Freeman

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“You Didn’t Build That . . .”

Where Obama goes wrong.

JULY 24, 2012 by SANDY IKEDA

Filed Under : Free Market, Central Planning, Collectivism, Market Process

In a recent stump speech President Obama articulated a view of the social world that reflects an all-too-common political perspective. Here is part of that speech:

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.

(A longer version is here. Elizabeth Warren, a Harvard Law professor running for the U.S. Senate from Massachusetts, made the same points in a speech last year.)

The gist of Obama’s message is that the rich and successful should pay an even higher percentage of their income in taxes than they do now  because taxpayer-funded programs and infrastructure made their success possible. (But see this from the National Taxpayers Union.) It has stirred up both libertarians and conservatives.

Many commentators have latched onto Obama’s statement: “If you’ve got a business, you didn’t build that. Somebody else made that happen.” I think if the President had a chance to take this stupid, insensitive remark back he would, if only because it makes him sound foolish and out of touch with ordinary people. But I’d like to write about a different aspect of the speech that few have commented on. It reveals a misunderstanding that I think is responsible for all the other confusion in the speech. It’s the part where he says, “Somebody helped to create this unbelievable American system that we have that allowed you to thrive.” There’s a deep intellectual muddle here.

“You Didn’t Get There On Your Own”

Now, I believe it’s entirely true that none of us could get to where we are on our own. Not only do we owe much of our well-being in a market-oriented society to help from those whom we know and can name–parents, teachers, friends–but we are even more deeply reliant on countless others whom we couldn’t name.

I need only refer, as I’ve often done before, to Leonard Read’s short and wise essay “I, Pencil,” which explains how no one could possibly marshal the resources, skills, and know-how to make an ordinary lead pencil because those things are spread across countless people around the planet. The same could be said, even more emphatically, of someone like the late Steve Jobs, whose Apple, Inc. created one of the first home computers. Even Jobs could not have made a pencil, let alone something like an iPad, himself. (I have an earlier column on Steve Jobs.)

This is not to discount in any way Steve Jobs’s achievement. Again, Obama is wrong when he says, “You didn’t build that.” It’s true that without the Apple designers, manufacturers, marketers, and millions of others, the iPad could not be built. But that’s true in the same sense that without air, water, and land, the iPad also couldn’t be built. Yet Steve Jobs was the indispensible element, the sine qua non, of the iPad.

The same is just as true of less famous entrepreneurs, including Cary who works in the coffeehouse down the street, which has been able to make a go of that location when others haven’t, or the pushcart vendor near Grand Central who has put three of his kids through college from what he has made selling hotdogs.

Who Created “This Unbelievable American System”?

Okay, so what’s behind all the confusion? What the President and others who think like him don’t understand is that the system that is largely responsible for pencils and iPads is not the result of anyone’s design. Politicos like Obama see the market as a big boat that has lost its bearings and so requires a smart, strong captain and disciplined crew to get it pointed in the right direction, or at least the direction they want it to go.

The paradox of the President’s position is that, on the one hand, supposedly a few smart politicians, wise enough to increase taxes on the right people and to increase spending on the right people, deserve credit for creating the “system,” while on the other, no single individual can claim credit for the success of her own business.

So who created the underlying order that politicians and bureaucrats want to control? The answer is–nobody. A free society is one in which people respect private property, freely associate, and do not tolerate legal privilege or persecution. Under those conditions, the free market is what happens when you just leave people alone.

Private property gives people a sphere of autonomy that lets them use their knowledge and skills as they see fit. The philosophy of individualism–that the individual is more important than society or the state–is the key because it enables and encourages free association, free trade, and an astonishingly complex division of labor and knowledge to spontaneously emerge out of individual choices. Nobody planned that degree of social cooperation, nobody could have planned it–any more than Steve Jobs could himself make a pencil.

(That goes for the Internet as well, as this article by Gordon Crovitz explains.)

The free market. THAT is what you didn’t build. And no one could.

ABOUT

SANDY IKEDA

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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