The 'give back' argument is the opposite of the truth

This post is an enlargement of a comment I made on Lindsay Mitchell's blog today. Lindsay wrote about the response of a 'social entrepreneur' who had contacted 300 local businesses to pay for school lunches for children, and who had had no takers. The 'social entrepreneur' said, 

"I'm not trying to sound harsh but if there are businesses that are making money off our community then I'm sort of garnering towards making them socially responsible to give back to the community that it makes money from."

What I said in my comment was,

"Businesses...'give back' in the taxes, rates and other government charges that they have to pay - often amounting to more than half their profits. But that is just the start of what they 'give back'. They also employ most people who work in their communities, paying their wages, their PAYE, their ACC, their holiday and sick pay, and their on-the-job training. Add to that the fact that many businesses sponsor local sports teams and cultural events, and that many business people are prominent in community service organisations, and you start to see why such claims that business people should 'give back' make me sick."

I have written before about the socialist U.S. senator Elizabeth Warren's "you didn't build that" argument - that businessmen do not create the wealth in their businesses but rather ride on the backs of everyone else in the community. As I pointed out in that earlier post, Elizabeth Warren exactly reverses the true facts. The reality is that everything in the community, every dollar* earned and spent by every worker, and every tax dollar collected and redistributed by the government has been created somewhere, sometime by a business owner or operator or investor.

But, I hear you say, the business owner sells his products and services to the community and therefore isn't he just recycling money that already exists? That would be true if the economy was a closed system and a zero sum game, and, if it was, we would never get wealthier as a society. In fact, we would get poorer because as the population increases and some wealth is destroyed by disasters, war and decay, our wealth per capita would decline. So how do we explain the following graph, showing an exponential increase in global GDP per capita (while the population was also exponentially increasing) over the past two hundred years?

The answer is capital, and by capital I don't just mean money invested. Capital is the sum of human knowledge - it is the equipment and processes, the inventions and patents, the brands and goodwill, and all the other things that go into producing and selling the goods and services we consume. It is the leverage that enables relatively unskilled workers, who would have trouble making a wooden cart wheel on their own, to produce a modern automobile. And because capital is as much about the ability of the human mind as it is about anything physical, it is limitless.

Marxists would have you believe that capital and labour are in conflict - that the more of the final price of the goods and services that go to reward the use of capital, the less that is available to reward labour. This is rubbish. Capital enables labour to be more productive and it is why workers in the Western world today are paid much more for their labour than at any time in history. It is the efficient use of capital that is characteristic of a free market (i.e capitalism) and that enables wealth to increase without limit - and for that increase in wealth to churn through society, thereby improving everyone's standard of living.

So next time someone says that a businesses should 'give back' to the community, just remind them that everything in the community has been derived from businesses in the first place.

[* Note that actually this isn't strictly true for a dollar of fiat currency, but it is true if you think of a dollar as a fixed equivalent amount of gold.]

You Didn't Build That...

Finally, the President of the United States has shown his true colours - and they are all dark shades of red.

Last week Mr Obama reiterated and extended the comments of Elizabeth Warren, a White House staffer who is standing for US Senate in November saying, "If you’ve got a business - you didn’t build that.  Somebody else made that happen."  

Last October when I blogged on Elizabeth Warren's comments, I thought that they were the words of a peripheral extremist in the Obama administration and couldn't be the views of the President himself, but I was wrong.

These are the views of a Marxist-Leninist.  Marx and Lenin believed that the people provided the means of production, not the business owner, and therefore the people should be entitled to any wealth or profit associated with it.  Were Mr Obama a private citizen, he would be entitled to hold such views - after all, the United States is a politically free, pluralistic society that is perfectly able to accomodate people of all beliefs and creeds.  But Mr Obama is not a private citizen, he is the head of state of a country founded on the premise that all have the right to life, liberty and the pursuit of happiness.  The "pursuit of happiness" bit includes material happiness, i.e. the right to acquire and own property without undue hindrance from the government.  Mr Obama's political views are diametrically opposed to those espoused in the Declaration of Independence and the Constitution. 

Mr Obama cannot in all conscience represent the principles on which the United States of America was founded and he should resign forthwith.  Given that is highly unlikely, I hope the good people of the United States have the sense to throw him out of office in November.  Assuming he lets them, because not only do Marxist-Leninists not believe in property rights, they don't believe in constitutionally limited government either.

Steve Jobs was the "factory owner"

I think the greatest tribute I can make to Steve Jobs was to say that he was the factory owner I wrote about in the blog below. Okay, I know the iPhone and iPod manufacturing was outsourced to factories in China, but he was the man whose vision created the products and brought them to market.

He was also the man who, when it was suggested that he should give the rest of his life over to philanthropy was reported to have responded that "he could do more good focusing his energy on continuing to expand Apple than on philanthropy".

"That’s his legacy. Everything else is a distraction."

He understood, unlike Bill Gates, Warren Buffett and Ted Turner, that his products and services would do far more for mankind than any philanthropy.

It is paradoxical that so much praise for this wonderful industrialist comes at the same time as the political left wing and media vilify his kind.

The Elizabeth Warrens of this world who want to pull us all down to the same size, to make us meek and mild servants of society and the state, in effect want a world without Steve Jobs. I am pleased we still have a world that can give rise to his kind.

Nobody Got Rich On Their Own...

I found the recent comments of Elizabeth Warren, Democratic Senate candidate in Massachusetts and former White House financial reform adviser, to be so ridiculous that I wasn't going to bother to blog on them, but none of the responses have fully captured the reasons why her comments are so ignorant and wrong so I thought I should set out the counter arguments here.

Just to recap, if you didn't see the video, Elizabeth Warren said:

“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 gist of what she is saying is that everyone in society pays for everything that goes into the factory owner's goods and that therefore the factory owner owes society and should pay and pay and pay.

There are several problems with this argument:

1) The factory owner is the only one who pays all of the input costs to his goods. He not only pays for all the parts and raw materials that go into his goods, he pays for the transport of getting those parts and raw materials to his factory including road user charges. He pays for the education of his workers in the higher salaries he must pay qualified staff. He pays for the fire service in the insurance levies on his buildings and plant. Perhaps the only input that he does not pay the full cost of directly in most countries is the police force, but as we know the police these days do not have protection of private property as a priority and therefore the factory owner has to pay for a private police force in the form of security guards and electronic alarm systems.

2) The factory owner is the source of all revenue that provides the tax base. He not only pays tax on his company's income and on the goods he sells (through sales and value added taxes), he pays the gross salaries of employees from which payroll taxes are taken. He pays these in addition to all the input costs mentioned above and receives little or no direct value in return for all the taxes he pays. And because almost all of the Government-provided services that Elizabeth Warren mentioned have a user-pays element in their pricing, he is actually paying for these twice.

3) His goods and services provide added value to those who purchase them and to the wider community. After all, the books and materials that are used to educate our children, the medicines that are used to cure our diseases, the fire trucks and the hoses that are used to put out our fires, the uniforms, cars and police stations used by our police - all these things are provided by factory owners.

Elizabeth Warren and her ilk want the factory owner to pay more. Why? So that she can dole more out to those in society who don't provide all the goods and services, jobs and taxes? Already, in most Western countries the vast majority of all income taxes are paid by only 10% of the population (e.g. see this US article Guess Who Really Pays the Taxes). They even pay the salaries of ungrateful, left-wing fools of politicians like Elizabeth Warren.
And she think those few people should pay more?

Sooner or later the productive few in society are going to say, enough! I think we are at that point already. Atlas is about to shrug (to use an expression of philosopher Ayn Rand who predicted precisely this). Those who carry the whole world on their shoulders will throw off the burden. And why shouldn't they?

Elizabeth Warren wants slavery. She wants the productive in society to be slaves to the unproductive. Not content with the partial slavery we already have in most Western countries, where we are forced to work a significant proportion of our time to pay taxes to the government, she want us to accept that the society owns 100% of our bodies and our time. It is not surprising that she thinks we should be grateful to society for allowing us to keep any of our incomes, for that is the attitude of a slave owner. Of course, she sees herself as the slave owner rather than the slave.

The problem with her attitude (aside from the twisted morality of it) is that no slave ever produced an iPhone (or, if you want a more 'worthy' example, an MRI scanner). Elizabeth Warren's philosophy leads to a society where there are no factories, or at least only factories that produce Trabants rather than BMWs. If you want proof of this, you only need to look at the contrast between North and South Korean today. North Korea is built on Elizabeth Warren's philosophy and it is the inevitable result.