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The conventional wisdom got its start from Ronald Reagan's famous "government is the problem" statement, followed by
his prescription to "get the government off the backs of the people." The paradigm is that private individuals create all
the wealth of the world, through dint of their creativity and hard work. They are motivated by self-interest, which sometimes
-- amusingly and harmlessly crosses the border into greed. Most importantly, the best of these private individuals create
all of this wealth absolutely on their own. They receive no helping hand, either from welfare, subsidy or any other sort of
governmental handout. The only role of government in all of this is as a hindrance it places barriers in the way of their
success through regulation, and confiscates the just rewards of their success through taxation.
This argument has
developed into one of the fundamental truths of the American political economy. It is what leads George W. Bush to state to
wild applause that government shouldnt take the peoples money from them in the first place. In a recent op-ed piece entitled
Dont Hate Me Because I Am Rich, the author described his long hours of hard work and self-sacrifice. But more than that, he
described a scenario where other members of society played while he worked, then used government to take his just desserts
and give them to others. This self-made man is a hero, struggling mightily against the collective forces of society and government.
He alone struggles to create tangible value out of the chaos of the world. The collective action of society tries to stop
him at every turn, and then, if he does succeed, it tries to take it all away.
This argument has a profound flaw.
The truth of the matter is that the collective actions of civilized society read government are one of the primary enablers
of his success. The modern capitalistic society does rely on the hard work and self-sacrifice of motivated individuals. But
it relies just as much on collective institutions such as laws, regulations and civil improvements to smooth their path to
success and magnify the results of their efforts.
Perhaps this is best illustrated by comparing our modern capitalistic
mogul to a goat herder, trying to eek out a living in some remote mountain chain, far far away from the stultifying hand of
civilization. As hard as our self-made man may work, he doesnt work any harder than the goat herder. The goat herder never
takes a moment off, always having to be on duty to find more pasture, keep his flock together and protect it against predators
and danger. The so-called self-made woman in America doesnt work any harder than the goat herder, yet her work produces so
much more. The key difference is that she gets to stand on the shoulders of giants. She gets the benefits of our collective
activity called civil society or government. The civil institutions we have put in place magnify the effects of her work leverage
is the current term. She reaps benefits multiplied many times over by our systems of laws, education, public safety and security,
market regulations and civil improvements.
To show this in more detail, lets examine three different icons of American
economic success, the doctor, the car dealer and the entertainment or technology industry mogul. Lets see how even the most
self-made of these people have benefited from and fed off of the institutions of government.
Lets start with the doctor,
one of the oldest and most noble of professions. One of the most remarkable attributes of modern American doctors is the extraordinary
number of
years that they have to go to school. So perhaps at least through twelfth grade our doctor went to a public
school Is there a more shining example of the possibilities of collective government action that our public schools? America
taxed its citizens and spent approximately $347 billion on public elementary and secondary education in 1998/1999 (Source
National Center for Education Statistics, Digest of Educational Statistics, 2001). But look at the benefits. Fully 83% of
Americans over the age of 18 have a high school diploma (Source National Center for Education Statistics, Digest of Educational
Statistics, 2001). Our literacy rate has gone from 20% of adult Americans in 1870, the beginnings of the public school movement,
to much less than 1% today. And our doctor enjoyed every bit of the benefit, as his parents neither paid tuition nor home
schooled him.
But thats too easy, so lets suppose our doctor went to a private school, or at least to a private college
and medical school. Here again, even though there was no direct taxpayer funding, our fledgling physician fed at the public
trough. The private school benefited from our collective governmental actions regarding public health and safety. Even if
the school has its own security patrol, it needs local, state and federal law enforcement officials to prevent or respond
to serious crime. And if our doctors chemistry lab catches on fire, I doubt that he and his fellow self-made men would form
a bucket brigade to put it out. Rather, they would again call on the help of the government in the form of the fire department
to put it out.
But almost everyone agrees some begrudgingly that police and fire protection are a legitimate role
of government, so lets go one more step and look at the capital structure of the school. If government doesnt pay for the
school, how does it get paid for? Part of the answer to that is through its endowment. Harvard University has a legendary
endowment of over $15 billion, while private high schools such as Milton Academy and Phillips Andover each have over $100
million. None of these schools keep that money in gold, hidden under the mattresses of their students. Each one takes advantage
of an incredible investment and securities market here in the United States and elsewhere. And those securities markets would
not be there if it were not for the laws and regulations imposed by government. Before the state and federal securities laws
came along, people could not safely and routinely invest their money in securities. Unless a person had the time and ability
to personally oversee their investment, people would often buy nothing more than a patch of the blue sky. The securities markets
did not become a viable public investment mechanism until serious government securities regulation came along. Certainly the
returns on investment that pay for so much of our doctors private school would not be possible not without government help.
Now that our doctor is in his profession, he continues to enjoy government largess. He can prescribe for his patients
pure drugs and medicines, brought to him courtesy of the FDA. Perhaps he sometime curses their bureaucratic inefficiency or
arrogance, but ask him if he wants to go back to the days of patent medicine
And speaking of the drug companies, arent
they a perfect example of private enterprise bringing marvelous benefits to the world, without government subsidy? Lets leave
evidence of the direct government subsidy to others to parse through. Lets talk only about the billions of dollars in capital
that are necessary for the pharmaceutical companies to conduct their research and trails and bring these drugs to market.
This is the flip side benefit of the securities laws. Not only can investors successfully invest, but enterprises can successfully
raise capital. Without the trust, fairness and honesty of the securities markets all brought to you by government regulation
the drug companies couldnt raise the money to put patent medicine in a bottle. So once again our self-contained doctor benefits
enormously from the results of our collective actions.
Lets turn to the car dealer. A rough and tumble business, full
of proud, independent men who would never stoop to take a subsidy from the government. Or would they? Despite the current
fashionability of off road vehicles, few people would actually purchase cars without roads to drive them on. In fact, government
action enables the entire industry. Not to belittle the hard work, passion and creativity of people who work in the auto industry,
but they are not 100% of the story. Our system of roads, traffic signals, traffic cops and traffic laws makes owning a vehicle
a useful thing. It provides a reason the only reason for 99% of the auto industrys customers to buy a car. But of course theres
more.
The auto dealer probably doesnt use the public securities markets directly to raise capital. He or she probably
uses the commercial banking system. And Federal regulation and participation takes much of the risk out of the banking system.
It makes sure that depositors can get their money back, with interest. In turn, that is what gives banks the money to lend.
Without federal regulation and participation, banks would have less money to lend and would charge higher interest rates.
The car dealer would have a harder time borrowing to finance his inventory, and, maybe more importantly, his customers would
have a much harder time borrowing to buy a car. In todays regulated banking system car loans are a rite of passage for millions
of young adults. Without federal control over the banking system car loans -- and car buyers would be as rare as hens teeth.
Indeed, since World War II the automobile industry is a fantastic story but a major part of that story is the civil engineering
and government regulation that has enabled a hugely successful private industry. The government didnt design or build the
Mustang, but it gave 99% of their owners a reason to own one.
Finally, the entertainment or technology industry entrepreneur.
If ever there was a symbol of the rugged, self-made individual, it is the entrepreneur. And the entertainment and technology
industries were the twin pillars of the 90s economy. They created millions of jobs, disbursed billions in wealth and transformed
the worlds culture. They were each cutthroat, competitive industries. People had to fight their way to the top and fight to
stay there. If there are a million broken hearts for every light on Broadway, there are exponentially more for every star
in Hollywood or Silicon Valley. Nine out of ten start-up companies in the technology industry failed. Success requires extraordinary
luck, pluck and hard work. So if anyone can sit back, satisfied with his/her success and take satisfaction in the belief that
they made it on their own, it is the entertainment or technology mogul.
This would be true, were it not for the fact
that both industries stand entirely on the shoulders of government. Both industries depend completely on the existence and
enforcement of intellectual property laws. And intellectual property laws are one hundred percent the creation and province
of government.
Article 1, Section 8 of the Constitution gives Congress the power to promote the progress of science
and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and
discoveries. (Ironically, this is the same section that gives Congress the power to lay and collect taxes) Before the founding
of the Republic, the King granted intellectual property rights, as part of his divine power. Without these governmental grants,
intellectual property rights do no exist. Perhaps with tangible property things a person can hide them away, keep them from
others and consume them in private. The same thing does not exist with intellectual property. The whole point of intellectual
property is to be able to share and sell it to others, without other people being able to completely appropriate it. Simply
put, without intellectual property laws, Michael Eisner would not be a billionaire. He would be on Venice Beach, trying to
elbow aside the dozen other vendors selling Mickey Mouse tee shirts. And there wouldnt be a thing he could do about it, because
without this creation of civilized government, the concept of bootleg copies would not exist. Need more proof? Just look at
how hard the movie and recording industries are fighting to keep life in the intellectual property laws in the face of modern
technology. And what are these rugged, self-made men using to assert their property rights? Congress and the courts! The same
institutions that bring you affirmative action, AFDC and the progressive income tax.
Now of course, none of this argues
for or against the wisdom of any particular government institution or program. But it does frame the argument correctly. We
are properly arguing about the wisdom of particular government activities. We are not debating the morality of whether government
should exist at all. Anyone who earns a single nickel based on the intellectual property laws, or who invests money in the
stock market or who borrows money from a bank or sells to people who do cannot deny the moral legitimacy of government. If
government is immoral, then their income is immoral. And you cannot run a government without the taxes to pay for it. The
syllogism is easy. Government creates the institutions that leverage individual effort to create vast rewards. Taxes are necessary
for government to exist. Therefore, taxes are necessary to create the institutions that leverage effort to create wealth.
So at the end of the day taxes are not the greedy hand of government, reaching out to steal my money. Instead, they
are the entry fees you have to pay to be admitted to our economy. They are the dues that we have to pay to be part of the
club called civilization. If you join the club, and especially if you benefit from the wealth multiplying effects of civilized
society, please dont refuse to pay your dues. If you dont want to pay, dont join go find some goats.
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