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Opinion

Economic freedom empowers us 

Just writing these words recalls the extreme sense of pride and accomplishment that I felt that day. It was the feeling of economic independence, the dignity that emanated from the empowerment to make a personal choice. It was economic freedom at its core.

Tacky furniture never felt so good.

In 1986, just a month shy of my 23rd birthday, I moved to Chicago from New York. It was my first move arranged without assistance from a parent or roommate. Today, I'd view such a move as a headache; but back then, it excited me. I had a relocation allowance from my company, I had taken a "househunting" trip to find an apartment a couple weeks before, and now I had a one-way ticket. It was the first time I had ever booked a one-way. Good bye New York.

Upon arrival in my new city, I had to start from scratch. None of the crappy dorm furniture that I moved to New York was worth moving again.

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I planned day one, a Sunday, as my furniture shopping day. Growing up in Dallas, I was accustomed to seeing the Sunday paper stuffed with coupon and advertisement sections, so I figured that the local newspaper was a good place to start. I bought the day's paper and was thrilled to find the same overstuffed section of advertisements and coupons. Jackpot! Several furniture stores advertised with same day delivery and, after careful reading of their ads, I chose one. One stop shopping, I recalled.

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Wandering through that store, I was like a child at the ice cream counter. All of the matching bedroom and living room sets in the cavernous store mesmerized me. They all looked so good. After doing my comparison, I was ready to make a selection.

The salesman was eager to help me make the purchase. I handed him the ad from that morning's paper that said purchases could be made in 12 easy installments, same as cash. Without an interest rate, that sounded good to me. I had been working in finance so I was happy to use my understanding of present value to take him up on that offer. Sounded like a discount to me. Purchase price divided by 12 was better than paying it all today. Another jackpot!

To process the installment purchase, he handed me off to his "finance guy" to complete the paperwork. He pulled out a set of legal size pre-printed forms, white on top with yellow and pink carbon copy layers beneath, and started asking me questions.

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This was a loan application. I asked him why I had to fill out all that since I wasn't borrowing to buy the furniture. He told me that an installment sale was tantamount to a loan even though there was no effective interest rate. That made sense to me, so we continued.

Once the paperwork was completed, he disappeared to process my first credit application. He returned about 15 minutes later with a bunch of the pink pages from the forms I had filled out, a coupon payment book and my receipt.

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He had processed my credit application with the credit bureau and his finance company and I had passed. I felt like I had just passed my first driver's test. Confident and satisfied, I scheduled the delivery for later that day (same day delivery trumped just about any other aspect of the furniture I had picked out). My day concluded with meeting the delivery truck at my apartment.

That night, I ate dinner at my very own dinette set and slept in my very own bed after putting my clothes away in my very own dresser. Playing house never felt so good. I didn't have a cosigner on my apartment lease and my credit rating was good enough to furnish it. That was my furniture. I shopped for it. I picked it out. I had "earned" that furniture.

Just writing these words recalls the extreme sense of pride and accomplishment that I felt that day. It was the feeling of economic independence, the dignity that emanated from the empowerment to make a personal choice. It was economic freedom at its core.

Nobody told me that I needed to buy furniture; nobody told me which furniture to buy. When I went shopping, I had stores competing for the right to sell me something. Their inventory was in place awaiting my inspection.

Fast forward to this past summer when I went to Berlin to pick up my daughter who was completing a university summer program there. I was reminded of the feeling I had setting up my new home as a 22-year old.

Brandenburg Gate in Berlin
Brandenburg Gate in Berlin(Amy Laughinghouse)

Berlin today is a living reminder of the stark contrasts between two economic visions: one of human empowerment and the other of centrally controlled allocation of resources. I was drawn to think about similar adults, one who grew up in West Berlin and the other in East Berlin before the wall came down, and how their early adult experiences would have differed.

Walking the streets there today, it is easy to envision the differences. Some 26 years later, the east side is still in the process of emerging from the Soviet-induced deep freeze started more than 50 years ago. Signs of a 27-year head start on modernity are evident throughout the west side of Berlin.

Segments of the Berlin Wall (front right) at Potsdamer Platz in the heart of Berlin.
Segments of the Berlin Wall (front right) at Potsdamer Platz in the heart of Berlin. (Clayton McCleskey / Special contributor)

At its core, a market economy is simply a methodology for allocating resources -- Adam Smith's invisible hand. In the democratic West, both human and financial capital flowed to sectors generating the highest return based upon the laws of supply and demand. The amounts of capital so allocated were determined by those taking the orders for the output.

In the East's planned economy, the authorities directed capital to those sectors that they favored and in amounts that were determined by those giving the orders to create output. In the West, people earned; in the East, people were paid.

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When the Berlin Wall went up 55 years ago, the city divided itself into the perfect human economic laboratory. Similar people would make rational decisions based upon these two competing political and economic guardrails. The results and contrasts are stark and obvious.

The West experienced economic expansion, development, innovation and a dramatic increase in standard of living while the East did not. In the end, the West has subsidized the East to the tune of about $2 trillion for the honor of reunifying Germany.

When the Wall came down, we all remember the images of the contrasting ideologies: modern architecture vs. crumbling infrastructure; thriving retail stores vs. those with barren shelves; modern conveniences vs. antiquated contraptions still in use begging for spare parts.

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I was 26 years old when the Berlin Wall came down. I was engaged to be married and I was only five years into my career. I was too mired in my career trees to appreciate the beauty of the economic forest I was in. At the time, the opening up of Berlin was a victory for the West's version of economic and political freedom.

Today, I realize that it meant much more. It was the triumph of the human spirit when the light of human ingenuity is lit.

The personal drive to innovate and advance once the chords of government dependency are broken is strong. But more importantly, it was a victory for human freedom in its purest sense. People were liberated to pursue their potential. Walking the streets of Warsaw, Kraków and Prague present similar contrasts between the bland, stagnant existence under Communist control vs. the economic, cultural and spiritual renaissance that has occurred since.

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The combo shows West Berliners waving to relatives in East Berlin one year after the Berlin...
The combo shows West Berliners waving to relatives in East Berlin one year after the Berlin Wall was erected at Bernauer Strasse on Aug. 13, 1962 and people crossing the area of the former Berlin Wall in Berlin on Oct. 26, 2014 - 25 years after the fall of the wall. (AP Photo / Werner Kreusch, Markus Schreiber)

On a personal level, during my career, I have learned that while both dollars "paid" and dollars "earned" comprise 100 cents, the fruits of those earned dollars are so much sweeter. They include a sweetener called pride.

When economic freedom exists, human dignity and sense of pride flourish. When people are deprived of economic freedoms and market choices are restricted, both economic and personal growth are distorted. Human and financial capital flows are stilted and an unnatural outcome ensures. People don't feel ownership in their output and instead are simply paid laborers, unable to truly experience the prideful fruits of their labor. Both economic and spiritual growth become stunted.

Being a participant in a market economy is one of the most fulfilling aspects of being free. Earning a wage, helping an enterprise thrive, and seeing the impact on employees and families are the most heart-warming aspects of my career.

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Not providing a handout, but rather, providing a challenging and fulfilling work environment where people can achieve their potential with dignity has been one of my greatest feelings of accomplishments. Knowing that each of them will have the ability to feel the satisfaction that comes from earning satisfies me deeply.

Once a person has economic freedom he or she can dream. Dreams propel people and people propel the world onward, with dignity.

At its heart, these competing economic ideologies drive the political choices facing the U.S. today. A government that overreaches runs the risk of stifling innovation, distorting the allocation of resources and creating economic dependency. But the one that seeks to establish the proper boundaries while fostering self-reliance and creating economic opportunity propels people to reach their human potential with dignity. While a government promising money and benefits to voters sounds nice, its track record of accomplishing it without harmful unintended consequences is not good.

Berlin is living proof that a market economy enhances economic freedom and with that comes both heightened growth and dignity. The failure of the east side is a stark reminder of what happens when politicians direct the allocation of resources.

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Now, tell those politicians you want to buy your own furniture with your own money. It will feel so good.

Kenneth A. Hersh is president and chief executive of the George W. Bush Presidential Center. Twitter: @TheBushCenter

Website: www.bushcenter.org/catalyst