Obama’s Business Comment . . .
By Randall Holcombe • Thursday July 19, 2012 2:21 PM PDT • 20 Comments
Many readers will be aware that last week in a speech President Obama said “If you’ve got a business — you didn’t build that. Somebody else made that happen.” There have been many comments on this already — most of them I’ve seen have been negative — but I’m still going to add a few words, because I find the comment so troubling.
If the credit for a business person’s success belongs to “somebody else,” who is that somebody else?
In the same speech the president 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.” That statement is true. But in no way does it imply that if a person has a successful business, “Somebody else made it happen.”
Everybody’s well-being in a modern society depends on cooperation with other members of the society. Through specialization and gains from trade, we all are more productive, and we all benefit. First, consider the way that social cooperation works in the market sector.
People engage in exchange when they find it mutually advantageous. Both buyer and seller are better off because they have specialized, become more productive at some activity, and produced value for those with whom they trade. The only way a business person can succeed in a market environment is by purchasing inputs and combining them to produce output that is more valuable than the inputs they purchased. This is a creative activity that adds value to the economy, and the credit for that accomplishment belongs entirely to the business person.
Many people start businesses that lose money. The implication of President Obama’s comment is that those people aren’t responsible for their failures either. Other people are. No, he didn’t say that. Perhaps this is something the president should clarify. If you don’t deserve credit for your successes, perhaps you’re not responsible for your failures either. In the real world, people make choices, and they are responsible for the consequences of those choices. Both the good consequences and the bad.
How about the businesses that make money? They do that by creating value for their customers. Doing so is not trivial. It is a creative activity, and it also requires hard work. Just because the success comes from trading with others does not take away from that fact that successful business people were able to make those exchanges because their entrepreneurial activities added value to the economy.
Consider a spectacular example. President Obama’ statement implies that Steve Jobs didn’t build Apple Computer, and the credit for the iPhone, the iPad, and all the other products the company has introduced goes to somebody else. “Somebody else made that happen.” Who? The same applies to less spectacular examples. The person who owns a restaurant, or an auto repair business obviously depends on customers, but those customers patronize the business because the people who work there create value, which enables mutually advantageous exchange.
I would think it is so obvious that what President Obama said is fundamentally wrong that it almost goes without saying, except that the statement was made by the President of the United States.
Now, consider the president’s other comment. “If you were successful, somebody along the line gave you some help.” We already considered market exchange, where both parties help each other. How about that great teacher? Lots of people had the same teachers as Steve Jobs and other successful business people. I can assure you (as a teacher myself) that some students put more work into their studies, some students are more perceptive, and some students get more out of instruction than others who had the exact same instruction. Ultimately the teacher-student relationship is an exchange relationship like many others. Teachers are paid to teach, just like auto mechanics are paid to fix cars. Yes, some teachers are better than others, but some students are better than others too. I get paid to teach; students (and taxpayers) pay to get my lessons, and the students themselves deserve full credit for any successes they have after they leave my classroom. I hope I give them something valuable, just like customers value the auto repairs they pay for, or the iPhones they buy. But they put in the effort, take the risk, and think creatively to add value to the economy and benefit from gains from trade.
How about the bridges? The president said “Somebody invested in roads and bridges.” This is an exchange relationship too. Taxpayers are the ones who sacrificed their incomes to invest in roads and bridges. The difference here is that they were forced into the exchange. We are compelled to pay taxes, and some of that money goes to build roads and bridges. If we are giving credit to anyone, it should be to the people who were forced to part with their earnings to pay for the roads and bridges everyone uses. The top 1% of taxpayers pay more than 36% of total federal income taxes, and the top 5% pay well over half of total federal income taxes. So if someone else deserves the credit for those roads and bridges, it is the very individuals President Obama wants to burden more by raising their taxes. But as with market exchange, just because some people produce what other people pay for does not mean “somebody else” is responsible for people’s successes.
Every one of us owes our prosperity to the social cooperation that occurs in a market economy. We rely on our customers, our suppliers, and all of the many businesses that provide us with the goods and services that make our standard of living so high. But this is far different from asserting, “If you’ve got a business — you didn’t build that. Somebody else made that happen.” No, if you’ve got a business, you built it and you made it happen, by creating value for your customers. The business people, the entrepreneurs, and the business employees in an economy chart their own path and make their own successes. Success is not guaranteed and it does not come easy. When people are successful in business, we should recognize their accomplishments and applaud them, for in the process of succeeding themselves, they also have created value for others in the economy.
Over the past four years I have found myself in disagreement with some of President Obama’s statements and policies. But I don’t recall him making a statement before that shows such a profound misunderstanding of the economic forces that have produced the material prosperity that too many people take for granted.
Tags: Business, Culture, Economics, Education, Entrepreneurship, Free Market, Liberalism, Nanny State, Politics, The State 
I’m still amazed that Obama made it to the presidency,birth certificate or not. The man has a personality akin to a Boardwalk nicknack salesman. What really amazes me is not Obama’s electability, but the intelligence of the buffoons who voted him into office. Can’t these voters see that Obama is nothing but a puppet for the One World Elitists? Not that the Republicans are much better. With either Party most of the voters lose. Except,of course, the special interests living off of the government gravy train and the Globalists who are striving for a one world government and a New World Order. Its more akin to a New World Odor. God help us.
libertarian jerry | Jul 19, 2012 | Reply
He did conclude with this:
The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.
A nice all-encompassing concept that would also agree with free-market ideas. What is fundamentally wrong is that too many non-regulated elites have fostered multinational corporations, using cheap labor that profits them in the short term, and destroys the working class and America in the long term.
Jerry Neal | Jul 19, 2012 | Reply
Randall,
You demonstrate not only a profound, but also a tragic, misunderstanding, dare I say ignorance, of American history with your ridiculous and childish commentary. Clearly, the reference to the term “American System” fails you completely. The term references pretty specifically the economic and political ideals of Henry Clay and the 19th century Whig party. I.e. the relationship between the entrepreneurial/industrial classes, and the need for government investment (through increasing tariffs) in infrastructure to support it, as well as the need for the need for maintaining social and political balance. In fact Henry Clay’s ideas represent a continuation and evolution of Hamiltonian economic thought, clearly you missed that as well. In that vein Obama is not wrong, especially in terms of how the American economy and social construct has evolved and worked for the past 2 centuries. If you take the whole paragraph and not just the sentence you want to hard on, and leave it within its full context that become much clearer. The “that” after the hyphen refers to the American System and not the business that someone built. i.e. the system was put in place my many others enabling the entrepreneur to be successful. In fact he said virtually those word just before the quote you are and many of your ilk continue to whine about. What is wrong with stating the simple truth, that others – even other generations have been responsible for building an economic/social system that enables entrepreneurial success.
Further, the fact that the critics of his comments generally are either completely ignorant of this history, or willfully distort it for a political point is to their shame.
Frank | Jul 19, 2012 | Reply
Frank, Obama is not talking about Henry Clay. I don’t even know if Obama is aware of Henry Clay’s economic platform.
When he says “this unbelievable American system” it is quite clear he is referring to the American economy, the American system of laws, and the American culture of today, not some antiquated economic ideas from the early 19th century that never made it past the Civil War, at least not in that form.
Jeremy | Jul 19, 2012 | Reply
Where did Randall use the term “American System?” Or Obama for that matter? You’re putting words into people’s mouths.
Kristin | Jul 19, 2012 | Reply
You obviously are to well educated by liberal professors and blinded by your beliefs to see the truth if it bit you in the face! The fact that your spelling is not so correct may be dismissed by an ability to understand any thing beyond your liberal teachings. You too did not write your comments some one else must have!
Mark | Jul 19, 2012 | Reply
Astute analysis Randall, thanks.
Bill | Jul 19, 2012 | Reply
It is simple math and doesn’t require a college degree, a President, or the Independent Institute. The evidence clearly depicts, the result of the equation. It is not singular. It is how one or many can deduce from the equation the result of the intention. Talk to much and the point gets lost. Big deal! This is the OBAMA picture,irrelevent.
Kimano | Jul 19, 2012 | Reply
Maybe he got confused with his friends who, actually, did depend on government to be successful. You know, Union Labors and Planned Parenthood.
Justin | Jul 20, 2012 | Reply
This topic is covered in the new book “Predator Nation” (everyone misspells once in a whil)
richard | Jul 20, 2012 | Reply
A couple of points I’d like to make.
First, Obama has never worked a real job and earned an honest dollar in his entire life. He is the head of the parasite class that lives off of the productive class. So, at least as far as he’s concerned, he’s never received anything that wasn’t taken from someone who did make it.
Secondly, taxpayers do not ‘invest’ in bridges, roads or anything else that the government does with the money that is taken from them. The idea of government spending as investment, I believe, started with Slick Willie.
Paul | Jul 20, 2012 | Reply
Frank,
During Henry Clay’s lifetime and for 50 years after, the income tax rate for all Americans was exactly 0%. Maybe it’s you who needs to put things in the correct context.
Matt | Jul 21, 2012 | Reply
Obama has no clue to how business works, never has and never will. For him success is some government sponsored program which supplies all the money and expertise which at this point is sorely lacking ! Look at his record at an organizer in Chicago, a city that has lost over 1/4 of its population in tha past 2 and a half years ! Really successful !
Arthur Mackey | Jul 25, 2012 | Reply
Great piece... rather than politicizing these statements through democrat and republican talking points we should look at the real divide.....that is collectivism (Obama, Bush, and most elected officials) vs. Individualism (Hayek, Von Mises, along with candidates Gary Johnson and Ron Paul)
Colton Cranston | Jul 26, 2012 | Reply
Nobody builds a business by themselves. The employees actually build the business and in my experience I have seen employees be less productive because they feel enslaved to their employers. If businesses would offer profit sharing and treat their employees as limited partners, which in reality they are,by sharing the budget with them and listening to their ideas perhaps those employees would be more productive.
Teri Calhoun | Jul 27, 2012 | Reply
Henry Clay ran for President 5 times and secured the nomination of a major party 3 times and was rejected outright by the American people 3 times.
Clay was a corrupt politician involved in the “Grand Bargain” Scandal of 1824 where as Speaker of the House he exchanged control of electoral votes in order to be appointed Secretary of State. Andrew Jackson had won the popular vote and had more electoral votes than John Quincy Adams but Clay nullified the election by making a deal to be Secretary of State. He was the “Blogdanovich” of his day.
Publicly he would state he opposed the expansion of slavery especially into the western states, ardently opposed the admission of Texas as a state in that it “Would Expand Slavery” but he maintained ownership of his own slaves until his death. Clay owned 60 slaves that worked his Kentucky plantation. He brought some of his slaves to Washington DC. A female slave that he brought to Washington DC sued Clay for her freedom based on her previous owners promise to free her. Clay fought her in the courts and the courts decided she was to remain the property of Henry Clay. This case was 17 years before the Dred Scott Decision.
Henry Clay also wanted to deport all Free Blacks out of the United States in that he said they were a economic threat to free whites and that “God had made blacks inferior.”
When first elected Speaker of the House he adamantly opposed the creation of a National Bank because he held interests in many privately owned banks himself. Later he would Flip Flop and support the creation of a National Bank in his run for the Presidency in 1832. He was soundly rejected by the American voter for his support of a National Bank of the United States.
As to his economic philosophy the “American System” Henry Clay was once again revealed to be totally corrupt. It had but one purpose and that was to build the Mayville Road through his home State of Kentucky and to line Clay’s pockets with public funds. Thankfully Andrew Jackson vetoed Clay’s proposals.
Henry Clay was a miserable man. A power hungry violent alcoholic. 9 of his 11 children died in childhood. His lust for power also made him a a very violent man who physically attacked others on the House floor and he would challenge his opponents to duels. Unfortunately he survived the one duel he did engage in taking a wound to his leg.
So please do us all a favor. If you wish to use American history in your argument “Learn It First!”
OlderButWiser | Aug 1, 2012 | Reply
Do you have any idea what it costs a business to train it’s employees to properly function in their tasks?
Especially in today’s world where this nation’s school systems are sending “Dummies” out into the global business world.
My first full time job was in a steel door manufacturing company. No exaggeration it took that employer a full 2 years before I was fully qualified in working with steel and qualified in operating steel fabrication machinery without direct supervision or chopping my arm or another employees arm off.
The government didn’t train me or pay to have me trained the two men (Brothers) who owned the business paid for that.
God Bless the Gallo brothers they not only invested in me they gave me the means to pay for my college education.
OlderButWiser | Aug 1, 2012 | Reply
If you want to be a partner then buy stock.
Otherwise you are only entitiled to a salary.
Nobody is forcing you to work for anybody.
OlderButWiser | Aug 1, 2012 | Reply
You and many others are simply to pessimistic about America’s future.
Google search 3D printing technology. Learn about this nation’s future.
Learn how this nation’s techies are going to make the Chinese labor pool obsolete.
3D replication printing technology is not a theory or a dream. It’s here now and guess who is going to control the software that will be applicable to very industry known to man.
Correct! The U.S.A. If you are not invested in 3D Printing companies you are simply being stupid.
OlderButWiser | Aug 1, 2012 | Reply
Sad but true >> If you are an employee then you are only entitled to a salary. If you want to be a partner, buy stocks. Makes sense.
Rob @Novated Lease | Apr 26, 2013 | Reply