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Tom Donohue: Free Enterprise Drives Prosperity — If We Let It

Runaway government spending and overregulation threaten America's economic freedom

Assaults on the free enterprise system have gone global. We’ve heard them in the United States for months. But a debate recently erupted at the World Economic Forum in Davos, Switzerland, where some critics suggested that capitalism was to blame for the European debt crisis, widespread unemployment and the fragile state of the world’s economy. Some officials in Davos went so far as to call for a complete overhaul of the free market system.

Are they right? Is capitalism broken? Is the free market system failing us? Not on your life.

While not perfect, the free enterprise system remains the single most effective way to create widespread prosperity and opportunity. Those who have the freedom and incentive to put their creativity to work generate new ideas and foster innovations. They create wealth and opportunities, and improve life for everyone.

What poses a threat to prosperity isn’t free enterprise, but expansive government and policies that weigh down the private sector and poison the environment for business. One indicator of the health of free enterprise is the Heritage Foundation’s Economic Freedom Index, which measures the extent to which entrepreneurship can thrive in a nation’s economy. The greater a nation’s economic freedom, the greater its prosperity. Size of government, openness of markets, regulatory efficiency and rule of law are key factors that contribute to — or conspire against — economic freedom.

America’s economic freedom has fallen in the 2012 index, largely because of runaway government spending and overregulation. Meanwhile, the Congressional Budget Office has forecast another $1 trillion in annual deficits this year. And this administration continues to pursue some of the costliest, most burdensome regulations in history.

It’s no surprise that the economic freedom of European nations has also declined. The major drags on their economic freedom — unsustainable social spending and massive welfare programs — are also the source of the European Union’s sovereign debt crisis.

So, no, capitalism hasn’t pushed those countries to the economic brink — top-heavy government has. It should serve as a sobering call to American leaders to reform our entitlement programs so that they’ll be solvent for future generations without devouring our budget.

If we’re going to remain an economically free nation, driven by the ideas and innovations of our people and businesses, we’ve got to let the free markets work. We’ve got to break the shackles of debt, deficits and overregulation. We’ve got to clear away the impediments to prosperity and let capitalism do what it does best — grow the economy and create jobs.

— Tom Donohue is president and CEO of the U.S. Chamber of Commerce.

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