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An Enduring Culture of Free Enterprise

Wednesday, May 19, 2010

Despite the bruising it has taken, support for free enterprise and the capitalist system remains robust.

As the Senate pushes ahead on sweeping legislation to revamp the financial system, new polls show that public attention is waning. Perhaps this is not surprising, since coverage of the oil spill and Arizona’s new immigration law have overtaken the arcane Senate deliberations. But polls also point to another problem: While 70 percent of Americans have only a little or no trust in Wall Street to fix the problems that caused the crisis, almost that many, 66 percent, lack trust in Congress, according to an Economist/YouGov poll.

In two new American Enterprise Institute Public Opinion Studies, we have examined thousands of questions asked over the past 40 years by more than a dozen pollsters to understand current views about business and Wall Street. Central institutions such as business rely on popular consent for their undertakings, and so understanding how Main Street feels about Wall Street is essential.

Confidence in big business has never been particularly high. Since 1971, in a question asked yearly by Harris, the highest proportion having a great deal of confidence in the people running major companies was 28 percent. High confidence in business leaders sank to 11 percent in 2009. Although it recovered a bit in the early 2010 poll, it remains at one of the lowest points since the early 1970s.

Confidence in business leaders recovered a bit in the early 2010 poll, but it is at one of the lowest points since the early 1970s.

Views about Wall Street, although again slightly more positive than a year ago, are worse than usual. In February 2010, 66 percent told Harris interviewers that most people on Wall Street would be willing to break the law if they thought they could make a lot of money get away with it. The view in the same poll that Wall Street benefits the country was still positive (55 percent), but lower than in years past.

What’s more, 58 percent told Bloomberg interviewers in late March 2010 that it had taken too little action to fix what is wrong with the financial industry, which explains Americans’ desire for more oversight. In Harris’s polling, the view that banks need more regulation is up sharply from 2005, when 19 percent said banks needed more. In 2009, 40 percent gave that response. After the Enron and WorldCom scandals, people told pollsters they wanted wrongdoers punished. They wanted to enforce the laws on the books, not pass new ones. Something similar seems to be true now, and the desire for greater regulation of Wall Street is tempered by concern about government’s reach. The March Bloomberg poll found that 69 percent said it would be better to enhance the existing system to make sure bank regulators do more. Only 24 percent wanted a new, independent agency.

Americans have long been of two minds about business regulation, believing on the one hand that regulation often does more harm than good and on the other that it is necessary. Skepticism of greater regulation of business in general is strong today, and the view that Washington could do great damage to our economic engine is widespread. A January 2010 Gallup poll found 57 percent of respondents were more worried about too much regulation of business, while 37 percent were more worried about not enough regulation. Fifty-five percent in a 2009 Gallup poll said that big government represents the biggest threat to the nation; 32 percent said big business does.

Skepticism of greater regulation of business in general is strong today, and the view that Washington could do great damage to our economic engine is widespread.

Concern about more business regulation has been exacerbated by the expansion of Washington’s role in the economic crisis that began near the end of George W. Bush’s presidency. Our collection shows that Americans initially supported the Troubled Asset Relief Program (TARP) but turned against it very quickly; in most polls, people opposed releasing the second half of the TARP funds. In a late September 2008 Pew Research Center poll, for example, 57 percent said government was doing the right thing in “potentially investing billions to keep financial institutions and markets secure.” By March 2009, 48 percent said this was the right thing to do, and in February 2010, 40 percent did. In January and February 2009 polls, six in ten told CNN/Opinion Research Corporation interviewers that Congress and President Obama should not provide the “remaining money to banks and other financial institutions.”

Majorities in nearly every poll opposed the auto bailout, even as they believed major auto companies would go out of business without it. In an early December 2008 CNN/Opinion Research Corporation poll, when people were told that the “major U.S. auto companies have asked the government for a program that would provide them with several billion dollars in assistance. The auto companies say they may go into bankruptcy without that assistance,” 36 percent favored giving the assistance, but 61 percent opposed it.

After the Enron and Worldcom scandals, people told pollsters they wanted wrongdoers punished. They wanted to enforce the laws on the books, not pass new ones. Something similar seems to be true now.

Meanwhile, Americans supported mortgage relief cast in terms of helping homeowners. Fifty-eight percent told CBS News pollsters in September 2008 that they favored the government providing “financial help to homeowners who are having trouble repaying their mortgages because their rates went up.”

While there was strong support for the stimulus last spring, much of it has evaporated. In a January 2009 Gallup poll, 52 percent favored a new “economic stimulus package of at least $800 billion.” In a March 2010 NBC News/Wall Street Journal poll, 35 percent said the economic stimulus legislation was a good idea and 42 percent said it was a bad one. In an April Pew poll, a third said the stimulus had helped the job situation; 62 percent said it had not.

More important and reassuring, given the bruising it has taken, support for free enterprise and the capitalist system remains strong. In January 2010, when Gallup asked about ten different terms relating to government and business, 86 percent had a positive view of the free enterprise system, and 61 percent of capitalism, with young people 18-29 years old the most enthusiastic age group about both. (It should be pointed out that a newer poll from Pew with different question wording from Gallup’s finds that only 52 percent have a positive reaction to the term “capitalism.”) Pew also finds no change since 1987 in the large majorities (usually around 75 percent) who believe the strength of the country is based on the success of American business.

Recent news stories suggest that Wall Street is embarking on an image campaign as Congress considers far reaching financial reforms. Opinion won’t change unless it starts to perform better. Washington needs to learn that lesson, too.

Karlyn Bowman is a senior fellow at AEI, and Andrew Rugg a research assistant. Nick Davis assisted with these compilations.

FURTHER READING: Early last year, Bowman presented a similar report on “How’s Business?” in America. Jeffrey Friedman discusses the financial crash in “Capitalism without Romance,” while Jay Richards details how “Greed Is Not Good, and It’s Not Capitalism.” Bowman outlines Americans’ depreciating opinions of politicians and businessmen in “Liar, Liar” and describes how we are “Itching for That Economic Recovery.”

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