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Sunday, October 1, 1995

Free to Try

Why Do Americans Insist on Punishing the Rich?

Where else in America but in law-passing, tax-imposing, and regulation-issuing Washington, D.C., is private success so roundly condemned? And where else is it so punished, especially when it involves entrepreneurship and “the rich”?

(A measure of U.S. “capital” punishment is seen in the climb of the top income tax rate from 28 percent in 1987 to 39.6 percent today. Said President Clinton in his 1994 State of the Union Address: “Only the top 1—yes, listen—only the top 1.2 percent of Americans, as I said all along, will face higher income tax rates.”)

I ask: Where? But perhaps the sharper question is: Why?

Back in 1966 German sociologist Helmut Schoeck gave one answer to why in his pathfinding book, Envy. Envy is a major force shaping—really distorting—man and society, history and politics, says Schoeck. He finds it rearing its ugly head from Greek democracy 2,500 years ago to Western democracy today.

How good then to get this FEE collection of essays from The Freeman glorifying future-oriented entrepreneurship, justifying the rich, and excoriating the politics of envy.

Such politics can be seen in the progressive income tax—a tax called for, by the way, in Marx’s 1848 Communist Manifesto as a means of undermining capitalism. It can be seen again in the current opposition to a flat tax or a cut in the entrepreneur-strapping capital gains tax—a cut which opponents unjustly and counterproductively brand a “handout” to the rich. (A handout to the nonrich, including the poor, is closer to the mark.)

Indeed, entrepreneurship along with capital investment is the secret of American prosperity. More often than not, the rich gain their wealth through entrepreneurship. In a brief but pungent essay here, Ludwig von Mises portrays the entrepreneur as indispensable to a free society, as one who enriches that society, as the driving force behind the whole market system, as a kind of an unsung hero who in a sense shares his wealth with society through what Mises called “social liability,” his recognition that investments have to be monitored scrupulously, that they can and do fail.

In his introduction to this volume, FEE’s Hans Sennholz hails futurists and visionaries like John D. Rockefeller, J. P. Morgan, and Henry Ford. These giants bequeathed capital investment, industrial might, and labor productivity to succeeding generations of Americans.

The rub is that Americans are largely ignorant of this bequest, are apt to snap at “robber barons,” and vote anticapitalists into office. A deadly business. Cautions Dr. Sennholz in punchy terms: “The future is purchased today. We have a number of choices. But all sales are final.”

In a refreshing essay, contributor Jane Shaw of the PERC research center in Bozeman, Montana, thanks the entrepreneurship behind Bozeman eateries for gastronomic delights. She calls attention to George Gilder’s idea that entrepreneurs are “givers”—altruistic people who give first and get rewards later, if profits kick in.

Contributor Israel Kirzner of New York University says the glory of free enterprise lies in its ability to attract vigorous and imaginative individuals who establish long-run capital-conserving profitable firms—profitable to themselves and, of at least equal importance, profitable to their customers, i.e., to the American consumer.

Wal-Mart is such a firm and its founder Sam Walton was such an entrepreneur, notes David Laband of Auburn University’s economics department in his contribution. Dr. Laband sees Wal-Mart giving significant benefits to its customers and a hard time to its big competitors such as Sears and K-Mart and to its local, small competitors such as independent drug and hardware stores.

But that competition is anything but “unfair,” as charged by many of Wal-Mart’s rivals. As he writes: “It is true that Wal-Mart’s competitors lost business. However, let’s get the cause and the effect straight: Wal-Mart never put anybody out of business, American consumers (his emphasis) did.”

Chinese consumers in Beijing’s big 500-seat, fast-food Kentucky Fried Chicken restaurant also exercise quite a degree of sovereignty, observes contributor Lawrence Reed of Michigan’s Mackinac Center. But that sovereignty and Kentucky Fried Chicken’s entrepreneurship are still held back in post-Mao, ongoing socialist China.

The Chinese government, for example, insists on majority ownership. Kentucky Fried Chicken’s share is held to 40 percent. Too, its management has to put up with state-set wages and a state-owned utility refusing to provide any heat before November 15th or after March 15th, regardless of any intervening but not uncommon freezing weather.

In his contribution, the Reverend John K. Williams of Australia tells of Ralph Nader on a speaking tour Down Under, with the so-called consumer advocate suggesting to Aussies that “big business” executives should be sent to prison for defrauding the public. The suggestion received rapturous applause. Reverend Williams attributes that applause to what he calls “the business bogey.”

No doubt about the bogey. Throughout the West the highly constructive role of business in society is not only very often unappreciated at the university lectern, church pulpit, editorial office, and so on but, ironically, all too frequently by businessmen themselves.

Mr. Businessman, in other words, often inadvertently supports anticapitalist causes by mindlessly sending a check to his left-wing alma mater. Or he lets the battle of ideas go by default. Comments John Williams: “That is his failing, and possibly his fatal failing.” He might have added a line from FEE writer Admiral Ben Moreell back in the 1950s: to communism via majority vote.

This reviewer, on the firing line of defending the rich for more years than he cares to remember, suggests: Let those critics attacking “greed” and “fat cats” redirect their frustration into a new outlet: Don’t get mad, get even—get rich. Remember, critics, you’s free to try. But watch out: You may become the butt of your own diatribes. []

Dr. Peterson, an adjunct scholar at the Heritage Foundation, is the Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina.

  • William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises.