societies that do not permit the free market to operate. This is true of feudal societies like medieval Europe and India before independence, and much of modern South America, where inherited status determines position. It is equally true even where central planning has been introduced, as in many countries, in the name of equality
Russia is a country of two nations: a minutely small privileged upper class of bureaucrats, Communist Party officials, technicians and a great mass of people living only a little better than their great-grandparents did. The upper class has access to special shops, schools and luxuries of all kinds; the masses are condemned to enjoy little more than the basic necessities.
Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant little to the wealthy. The rich in ancient Greece would have benefited hardly at all from modern plumbing — running servants replaced running water. Television and radio — the patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading artists as domestic retainers. Ready-to-wear clothing, supermarkets — all these and many other modern developments would have added little to their life. They would have welcomed the improvements in transportation and in medicine, but for the rest, the great achievements of western capitalism have rebounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful.
The strengths of private enterprise are also visible when the standard of living under capitalism is compared with the standard of living under communist and other totalitarian systems. Whether private enterprise is compared with what it replaced, namely feudalism, or whether it is compared with other available alternatives — the economic structures of totalitarian regimes or dictatorships (feudal, semi-feudal, communist, fascist) — private enterprise must rate head and shoulders above its competitors. Critics of private enterprise do not consider this aspect, except to concede that capitalism is superior to feudalism. They do not focus on the extent of the superiority, nor do they compare its record with communism or with democratic socialist interventionism.
A perceived market failure or injustice within capitalism is for some a reason for government activity. Such advocates do not realise that the choice is between the imperfect market, subject to law and investigative reporting, which are important barriers upon actions and imperfect legislators and imperfect bureaucratic activity. If a rational choice is made, bearing in mind the record of bureaucracies and government commercial enterprises, there will be a great deal less pressure for government activity and funding. Many academic, media and bureaucratic studies are published about the abuses which exist within the liberal democratic system. By comparison there are few studies of the abuses which exist within government bureaucracies and particularly within government commercial enterprises. A better sense of perspective will be obtained if there is a greater focus on such aspects.
While conscious of the injustices which are perpetrated under private enterprise, the regulationists are unwilling to realise that the alternative to private enterprise is public enterprise, which is invariably worse in most respects. If the economic cake is to provide shares to the underprivileged it must grow in size. The enemies of the free society distrust wealth. But that wealth must be created — and it is created by entrepreneurs. The coercive utopians are talkers and planners but not creators and doers. The policies of excessive government regulation and over-taxation have, in the latter half of this century, had the consequence of preventing the size of the economic cake from expanding, even of making it smaller. There is a blindness to the reality that the policies based on hatred of capitalism, lead to a smaller economic cake — and that the smaller economic cake is not even more fairly divided. A great deal of money is creamed off by the bureaucracy and special interest groups and does not reach the poor and underprivileged sections of the community.