Latest posts by Joe Bast (see all)
- House Democrats Are Wrong About Heartland’s Book on Climate Change - April 4, 2017
- Heartland Replies to Naomi Oreskes - March 31, 2017
- EPA Administrator Scott Pruitt Endorses Pro-energy, Pro-jobs, and Pro-environment Agenda - March 10, 2017
Watch the speech below. The transcript follows.
Although my organization, The Heartland Institute, is located in Illinois, I am not just some Bears-loving FIB. If you know what “FIB” means, well, shame on you!
I was born on a dairy farm in Hortonville, Wisconsin, population 2,711. I was raised in Kimberly, Wisconsin, within shouting distance of the entrance to the original Kimberly Clark paper mill, population 6,508. And God willing, when I retire, if I retire, I’m coming back home to Wisconsin.
You Didn’t Build That?
Back in July, President Obama said:
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.
Many people have parsed those lines, trying to defend them or attack them. There is some truth in some of them. I had a great teacher from 1st to 3rd grade. She taught me how to read and write, gave me my first book. We all use roads and bridges, and the government had a hand in creating the Internet.
But my great teacher was Sister Agatha, and she didn’t work for the government. She worked for the Holy Name of Jesus parish, which was built and supported by thousands of hard-working blue-collar Catholics. “Somebody” didn’t pay tuition for me at Holy Name; my folks did.
And so it goes with the rest of President Obama’s examples. Government might plan and own roads, but it doesn’t build them. Companies like Payne & Dolan, Kraemer, Edgerton, Hoffman, Mashuda, and Daar Engineering build the roads, using vehicles built by companies like Caterpillar and John Deere.
Government doesn’t just allow us to use roads and bridges. We pay our way with federal, state, county, and local excise taxes on gasoline, and vehicle registration fees, drivers license fees, sales taxes on motor vehicles, heavy truck use taxes, traffic violation fines, and more.
And what about the Internet? The story that the Pentagon created the Internet to sustain communications during a nuclear attack is an urban legend. Xerox invented the Ethernet – the true precursor of the Internet – and the first personal computer, and the graphical user interface that still drives computer use today.
Try as it might, the government doesn’t own or operate the Internet. Maybe in China it does, but not here in America. Let’s all say a prayer to God that it never will.
Government doesn’t build businesses, individuals do. Entrepreneurs do. People who are willing to put in long hours and hard work, take the hard way instead of the easy way, and risk losing it all. Starting a business and making it work is something only individuals can do, because a successful business exists inside its CEOs head, not out there. It’s as simple, and as hard, as that.
Obama’s View of the World: We all belong to the government
At the Democrats’ convention in Charlotte on September 5, we learned that Democrats believe we all belong to the government. Do you all believe that? They got it exactly backwards. Who owns the government? We do!
As the founding fathers said in the Declaration of Independence, “governments are instituted among Men” to secure our natural God-given rights, governments “deriv[e] their just powers from the consent of the governed,” and “whenever any form of government becomes destructive of these ends, it is the right of the people to alter or abolish it. …”
Doesn’t sound like the government owns us, does it? We own the government. But President Obama believes everything good in America flows from government. He thinks schools, roads and bridges, and the Internet all come from the government. We are “allowed to thrive,” in his words, because government lets us use these goods and services.
President Obama thinks jobs and prosperity comes from government, too. An article in the New York Times Magazine – so you know it must be true – reported recently that during the financial crisis, Obama’s economic team was going around with a report from Moody’s Analytics.
It said every dollar spent to extend unemployment benefits would produce $1.64 in economic stimulus, and very dollar spent on food stamps would generate $1.73 in economic activity. Cutting corporate income taxes by a dollar, on the other hand, would increase economic growth by only 30 cents. Making the Bush tax cuts permanent would generate only 29 cents for every dollar of lost federal tax revenue.
Well, the number of food stamp recipients is up 70 percent in four years, to 46.7 million. But surprise, we haven’t seen any economic growth!
We’ve tried the theory that government can create economic growth. This year, the federal government will spend $3.8 trillion, bring in $2.5 trillion in revenue, and borrow $1.3 trillion. The federal government has a debt of $16.4 trillion, not counting unfunded liabilities. Our debt is 32 times as large as Greece’s debt. It’s now 100 percent of our Gross Domestic Product.
If more government could produce an economic recovery, don’t you think we would have seen it by now? Moody’s also got it wrong about the effect of cutting taxes. The United States competes with the rest of the world for capital, talents, and markets. Taxing corporations means taxing profits twice, once when they are reported as corporate income and again when they are distributed as dividends or realized as capital gains on business ownership.
This destroys economic growth by discouraging business creation and expansion, and by driving investment and jobs to countries with lower taxes.
Even the socialists in Sweden have figured this out. Sweden lowered its corporate income tax rate from 30 percent to 28 percent in 1993, down to 26.3 percent in 2009, and announced last week that it will lower it again to 22 percent effective January 1, 2013. What’s the average effective corporate tax rate in the U.S.? 35 percent. Who has the highest corporate income tax in the entire developed world? That’s right, we do.
How the World Really Works
If Obama is wrong, if government isn’t the source of economic growth, then what is? Listen closely, because I’m about to say a word that most politicians are afraid to speak: Capitalism. Yeah, capitalism.
What is capitalism? It is a way of organizing an economy that relies on freedom instead of force. It minimizes the role of politics and expands the role of individuals and the institutions of civil society – like churches, businesses, clubs, and charities. Capitalism consists of three institutions:
1 – Private property – the right to keep the fruits of our labor and whatever property we acquire through legal means.
2 – Markets – places where goods and services are voluntarily exchanged at mutually agreed-upon prices.
3 – Rule of Law – a system whereby rules defining property rights and the duties and rights of citizens are established, made widely known, and enforced. Equal treatment under the law is the most important principle of the Rule of Law.
Capitalism is a spontaneous order: nobody designed it, nobody stands at the top of it and tells everyone else what to do. Capitalism works because it solves the universal problems of coordinating the processes of production and distributing goods and services. Every society has to solve these problems.
People naturally want to better their condition, to relieve discomfort and to have more than other people. That’s why we work. The division of labor dramatically improves our productivity, but it creates a problem: How many potatoes can you eat? How many sweaters can you wear?
Barter solves the problem: I can trade my potatoes for your sweaters. But even barter requires property rights. We have to agree on what belongs to you and what is mine.
Money, or currency, makes much more exchange possible. I can trade my potatoes for money, which I can then use to buy a wide range of other products. Money makes finding a trading partner much easier. But advanced exchange like this requires markets, places where people meet to buy and sell things.
Markets create prices. Prices act as signals telling producers what consumers will buy, and consumers what producers are willing to sell. Entrepreneurs – business men and women – use prices to find opportunities to make profits by putting resources to their best use. And profits are their incentive and reward.
Entrepreneurs create businesses to create profits. They hire people with all the different skills needed to produce goods efficiently and to manage risk. But advanced production like this requires contracts – employment contracts, contracts to own buildings and machinery, contracts to buy and sell large quantities of products. The Rule of Law is necessary to make sure those contracts are enforced.
Too much government undermines the Rule of Law when it creates privileges, exemptions, and entitlements. The Rule of Law requires some government … but only as much as is necessary to prohibit the initiation of force. Too much government undermines the Rule of Law when it creates privileges, exemptions, and entitlements.
So now you know how capitalism works. In three minutes you’ve learned more about economics than President Obama learned in four years of college and two years of law school!
Capitalism Is the “Unbelievable American System”
Capitalism taps the inherent desire of people to better their condition. It takes the greed or selfishness that has always been in human nature and puts them to work bettering the condition of mankind.
This is what Adam Smith meant back in 1776 when he compared markets to an “invisible hand.” Everyone acting in their own self-interest nevertheless end up doing things that benefit all of us, as if guided by an invisible hand.
The result is the most successful wealth creation machine ever discovered by man. Capitalism is the “unbelievable American system” that Barack Obama was talking about. It is a prosperity machine, a system that rewards innovation and productivity, which increases total prosperity.
Its discovery raised millions of people from abject poverty and slavery to relative prosperity and freedom. Today it makes it possible to feed and clothe a global population of seven billion people.
It’s a miracle, but because nobody invented it or runs it, politicians like President Obama can claim it is a gift from government. You know, the government that owns you.
The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. The only cases in which the masses have escaped from …. grinding poverty … the only cases in recorded history, are where they have had capitalism and free trade. If you want to know where the masses are worse off, … it’s exactly in the kinds of societies that depart from that.
Friedman went on to say:
The record of history is absolutely crystal clear, there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.
You don’t often hear people defending capitalism. Why is that? A major reason is because the media has been completely overrun by the left, and they will attack anyone who dares to defend capitalism.
Matthew Arnold, back in 1888, wrote that the best way to kill the discipline of self-reliance and morality in a nation is to take over its newspapers. The left must have read that, because this is exactly what they did. Way back in 1671, Sir William Berkeley, the governor of Virginia, thanked God his colony didn’t have a newspaper! Richard Weaver, in his book Ideas Have Consequences, described it as “another example of evil discerned most clearly on its first appearance.”
Evil isn’t too strong a word for it. The media was “in the tank” for Obama in 2008, and they are in over their heads for him now. If you haven’t seen it, I highly recommend to you a book by Bernard Goldberg titled A Slobbering Love Affair: The True (and Pathetic) Story of the Torrid Romance Between Barack Obama and the Mainstream Media. Goldberg knows whereof he speaks: He won eight Emmy Awards for his work at CBS News and at HBO.
Surveys show that nine out of ten reporters will vote for Obama. Maybe sometime in the past this bias wouldn’t have affected their reporting, maybe professional ethics were stronger back then. But today, it’s all too obvious that reporters allow their personal political bias to influence what they write.
Yesterday, Gallup released a poll showing 60 percent of Americans say they don’t trust newspapers, TV, or radio “very much” or “at all.” That’s the highest level of skepticism toward the media recorded since Gallup started asking the question in 1998.
We might well ask, what are the other 40 percent drinking? Or maybe they are all watching Fox News.
The media will blast anyone willing to say publicly that the “great American system” has a name, and it is capitalism. You gotta have a pretty thick skin to do it. But it’s true: Capitalism works. Without it, our lives would all be nasty, brutish, and short.
Capitalism Is Moral, Too
Before I end, let me make the case that what business owners and entrepreneurs do isn’t just necessary – doesn’t just put food on our plates, clothes on our backs, and roofs over our heads, however important that may be. What they do is also profoundly moral.
There are only two ways to get someone to do something: You either make it in his or her interest to do it, or you force him or her to do it. Governments have the ability to use force to compel people to do things, like buy health insurance under Obamacare. Businessmen and -women can’t use force. They can only trade you value for value. So capitalism is inherently peaceful.
Capitalism didn’t invent greed. The great German sociologist Max Weber wrote in 1904:
The impulse to acquisition, pursuit of gain, of money, of the greatest possible amount of money, has in itself nothing to do with capitalism. This impulse exists and has existed among waiters, physicians, coachmen, artists, prostitutes, dishonest officials, soldiers, nobles, crusaders, gamblers, and beggars. One may say that it has been common to all sorts and conditions of men at all times and in all countries of the earth, wherever the objective possibility of it is or has been given.
What distinguishes capitalism from all other methods of organizing production is not that it relies on or encourages greed, but that capitalist institutions act as a check on greed by elevating trade – voluntary exchanges that create new wealth, not just redistribute existing wealth – over the use of force, fraud, or privilege.
Capitalism protects rather than violates human rights, and by doing so it creates a path to financial security and wealth that is open to the vast majority of people who don’t have political or military power.
America was founded on capitalist values. It’s no coincidence or mystery that 1776 was both the year of America’s founding and the year Adam Smith’s The Wealth of Nations was published … the first treatise on economics that made the case for capitalism. Adam Smith corresponded with Benjamin Franklin and other founding fathers.
In his Autobiography, Franklin listed 13 virtues, all of them consistent with the new morality of capitalism. They are still worth pursuing: temperance, silence, order, resolution, frugality, industry, sincerity, justice, moderation, cleanliness, tranquility, chastity, and humility.
Two hundred and forty years later, Investor’s Business Daily runs “10 Secrets to Success” on the editorial page of every issue. Greed, cheating, lying, and cutting corners aren’t on the list. Number one on the list is: “How you think is everything: Always be positive. Think success, not failure, beware of a negative environment.”
The next eight secrets to success are: decide upon your true dreams and goals, take action, never stop learning, be persistent and work hard, learn to analyze details, focus your time and money, don’t be afraid to innovate, deal and communicate with people effectively.
Number ten on Investor’s Business Daily’s list is “Be honest and dependable, take responsibility; otherwise numbers 1-9 won’t matter.”
I think Adam Smith and Benjamin Franklin and the other founding fathers would have approved of that list. These are basic American values. These are the values of successful businessmen and -women.
What’s at Stake on November 6
I mentioned Richard Weaver’s book, Ideas Have Consequences, earlier. It’s a great book, and it’s a pity that so few people nowadays have read it. And it’s true that ideas do have consequences. Ideas rule the world … but only if they are effectively advocated.
Bill Richardson, a former state senator from California, wrote, “to put it bluntly, ideas count for nothing unless there is a way or will to implement them. To return this country to fiscal sanity will take guts and structure.”
Richardson liked to say that “dogs bark, jackasses bray, snakes wiggle, and liberals lie. It’s their nature to do so.” He also wrote:
Exposing a liar is confrontational. They first deny, then change the subject, then attack the accuser’s character. The more vigorously we pursue the truth, the louder they scream.
But the lies of the left need to be confronted, and it’s up to you to do this. The media won’t do it. Teachers in K-12 schools won’t do it. Professors in colleges won’t do it. It’s up to you.
There is a lot of free literature on the tables at the back of this room. Take it all with you as you leave today. Share it with your family, friends, neighbors, and people you know at work.
Tell them you don’t belong to the government, the government belongs to us. Tell them government can’t create wealth. Obama tried that and failed. Tell them “capitalism” isn’t a bad word. In fact, it’s the greatest wealth creation machine ever discovered by mankind, and it means the differences between life and death for billions of people.
Tell them not to believe what they read in the newspapers or see on television. Tell them “dogs bark, jackasses bray, snakes wiggle, and liberals lie.”
And tell them it’s time to appreciate and thank the businessmen and -women who sacrificed so much and so long to make everyone’s safety and prosperity possible, and to stop blaming them and running them down. They are what makes America truly exceptional.
Thank you very much for listening, and God bless America.
© 2012 The Heartland Institute. Distributed by The Heartland Institute, a nonprofit and nonpartisan public policy research organization. Nothing in this report should be construed as reflecting the views of The Heartland Institute, nor as an attempt to aid or hinder the passage of legislation. Additional copies of this Policy Brief are available for $6.95 from The Heartland Institute, One South Wacker Drive #2740, Chicago, IL 60606; phone 312/377-4000; fax 312/377-5000; email firstname.lastname@example.org.