Free Enterprise: Overview

“Work hard, save your money, and you can become wealthy – or, at least, “independent! ” This is the motto of old-fashioned, “free enterprise. ” It expresses the idea that everybody in a capitalist society can participate and compete on the same terms with similar chances of success. It implies that the working class is just a collection of individuals who have not yet established their independence (worked their way up) through “individual initiative,” rather than a being permanent class. In the early 19th Century, most Americans (including Abraham Lincoln, for instance) believed this.
They thought opportunities under capitalism would keep expanding forever. But what is the reality behind this capitalist thinking? In the past, working people in America have had more opportunity to go into business or to get land for farming than anywhere else in the developed world. At the time the U. S. Constitution was written, it was generally assumed that only property owners should have the right to vote and participate in government. The “Free Labor” thinking of the Republican Party before the Civil War was basically a form of the capitalist work ethic.
It meant that if 1) you were free yourself; 2) your country was “free”; and, 3) there was no slave labor to take your livelihood, you could “make something of yourself,” and become a capitalist or, at least, an independent producer, professional or artist. Americans in the North at that time were influenced by this capitalist “work-ethic” to under-estimate the energy of the South. They thought (as the capitalist “work-ethic” would lead them to believe) that the poverty and economic decline of the South were probably due to laziness and that this indicated that the North should be able to easily defeat the South.

But the Civil War proved that Southerners were not “lazy;” it was the slave system (lacking science and industry) that caused many of the economic problems there. The capitalist “work-ethic” also caused Northerners to overlook the only chance for real progress in the South during the “Reconstruction” — taking of the lands of former slave-owners, and their distribution to Blacks and poor Whites. They assumed, as did Abraham Lincoln, that anyone with ambition would simply work his way up.
They could not understand that capitalism naturally limited opportunities, because the majority would have to be workers, not capitalists. With no land or other economic basis to start from, most workers in the South would have no way of lifting themselves from poverty. Strong competition with other capitalists, who are constantly trying to gain a larger market by offering a cheaper product, forces the beginner to keep putting everything back into his business. He must invest in more modern equipment in order to be able to produce more cheaply with higher quality, and on a larger scale.
He must do this in order to improve his product or services, and also capture a larger share of the market, until he has reached a level where there is no immediate threat of being put out of business by his competition. This means having the most modern machinery and getting the most productivity out of his workers. This huge need for capital also forces the capitalist to rely more and more on third parties. Making the capitalist borrow from banks to keep his capitol at a safe amount. They simply hire employees to make all the management decisions, design and develop the product, etc.
Free enterprise” thinking forgets that a worker has only his labor-power to sell in order to earn his living. He competes with other workers to sell his labor-power at the cheapest price. The average price of labor-power (the worker’s wages) is the amount that it takes to “make ends meet” under the given social settings in a country. The laws of economics determine that if the worker works faster, he creates a cheaper product. But this eventually cheapens the amount which the capitalist must pay him in wages because there are always unemployed workers somewhere willing to work for the bare necessities.
Working faster increases competition without increasing their earnings. Because of these realities, workers learn to “work smart” according to their own understanding. Working smart for the worker means withholding his labor power, working more slowly and learning the tricks of the trade, better known as bargaining. These things raise the price of his labor-power. This in turn forces the capitalist to concentrate more on improving productivity through better machinery and production processes in order to increase his profits.