TGIF: "You Didn't Build That"

Remember Barack Obama's profound 2012 campaign speech about success? Here's part of what he said:

There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed [!] you to thrive.  Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.

So we say to ourselves, ever since the founding of this country, you know what, there are some things we do better together.... We rise or fall together as one nation and as one people, and that’s the reason I’m running for President—because I still believe in that idea. You’re not on your own, we’re in this together.

Obama was no outlier. Plenty of people would be willing to give that speech today, maybe even Donald Trump.

Where to start? Obama said that he knows wealthy people who want to "give something back." Why? Presumably because of their wealth and success. That makes no sense. If these people made their wealth by producing attractive goods for consumers (which is how most wealthy people get wealthy), then what's to give back? We consumers did not give them money as a favor. We engaged in voluntary exchange. We gave up $X to get product Y because we prefer what we got to what we gave up. They benefitted and we benefitted. Double profit, double "thank you," as John Stossel says. That's how trade works when it's uncoerced. No debt; nothing to give back. End of.

Second, superstar entrepreneurs likely are smarter and more perceptive about the future state of the market than most other people. I doubt they go around bragging about it or minimizing the role of "good breaks." They surely know that things other than sheer intelligence figure into success. But let's not be unrealistically egalitarian about it. Some people are better suited to be entrepreneurs than others. Many of the outside factors that Obama named were also available to others. Why didn't those others succeed?

Next, what's this buncombe about all of us rising or falling together? When a business fails to satisfy us, it falls. Its owners, managers, and employees have to find other work. Its investors lose out. But the rest of us have not fallen. The failed businesses's material factors are now available to produce things we want. The discharged employees are now available to make other things we want. Where's the general failure? Obama spoke collectivist nonsense. Something does—or should—unite people, but it's not what Obama had in mind. They have a stake in a free society, that is, a society in which the government does not try to manage their lives and market relations.

The rest of the passage is Obama's elaboration of this thesis: "If you’ve been successful, you didn’t get there on your own." Was he so ignorant of the case for laissez faire that he thought this was news for defenders of the unmolested market economy? Was he having a laugh? Ludwig von Mises, one of the 20th century's premier champions of individual freedom considered calling his economic treatise "Social Cooperation." That is the second most common phrase in Human Action, right behind "division of labor," which Mises sometimes called the "social division of labor."

So Obama was tackling the scrawniest of strawmen. He was being a demagogue. No market advocate ever suggested that lucrative businesses were built in isolated shacks in rural Montana. Businesses were always described as embedded in the complex network we call the market economy.

I modestly suggest that Obama and every one of his ilk read I, Pencil. That's Leonard E. Read's 1958 essay explaining why no one person can make something as commonplace as a pencil. On the contrary, it takes incredibly complex worldwide cooperation, and it happens without a central authority. The price system, rooted in private property in the factors of production and in trade, directs the myriad self-interested activities that entrepreneurs, under no one's orders, combine to produce the pencil. No kidding. I. Pencil was written three years before Obama was born. Read, founder of the Foundation for Economic Education, had a different lesson in mind from Obama's ignorant message. The former president had a collectivist, interventionist message. Read's was an individualist, free-market message. Read for the win.

Obama named particular things, such as the internet, which got started or built under government auspices. But, as usual, he overlooks what is not seen. (Also see "I, Website.") Obama thinks that if the government does not do something, it does not get done. But if the government did not build roads, bridges, airports, ports, schools, and the internet, would those things never have come into being? That's beggars belief. We know it's not true. People privately built public infrastructure before the government did. It didn't happen "on its own." Profit-seeking individuals and their free associations made it happen.

Businesses that relied on the infrastructure paid for its services. "Take what you want, said God, and pay for it," the Spanish proverb says. That's the market; no need for coercion. Why the mystery? Obama ignored all of the amazing things that free and private enterprise has created over the centuries, not without any assistance, but without government assistance. If he knows better, he's a demagogue.

Here's how Ludwig von Mises addressed the issue in Human Action in 1949, long before Obama  was born (but the year I was born):

The interventionists and the socialists contend that all commodities are turned out by a social process of production. When this process comes to an end and its fruits ripen, a second social process, that of distribution of the yield, follows and allots a share to each. The characteristic feature of the capitalist order is that the shares allotted are unequal. Some people—the entrepreneurs, the capitalists, and the landowners—appropriate to themselves more than they should. Accordingly, the portions of other people are curtailed. Government should by rights expropriate the surplus of the privileged and distribute it among the underprivileged.

Now in the market economy this alleged dualism of two independent processes, that of production and that of distribution, does not exist. There is only one process going on. Goods are not first produced and then distributed. There is no such thing as an appropriation of portions out of a stock of ownerless goods. The products come into existence as somebody’s property. If one wants to distribute them, one must first confiscate them. It is certainly very easy for the governmental apparatus of compulsion and coercion to embark upon confiscation and expropriation. But this does not prove that a durable system of economic affairs can be built upon such confiscation and expropriation.

Before the interventionists dispense more advice, they might learn some economics.

 

Taking It for Granted

"Capitalism, says Marx, unthinkingly repeating the fables of the eulogists of the Middle Ages, has an inevitable tendency to impoverish the workers more and more. The truth is that capitalism has poured a horn of plenty upon the masses of wage earners who frequently did all they could to sabotage the adoption of those innovations which render their life more agreeable. How uneasy an American worker would be if he were forced to live in the style of a medieval lord and to miss the plumbing facilities and the other gadgets he simply takes for granted!" —Ludwig von Mises, Human Action

The Miracle of Mass Production

"The fact that my fellow man wants to acquire shoes as I do, does not make it harder for me to get shoes, but easier." —Ludwig von Mises, Human Action

Shame on You, Socialists

American socialists not only pit workers against entrepreneurs; they also pit rich American workers against the poor workers of the rest of the world. Shame on you, socialists!

The Value of Selfishness

"The welfare school pretends not only to stand for the interests of the whole of society as against the selfish interests of profit-seeking business; it contends moreover that it takes into account the lasting secular interests of the nation as against the short-term concerns of speculators, promoters, and capitalists who are exclusively committed to profiteering and do not bother about the future of the whole of society. This second claim is, of course, irreconcilable with the emphasis laid by the school upon short-run policies as against long-run concerns. However, consistency is not one of the virtues of the welfare doctrinaires. Let us for the sake of argument disregard this contradiction in their statements and examine them without reference to their inconsistency.

"Saving, capital accumulation, and investment withhold the amount concerned from current consumption and dedicate it to the improvement of future conditions. The saver foregoes the increase in present satisfaction in order to improve his own well-being and that of his family in the more distant future. His intentions are certainly selfish in the popular connotation of the term. But the effects of his selfish conduct are beneficial to the lasting secular interests of the whole of society as well as of all its members. His conduct produces all those phenomena to which even the most bigoted welfare propagandist attributes the epithets economic improvement and progress....

"The welfare propagandist, it is true, raises two objections. First, that the individual’s motive is selfishness, while the government is imbued with good intentions. Let us admit for the sake of argument that individuals are devilish and rulers angelic. But what counts in life and reality is—in spite of what Kant said to the contrary—not good intentions, but accomplishments. What makes the existence and the evolution of society possible is precisely the fact that peaceful cooperation under the social division of labor in the long run best serves the selfish concerns of all individuals. The eminence of the market society is that its whole functioning and operation is the consummation of this principle."

—Ludwig von Mises, Human Action

Mises on Equality and Inequality

"The liberal champions of equality under the law were fully aware of the fact that men are born unequal and that it is precisely their inequality that generates social cooperation and civilization. Equality under the law was in their opinion not designed to correct the inexorable facts of the universe and to make natural inequality disappear. It was, on the contrary, the device to secure for the whole of mankind the maximum of benefits it can derive from it. Henceforth no man-made institutions should prevent a man from attaining that station in which he can best serve his fellow citizens."

—Ludwig von Mises, Human Action

TGIF: Police-State Progressives

Progressives see themselves as, well, progressive. But they aren't. Even at their best, in opposing the national security state, they support massive government power in other realms of life. At heart they are social engineers. They seek a "moral equivalent of war," that is, regimentation without bloodshed. They are even anti-democratic when it suits them.

We can see all of this through the eyes of Ludwig von Mises. This is from his book Planned Chaos (1947; free audiobook here). Mises, of course, championed the unhampered market economy, or laissez-faire capitalism. He wrote:

In the market economy the consumers are supreme. Their buying and their abstention from buying ultimately determine what the entrepreneurs produce and in what quantity and quality. It determines directly the prices of the consumers' goods and indirectly the prices of all producers' goods, viz., labour and material factors of production. It determines the emergence of profits and losses and the formation of the rate of interest. It determines every individual's income. The focal point of the market economy is the market, i.e., the process of the formation of commodity prices, wage rates and interest rates and their derivatives, profits and losses. It makes all men in their capacity as producers responsible to the consumers. This dependence is direct with entrepreneurs, capitalists, farmers and professional men, and indirect with people working for salaries and wages. The market adjusts the efforts of all those engaged in supplying the needs of the consumers to the wishes of those for whom they produce, the consumers. It subjects production to consumption.

The Worker as Free Person

"In the market economy the worker sells his services as other people sell their commodities. The employer is not the employee’s lord. He is simply the buyer of services which he must purchase at their market price. Of course, like every other buyer an employer too can take liberties. But if he resorts to arbitrariness in hiring or discharging workers, he must foot the bill. An employer or an employee entrusted with the management of a department of an enterprise is free to discriminate in hiring workers, to fire them arbitrarily, or to cut down their wages below the market rate. But in indulging in such arbitrary acts he jeopardizes the profitability of his enterprise or his department and thereby impairs his own income and his position in the economic system. In the market economy such whims bring their own punishment. The only real and effective protection of the wage earner in the market economy is provided by the play of the factors determining the formation of prices. The market makes the worker independent of arbitrary discretion on the part of the employer and his aides. The workers are subject only to the supremacy of the consumers as their employers are too. In determining, by buying or abstention from buying, the prices of products and the employment of factors of production, consumers assign to each kind of labor its market price.

"What makes the worker a free man is precisely the fact that the employer, under the pressure of the market’s price structure, considers labor a commodity, an instrument of earning profits. The employee is in the eyes of the employer merely a man who for a consideration in money helps him to make money. The employer pays for services rendered and the employee performs in order to earn wages. There is in this relation between employer and employee no question of favor or disfavor. The hired man does not owe the employer gratitude; he owes him a definite quantity of work of a definite kind and quality."

--Ludwig von Mises, Human Action