Who Built That?By: hawkgrrrl
“If you’ve got a business — you didn’t build that. Somebody else made that happen.”
The implications of this little dust-up over a few little words is the crux of this election’s economic debate and perhaps the key differentiator between the two candidates. Does it take a village to be successful or not? How do we compensate the village for its support? Do all business people merely stand on the shoulders of the community to create whatever they create?
I recently read a New Republic article that shed some light on this debate:
. . . in the original Obama speech . . . the list of helpers is artificially restricted to agents and achievements of the government. Obama talks of roads, bridges, the G.I. Bill, fire services, and the Internet. (Even within these examples he exaggerates the role of government. Fire services are often volunteers in the U.S. And while writing I heard Rush Limbaugh, drawing on Gordon Crovitz’s WSJ article, establish persuasively that it was corporate and individual innovators who put together the Internet from the disparate technical advances of government agencies that would otherwise have been devoted to much less important tasks.)
Fair enough so far. Obama was primarily talking about the contributions that government makes to communities and thereby to citizens, including those that start up businesses.
The President’s speech specifically mentioned safety, education, transportation and the internet as enablers of business, all of which are things that our federal taxes go to support. Of every dollar we pay in federal taxes, 1.3 cents goes to education, 2 cents to transportation, and one fifth of one cent to the national science foundation. The department of defense garners nearly 19 cents of every federal tax dollar! But safety initiatives that benefit small businesses directly (fire departments and police) are handled through state taxes and in the case of fire departments are staffed by volunteers. And many businesses have to make significant investments in their own security departments or fireproofing because the safety provided by government is not sufficient to protect their investment.
But anyone who has built a business has relied for help far beyond government: on his workers, his investors, his suppliers, his banker, his neighbors (in bad times), and local branches of groups such as the Rotary, the Jaycees, the Chamber of Commerce, and the Junior League. The market, civil society, and government all play their part in making a business possible. But government is probably the least helpful of the three; its help comes at a heavy price in taxes and burdensome regulation; and its importance in helping businesses to succeed is trivial in comparison to the efforts of the actual business owner.
Another fair point. Small business owners don’t necessarily see government as the enabler of their business success. Government also inhibits them through licensing, taxation and regulation. So, is government a “good parent” that develops educated and innovative citizens with access to an amazing infrastructure who then go out and build businesses? Fifty percent of small businesses fail in the first year. Is that the mark of a good support system? Is the failure the fault of those small businesses themselves? I would theorize those failures can be attributed to a variety of factors, just as the successes can.
Every U.S. citizen has government as a potential business partner, but somehow businesses do not spring out of the ground unless some individual or a few partners put in the “sweat equity” to start and sustain them.
While government maintains the infrastructure (roads, water, safety, legal system, anti-corruption) that makes us a first world rather than a third world country, government’s role remains mostly in the background. The idea, the financial risk and the “sweat equity” is all up to the small business owner. While we’re cherry picking contributors, small business couldn’t exist if our planet were in Mars’ orbit. It’s similar to saying that someone only got ahead because of luck or because God gave them daily breath.
This difference of opinion was mostly about small businesses. What about those of us who work at large corporations? Many of these corporations were founded over a hundred years ago and have continued to evolve over time. Government does still matter in terms of regulations to protect workers’ rights, to foster healthy trade agreements with other nations, and to prevent public endangerment. Government’s involvement comes at a high price in taxes and the cost of inefficiency.
Often governmental involvement creates an unwarranted advantage or disadvantage to a specific industry or corporation. When we talk about banks that were too big to fail, the failure was one of corporate greed, but also one of poor regulations. Back to the government as parent analogy, sometimes a parent is too strict or arbitrary, and sometimes a parent is too permissive. Does government really want to claim responsibility for building that? Should government get equal credit for the failures as the successes?
Businesses are created when someone identifies a demand and has a fresh idea to create a supply to meet that demand; then they have to knuckle down and make it happen. Who is paying for the business’s success? Ultimately, customers. Who benefits from it? Ideally both the business owner and those that buy the product. Whose idea is it? The owner. Who does the work? Initially the owner, and eventually the workers they hire through the jobs they create.
Why does Obama overstate the role of government in small business success? It’s simple. To a hammer, everything is a nail. Yes, infrastructure separates us from third world countries in terms of access to electricity, roads, clean drinking water, an educated workforce (if one is needed). But, none of us built that. We inherited it from our hard-working forebears.