Carl Schramm's Entrepreneurial Imperative Explained

Introduction: Capitalism, Democracy, and Carl Schramm

According to Carl Schramm's philosophy of entrepreneurialism and his belief in the value of the capitalist initiative, democracy is not necessary for capitalism to take root, but capitalism can lead to democracy, since a free market requires some form of free governance and discourse. However, a society without a free market—even if it attempts to be a democracy—will invariably curtail the rights of its citizens to explore different venues of entrepreneurship and their ability to choose the ways they live their lives. Other than short periods of government control under extreme circumstances, too much micromanagement of the economy by the government ultimately results in less growth, entrepreneurism, freedom, and wealth.

The controversial implications of his theory lie in the fact that Schramm suggests it is acceptable to do business with oppressive free-market economies in Latin America, Asia, and other areas of the world, because capitalism will eventually foster a liberalized government. Schramm's belief in the links between a free market system and the ability to freely enjoy one's rights and liberties is so absolute that he calls Adam Smith, the Scottish author of The Wealth of Nations, an unheralded Founding Father of America.

Adam Smith, American Founding, and Economic Freedom

In a recent editorial entitled "Capitalism Spreads Freedom Even as Democracy Falters," Schramm wrote: "Smith's great revelation was that political freedom would most likely emerge and persist under conditions of economic freedom, what we now call capitalism. Our democratic system as defined in our Constitution incorporated respect for this economic system" (Schramm 2006).

According to Schramm, an aristocracy of wealth is impossible if everyone is given an equal opportunity to use their creativity and talent. Although he concedes such aristocracies have existed under a system he calls oligopolistic capitalism, he believes that in a truly free market system, such radical imbalances of wealth are unlikely to occur. In Schramm's retelling of American history, Roosevelt and Truman's response to the Great Depression was fundamentally misguided. Because of the Depression, these presidents helped lay the foundations of the social welfare state by creating programs like Social Security and nationalizing major industries. They made government-funded social programs permanently institutionalized—a fixture of the system rather than a temporary measure. But then, Schramm argues, America saw the light in the 1970s and began to listen to once-iconoclastic economists like Milton Friedman, who advocated deregulation to heal the stagflation (slow growth and high inflation) that affected so much of the industrialized world at the time (Schramm 2006).

China, India, and Capitalism as Peacemaker

Schramm sees the United States' relationship with China as a paradigmatic example of the value of capitalism over democracy. China is growing more liberal in its policies toward freedom of speech, he believes. "It has been said that when goods cross borders, armies don't. Today, China and India are the world's two largest countries racing toward entrepreneurial capitalism. They are the example and test of that thesis. Several decades ago, their armies clashed. Now no one talks of war, only of their economic emergence. Capitalism has promoted peace and, in China, better—though still inadequate—respect for rights" (Schramm 2006).

Schramm suggests that if the United States had attempted to economically isolate China after the repressive actions the government took in the 1990s, China would have had even less incentive to allow the liberalism necessary to create a freer market within its borders, and the United States would have lost a positive economic partner that gave Americans access to cheaper goods. "More than the export of democracy, it is the export of entrepreneurial capitalism that can produce a new birth of peace and freedom around our globe. Entrepreneurial capitalism is based on individual invention, and because wealth comes from one's own initiative, it advances human dignity" (Schramm 2006). Schramm even suggests that entrepreneurialism is a solution for terrorism in his editorial.