The free market needs a moral defense.

Today, free market capitalism is under attack more than any other time in our nation’s history, whether the target is Wall Street, oil companies, or as Annie Leonard would have it, our whole system of wealth creation in general.

Many Americans are still confused about what went wrong on Wall Street during the 08′ financial crisis, and the distinction between free market capitalism and its ugly half sibling, crony capitalism, can be difficult for many to discern.

Enter the Atlas Network’s 2011 Morality of Free Enterprise Initiative, and its latest video explaining this important and often overlooked distinction.

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About a month ago I had the chance to have lunch in Washington with my Trifecta friends, Steve Green and Scott Ott at BlogCon sponsored by Freedom Works. Scott told the story of his flight to DC, during which the person sitting next to him — a lifelong Democrat — struck up a conversation with Scott about conservatism. By the time the man got off the plane, he turned to Scott and said, “That makes a ton of sense.” Then he smiled and said, “My God, maybe I’m a Republican!”

That story really stayed with me. So here is the first of a new series of FIREWALL videos, called “What We Believe.” In them, I’ll do my very best to explain in as rational and non-antagonistic a method as possible, just what the fundamentals of modern Conservatism — especially Tea Party Conservatism — are all about.

Part one covers the two big items: small government, and free enterprise. In the future we’ll look at elitism, wealth creation, gun ownership, immigration, and more.

I know I don’t speak for everyone on these issues — no one speaks for everyone, not even those in the same camp — but I do hope to capture the core beliefs in a way that people who share these views can use to pass on to those people in their lives who don’t.

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I pose this question seriously, not as a physiologist, but as an economic historian. I am provoked to raise the question by an advertisement that Amazon sent me recently, calling my attention a book titled Can Capitalism Survive? Creative Destruction and the Future of the Global Economy. Seeing this sales pitch, my immediate reaction was my usual sadly amused reply to such a question: Can capitalism survive? What an odd question! Assuming that capitalism ever existed at all, it has been dead for at least a century.

At first glance, I did not recognize that the book being advertised is one for which, in a sense, I am responsible. It turns out that the “new” book is only an old (portion of a) book, now adorned by a new subtitle and two new introductory paragraphs by the Newsweek columnist Robert J. Samuelson. If I reveal that the book’s author is Joseph A. Schumpeter, many readers will recognize it immediately as Part II of that famous economist’s best-known work Capitalism, Socialism and Democracy, first published in 1942, with subsequent editions in 1947 and 1950.

The new book’s front cover has a blurb from Fortune that declares Schumpeter to have been “the most influential economist of the twentieth century . . . a major prophet.” The back cover has an embarrassingly superficial blurb by publisher Steve Forbes that, among other things, describes Schumpeter as “the twentieth century’s foremost economist.”

I do not consider Schumpeter entitled to be called the most influential economist of the past century―that distinction unfortunately belongs to John Maynard Keynes, and Milton Friedman surely deserves the second place. As for Schumpeter’s rank as a prophet or as the intellectually foremost economist, I would place him below Ludwig von Mises and F. A. Hayek.

Nevertheless, Schumpeter was unquestionably one of the most important economists of his day, and his work has continued for good reason to attract readers ever since his death in 1950.

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Angelo M. Codevilla, professor emeritus of international relations at Boston University, has written an extraordinary essay for the July/August issue of The American Spectator. It’s called “America’s Ruling Class – And the Perils of Revolution,” but it deals much more extensively with the anatomy and functioning of the class system in the United States today than with the prospect of revolution.

Codevilla cuts immediately to the core: the United States today is divided into (a) a ruling class, which dominates the government at every level, the schools and universities, the mainstream media, Hollywood, and a great deal else, and (b) all of the rest of us, a heterogeneous agglomeration that Codevilla dubs the country class. The ruling class holds the lion’s share of the institutional power, but the country class encompasses perhaps two-thirds of the people.

Members of the two classes do not like one another. In particular, the ruling class views the rest of the population as composed of ignoramuses who are vicious, violent, racist, religious, irrational, unscientific, backward, generally ill-behaved, and incapable of living well without constant, detailed direction by our betters; and it views itself as perfectly qualified and entitled to pound us into better shape by the generous application of laws, taxes, subsidies, regulations, and unceasing declarations of its dedication to bringing the country—and indeed the entire world—out of its present darkness and into the light of the Brave New World it is busily engineering.

This class divide has little to do with rich versus poor or Democrat versus Republican. At its core, it has to do with the division between, on the one hand, those whose attitudes are attuned to the views endorsed by the ruling class (especially “political correctness”) and whose fortunes are linked directly or indirectly with government programs and, on the other hand, those whose outlooks and interests derive from and focus on private affairs, especially the traditional family, religion, and genuine private enterprise. Above all, as Codevilla makes plain, “for our ruling class, identity always trumps.” These people know they are superior in every way, and they are not shy about letting us know that they are. Arrogance might as well be their middle name.

The ruling class, not surprisingly, is also the statist party:

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We are in a fascinating period in American history, where a confluence of developments has transformed our citizenry’s relationship with government. The mainstream media is distrusted and dying. The majority of our elected officials – let’s not bother with terming them “leaders” – no longer care to represent the interests of the people. In response, the American people are rising up in protest at a rate and in a manner not seen in decades, if ever.

Congressional approval ratings are at historic lows at around 14% (an acquaintance joked that during the American Revolution, the British Crown had double that approval rating, with roughly a third of colonists supporting the Crown and Parliament). Rasmussen recently reported that only 21% of Americans believe our government has the consent of the governed, and CNN reports that 56% of Americans believe that our government poses an immediate threat to American citizens’ rights and freedoms . . . well you get the idea.

The American people are making it clear where they stand, and in an unmistakable manner. Next week, on April 15th, more than one million people will be at more than 1,000 Tea Party protests across the country as more and more Americans come out to protest where elected officials are taking this country.

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In modern day America, if you criticize the government you are now fair game to be called upon to explain yourself in front of it.  As Byron York reported in a recent Washington Examiner column, Rep. Henry Waxman sent letters to executives of major corporations such as Verizon and Caterpillar, requesting their testimony at hearings of the Subcomittee on Oversight and Investigations of the House Committee on Energy and Commerce, chaired by none other than Rep. Bart Stupak, as each of the companies “announced that provisions in the [healthcare] law could adversely affect” their “ability to provide health insurance.”  AT&T for instance had disclosed in an SEC form that changes in the tax treatment of a Medicare subsidy would lead to a $1 billion write-off in earnings from the first quarter of 2010, and said it was considering changes to the health care benefits it provides for its employees.

That the legislation would negatively affect the earnings of these corporations and potentially hamper their ability to provide healthcare is for Rep. Waxman “a matter of concern,” as the “new law is designed to expand coverage and bring down costs.”

But I wonder, for whom are the negative effects of this legislation really a concern?  For Rep. Waxman and his fellow Democrats who already forced the egregious bill on the public?  For the private enterprises pummeled seemingly on a daily basis by these same politicians?  Perhaps for the American people faced with all kinds of economy-crippling unintended consequences as a result of the legislation, on top of the higher costs and worse healthcare they will ultimately receive?

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He’s also the new Republican governor of Virginia and is taking aim at the commonwealth’s oppressive and inefficient state-owned liquor monopoly. More than a dozen states still completely control the sales and distribution of all distilled spirits.

The result? Higher payrolls for state governments (state-workers are public-sector employees after all) and rotten selection and service for customers (state-sanctioned monopolies tend to diminish the shopping experience).

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As President Obama concludes his first jobs summit, almost a year into his presidency, the nature of the guest list hints at a deliberate initiative that’s been underway for over 15 years – and it’s not one of the obvious presumptions that most would make.  Notice that of the list of leaders invited, the majority are labor union leaders, leaders of businesses with government contracts, or leaders of businesses that operate on partial public funding.  There is a common element across most of the businesses represented:  in one capacity or another, even if they are private sector businesses, most on the list benefit from some form of public money.

There is a legal precedent over 15 years old that is the pervasive push behind such a premise, one that was the product of ACORN and labor union coalitions.  And judging by Change to Win / SEIU’s Anna Burger’s plan for today’s jobs summit, it’s evident that this precedent is in play as we speak.

It’s no coincidence that in the wake of America’s economic crisis, some lawmakers have been pushing for infusions of public funds into the private sector.  No, we’re not just talking bank and insurance company bailouts. We’re talking about tax credit and incentive programs, health care reform proposals, green jobs programs, energy efficiency initiatives,  and even real estate development companies.  As the conservative accusations of socialism have begun to sink in with progressive leaders -especially with union leaders, who are especially sensitive to being perceived as public spenders – the language has been changing.  Adam Smith’s “Invisible Hand” doesn’t sound so scary when it’s wrapped in the glove of words like “co-ops” and “public-private partnerships” and “national service”, which are now quickly being mainstreamed into the rhetoric.

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It’s okay for the Chinese to lecture President Obama on free market capitalism because he clearly doesn’t understand even the most basic principles of capitalism  and needs all the help he can get.  What’s not okay is for the Chinese to lecture the American people.  Here’s what I think:

Americans understand that prosperity, true prosperity, is created by an economic system where strong dynamic firms with better ideas, management and motivated employees  are free to prosper and the weak are allowed to fail.  This kind of Darwinian economic system has allowed our country to prosper for over 200 years.

Americans also understand that the federal government doesn’t really create jobs that lead to economic growth because Americans know that any job the government creates  can only be paid for by increasing taxes or by borrowing money–probably from the Chinese.  Nor is there any need to remind Americans that small businesses are the engine that move our economy, and that small businesses create 3 out of every 4 jobs in this country.

On the other hand, there is an urgent need to help President Obama learn the basic principles of a free enterprise system and how jobs are actually created in a market economy, for he is plunging headlong in the opposite direction.

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