Thomas J. DiLorenzo
August 13, 2012
Barack Obama recently proved once again that he is indeed a Proud Marxist (as Yuri Maltsev, former advisor to Mikhail Gorbachev, calls him) when he argued that successful American entrepreneurs “didn’t build” their businesses on their own. Government bureaucrats were mostly responsible for their success, the Marxist in the White House asserted, citing government-run schools, roads, etc. Like all Marxists, Barack Obama is belligerently ignorant of economics and is in denial of much of economic reality.
No successful business person believes that he built his business completely on his own, without help from anyone. Obama’s claim is a straw-man argument. Every business person collaborates day in and day out with suppliers, customers, employees, managers, accountants, marketers, bankers, investors, and many others. As Adam Smith wrote in his famous 1776 treatise, An Inquiry into the Nature and Causes of the Wealth of Nations(1937 Random House edition, p.422):
In civilized society [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons . . . . Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, brewer, or the baker, that we expect our dinner, but from their regard to their own interest . . . . Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens.
As for the role of government, history proves that it has always been the mortal enemy of free voluntary exchange and the generation of prosperity through the free market. As Ludwig von Mises wrote in his 1956 book, The Anti-Capitalistic Mentality, “A nation is the more prosperous today the less it has tried to put obstacles in the way of the spirit of free enterprise and private initiative. The people of the United States are more prosperous than the inhabitants of all other countries [as of 1956] because their government embarked later than the governments in other parts of the world upon the policy of obstructing business.”
Government spending at all levels accounts for some 40 percent of GDP, signifying that the American economy is at least 40 percent socialist. The socialist “public” school system is a disaster in every city with only a relatively few affluent suburban enclaves of success. As such, the American workforce has been dumbed down, year in and year out, to the economic detriment of everyone. The socialist “public” roads are responsible for more than 50,000 highway deaths each year, which is hardly a good record. The welfare state has destroyed the work incentive of millions and caused the break-up of untold numbers of families. (The basic mechanism here is welfare and child support payments that are generous enough to create millions of deadbeat dads who abandon their children without the social stigma of having left them in dire poverty).
Social Security reduces incentives to save for one’s own retirement. Lowered savings rates lead to less capital investment and, consequently, slower economic growth. All other government spending programs enrich the parasitic political class while impoverishing the producer class. The long history of aggressive militarism by the U.S. government has always ratcheted up governmental powers at the expense of liberty and prosperity while enriching the military/industrial/congressional complex. The system of unlimited democracy that Americans now slave under can be defined as follows: Moochers and parasites hiring/electing professional looters to steal from producers.
The Fed has always generated boom-and-bust cycles in the economy, and then blamed the problems it created on the free enterprise system. After the Greenspan Fed created The Great Recession the current Fed “godfather,” Ben Bernanke, went on television to arrogantly sneer at the notion that markets and the free enterprise system should or could be the way out of the depression, while arguing for the granting of vast new regulatory powers for the Fed.
Every business in America is now strangled by tens of thousands of pages of regulations in The Federal Register, not to mention reams of state and local government regulations. The pettiest, most selfish, and most ignorant local political hack has the ability to use government regulations to shut down billion dollar construction projects on a whim. A recent example of this is how a single member of the West Palm Beach, Florida city council caused a stoppage of the building of a major outlet shopping center in that city by demanding that the construction company that is building the shopping center hire more “local firms.” It is a good bet that the city councilwoman in question has a relative who is a construction contractor. Such acts are nothing more than legalized extortion.
The more a business person must deal with regulations and regulators, the less time he has to devise ways to improve his products, cut his costs and prices, and create new products. Government regulation crowds out entrepreneurship, wealth creation, and job creation while imposing immeasurable costs (in time and money) on private businesses.
There are a few exceptions, but for most of the past 120 years government regulation of business has been a tool used by large corporations to stifle competition from their smaller competitors and to create barriers to competition from potential competitors. The very first federal regulatory agency, the Interstate Commerce Commission, founded in 1887, was used first by the railroad industry to cartelize the industry as a government-controlled price-fixing cartel. It then did the same thing for the trucking industry. The Civil Aeronautics Board was similarly “captured” by the airline industry, which enjoyed a government-enforced cartel price-fixing monopoly for half a century before it was deregulated in the late 1970s. The entire regime of “public utility regulation” has been one big government-run cartel or monopoly scheme since the late nineteenth century. This all goes under the rubric of the “capture theory of regulation” in the discipline of economics. (See Butler Shaffer, Restraint of Trade; and Gabriel Kolko, The Triumph of Conservatism).
Government also deals a death blow to the institution of capitalism with its massive bailouts of failing businesses as an additional form of corporate welfare. Capitalism is a system whereby profits and losses are private. Serving customers well leads to profits; failing to do so leads to losses or bankruptcy. Socializing the losses while keeping profits private encourages reckless risk taking and sloppy business management and causes “private” businesses to operate more like government bureaucracies.
In short, Barack Obama’s ignorant “you didn’t build it” remark did two things: First, it displayed remarkable economic ignorance; and second, it asserted exactly the opposite of the truth with regard to the role of government in the economy. In today’s world American businesses that are successful in the marketplace have become so despite government intervention, not because of it.