“I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!
There is nobody in this country who got rich on his own. Nobody.
You built a factory out there—good for you! But I want to be clear.
You moved your goods to market on the roads the rest of us paid for.
You hired workers the rest of us paid to educate.
You were safe in your factory because of police forces and fire forces that the rest of us paid for.
You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.
Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.
But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
The implicit premise of Warren’s argument is that government came first, industry second. If this were true, where would tax dollars have come from to fund the fire department, police department, and public infrastructure? Obviously, no government funded entity can tax itself and remain sustainably in business or even exist to begin with; all public monies must, by absolute and irrefutable necessity, be derived from productivity. Businesses make things or offer skilled services per customer for a price, the exchange of which is taxed to fund public outlays. Individuals then pay compulsory taxes after earning their own income from a value-added activity, paid for by a productive entity.
If, by some miraculous shift, politicians decided that tax dollars were too old-fashioned and decided to engage in commerce to gain revenue, they could not subsidize government’s activities. Having no tax dollars, they would have to, by necessity, offer services on an individualized basis, collecting payment for product or service per customer and in accordance with market prices. Profits could then be used for public roads and law enforcement. But do we really want to mix profit and guns?
Government requires the existence of taxable industry in order to exist itself, and serve the public effectively. Without individualized productive exchange, no matter what form it might take, the provision of public goods or services would not be possible. It cannot be otherwise; not because anyone believes this might be true or that it should be this way, but because it actually is.
It doesn’t matter where on earth one might look, the answer is the same. In the tiny island state of Nauru, in which 19 out of 20 working people are employed by the government, the functions of government include to a very large extent, value-added industry in which government serves as a monopolized corporation that hires and pays miners on an individual basis to extract phosphorus, which it will sell to buyers overseas to earn a profit, which it can use to improve its own operations and finally invest in public goods. Productive, profit-seeking industry that provides products and services on an individualized, per customer, price-exchange basis is the true engine, transmission and wheels of any economy. Now, whether the path traveled is smoother thanks to a system of public roads becomes an issue of how existing productivity is going to pay for it.
Government cannot exist without industry. It can only be sustained by either engaging in industry itself – and creating potentially severe inefficiencies by eradicating competition, as it by definition holds the monopoly on force – or collecting a portion of industrial productivity in order to provide public goods and services. Private industry (and thus private protections, provisions and infrastructure) came first.
Even police officers, teachers and firefighters, today often immediately associated with public funds, were at some point exclusively part of private or community-based industries. You might think of the “man in the white hat”, the chains of neighbors passing a water-bucket to stop the spread of fire, or even the unthinkable notion of industrial apprenticeships or homeschooling. Whether one might call them preferable or archaic, these methods had to exist during the development of any presently advanced economy, before tax collection was even possible.
History deals a fatal blow to Warren’s implicit suggestion that industry depends upon government or at least “other” people’s contributions, presumably without return, in order to exist. She uses the phrase “the rest of us” four times to describe those who pay for the public goods and services that she deems so critical to the success of businesspeople. She does not consider the very real possibility, or rather likelihood, that the entrepreneur or industrialist has already contributed a great deal to the productivity of his economy and thus has both paid directly and contributed to the paying of a great many tax dollars before setting off to chart his or her own course.
In essence, the entrepreneur, the industrialist, the organizer is indeed paying for his use of roads, peace-keeping activities, and publicly-funded education, all of which only aid in the development of the venture, insofar as the venturist makes use of them. On top of that, the more he makes through the venture, the more taxes can be and are paid, and the larger portion of public goods the industrialist is conceptually entitled to use – though everyone else, ambitious industrialist or not, enjoys equal access to the same foundation.
The more explicit message in Warren’s words is certainly an attack on the idea of the self-made man, but whether it is an actual indictment against the concept is questionable. To support her assertion that “nobody…got rich on his own”, she brings up the hiring of workers. The hiring of labor or contributory efforts, the use of loans or capital, and the seeking of advice or education necessary for successful business ventures are all common ammunition used by those who deny the existence of the self-made man – often those who live as though personally defeated themselves, if I may inject an observation of my own.
If one watched the activities of a highly effective individual from the sky, having no knowledge of money, contracts or prospects, it would, to a great extent, appear as though our hero were exploiting labor, running with the good ideas of others and taking large quantities of the property of others to be used for his own endeavors without a fair exchange. Obviously, anyone who is only able to view these occurrences from such an ignorant perspective will quickly find the conclusion that the self-starter is a thief, and if not stopped, must be forced to return to his victims the products of the capital he stole.
Such alleged activities are crimes for good reason, yet entrepreneurship continues to remain legal and is in fact quite a necessary component of functional economies. So is entrepreneurship one of those “necessary evils”? Not even close. The entrepreneur becomes a self-made man or woman, not by exploiting the property and labor of others, but by making the property and labor of others more valuable than it would be otherwise, benefitting all contributing parties. In exercising the initiative, our hero reaps a just reward – profit. Profit is the surplus value created due to the entrepreneur’s efforts in orchestrating a company in such a way that it becomes greater than the sum of its justly compensated components. And it is profit that makes tax-funded anything possible.
Are employees of any skill level being exploited when they find the opportunity to exchange their skills for pay that would not have existed without the entrepreneur? No. Is the entrepreneur unjustly enriched by the employment of skill that is not his own? Not if the skill is hired for pay deemed acceptable by the employee, who maintains the right to seek employment elsewhere. Are investors exploited when they put huge sums of money in with nothing to show for it in the time being but a piece of paper? Not if the venture has real potential to generate returns and the entrepreneur is deemed capable of the organizing capacity to bring good ideas into reality.
Yes, it certainly takes a lot of people to get a new business off the ground. It takes employees, managers, investors, lenders, contractors, consultants, and the list goes on. So how is the entrepreneur really self-made? In the employment of skill that our hero does not possess, he or she is exchanging payment for it, or the skilled worker doesn’t work. The contribution of that skill is made available to the venture only if the entrepreneur can demonstrate that his or her business is worth the employees’ time and effort. That signal normally comes in the form of an attractive wage – funded initially by investors.
Investors only put up capital if they see real potential in the business plan and the orchestrator himself. They only put money at risk in a new business when they have a pretty solid expectation that the money invested will become much more money earned by the business once self-sustaining, giving them back a sizable return. This is where the merit of the entrepreneur, his motivation, energy and ideas shines through to represent his potential in terms of actual value.
Ultimately, all the productivity, career opportunities and customer satisfaction that can be delivered by a new business are only possible when the entrepreneur takes it upon himself to first convince existing abilities and capital to join the cause, and then to conduct these resources into the best outcome as he has conceived. Tether and wood could never have thrown an arrow without a thought for their arrangement as a bow.
Every helpful gesture someone gets is somehow related to the helper’s perception of the helpee’s merit. Charity is given, for instance, when a donor sees more dignity in a person than he or she is presently receiving. Investors don’t give for the sake of charity however; they expect a return based on the motivation and valuable ideas of an entrepreneur. Lenders don’t lend to be nice; they expect interest based on the credit of the borrower. Employees offer their services because they expect payment for the skills they have worked to gain, payment which must come from a successful employer or a well-backed entrepreneur. Quality professors don’t waste time trying to educate the hopelessly unmotivated; they expect their students to strive for excellence or fail. All contributions to the making of a person, especially in a professional sense, are inspired in some form by the efforts, skills, talents and the demonstrated merits of the self-maker himself. Self-made men and women do very much exist, and it is their dedication that has made the world a better place.