– August 7, 2020
obama

During a July 13th, 2012, campaign stop in Roanoke, Virginia, President Barack Obama (in)famously dispensed this tidy bit of information to successful businesspeople: “You didn’t build that.” Immediately, the president was misinterpreted. He was mistakenly said by many to have accused hard-working restaurateurs, intrepid founders of construction companies, and risk-taking financiers of Apple and other profitable corporations of not really building their enterprises. Yet what Mr. Obama in fact said is that successful business people could not possibly have become successful without the help of many others – including especially, in Mr. Obama’s mind, government officials.

Mr. Obama is correct that no person’s success in a market economy is literally “self-made.” (The first person I encountered – it was decades ago – who explicitly identified the silliness of the “self-made man” myth is Thomas Sowell.) Mr. Obama is correct also that every business in America relies upon roads and bridges constructed by government, as well as upon other government projects such as state-supplied education and research funding. But from this rather mundane reality Progressives such as Mr. Obama and Sen. Elizabeth Warren (D-MA) draw two mistaken implications.

As Compared To What?

The first mistaken implication is that if some good or service is supplied by government, then government necessarily promotes the well-being of everyone who uses that good or service. It’s possible for government provision of some good or service to be genuinely useful, but mere provision itself does not imply such usefulness – at least not when compared to alternatives.

Consider a highway built, owned, and maintained by government – for example, I-95 on America’s East Coast. It’s true that private businesses now use this highway. Many employees of businesses travel to and from work on I-95. Likewise, this highway is part of the route taken by trucks that deliver supplies to businesses and that businesses use to ship their outputs to market.

But suppose government didn’t build highways. Innovators and entrepreneurs are wonderfully clever at figuring out ways to profitably – that is to say, efficiently – satisfy consumer demands. And the profits available from efficiently satisfying motorists’ demand for a limited-access multi-lane highway – or a series of connected highways – running from Miami to northern Maine would almost certainly have incited entrepreneurs to build and operate such a road had government not built I-95.

If this counterfactual is true, is any special gratitude owed to government? The answer depends on whether the never-built private highway would have been better or worse, in the eyes of those served by the highway, than I-95. If I-95 is superior to any alternative road that private entrepreneurs would have built, then government in this case played a productive role. Thank you, government. But if I-95 is inferior to its never-built alternative, then government played an unproductive role. It owes us an apology for wasting resources on a project that prevented the creation of a better highway.

I leave it to the reader to speculate on the likely quality of a system of private interstate highways compared to that of America’s existing system of interstate highways – a system designed, built, and maintained by government.

A nearly identical analysis should be done for schooling. What special thanks do Americans owe to schools owned and operated by government if, in the absence of such schools, citizens in their private capacities would have built and operated better schools?

You Paid For That!

The second mistaken implication drawn from the scolding phrase “You didn’t build that” is that those persons who are successful remain perpetually in debt to each of the countless individuals whose efforts contributed to that success. In fact, in commercial society each of us depends nearly every second of our lives on the efforts of countless other people, almost all of whom are strangers to us. Yet this reality does not imply that everyone is forever running up economic and ethical debts to everyone else.

A few days ago, Joyce Chang cut my hair. Because I’ve gone to Joyce for my haircuts for 19 years, it won’t surprise you to learn that I’m pleased whenever I walk out of her shop. And I’m certain that had I gone 19 years without getting my hair cut, I would have been somewhat less successful economically. Were my hair to reach down to my lower back, I almost certainly would have received fewer speaking and TV-appearance invitations than I received.

So do I owe to Joyce that portion of my income that I’ve earned because my hair is kept in a style that doesn’t discourage people from inviting me to speak? Of course not. In addition to the fact that I could have had someone other than Joyce cut my hair, I pay Joyce each and every time she cuts my hair. I’ve taken nothing from her. I’ve borrowed nothing from her. The excellent service that Joyce supplies to me is one for which I compensate her fully.

And what holds true for my economic relationship with Joyce holds true for my economic relationship with each of the millions of other individuals whose productive activities improve my economic well-being. I pay my supermarket. I pay my wine merchant. I pay my physician. I pay my mortgage banker. I pay my auto mechanic. These payments erase any debts that I might otherwise have with these suppliers.

Similarly, I fancy that I’ve contributed to the well-being of others. Or such is my sincere hope. Since 1982 I’ve taught economics and legal studies to upwards of 10,000 students. Most of these young men and women went on after graduation to enjoy rewarding careers. But none of them owes me a cent. I was paid fully for the teaching services that I rendered to them.

In this regard, goods and services supplied by government are no different. With rare exception, every government official, every government employee, every government contractor, and every government supplier is paid fully for whatever it is government buys from him or her. And so even if everything that government does is unambiguously productive, people who succeed in markets owe nothing to the state.

A complexity, alas, does arise when government is in the picture. It arises from government’s unique ability to ‘lawfully’ acquire goods and services without paying for them – as it does, for example, when it conscripts soldiers or when it uses eminent domain without justly compensating those whose properties are taken. The individuals who support such government actions do become indebted – ethically if not legally – to those whose properties or lives are seized by the state. Likewise, such unethical redistribution occurs to the extent that the taxes an individual pays are paid without his or her consent, for such ‘payment’ implies that the value of the benefits gotten from government by this taxpayer are less than the cost this taxpayer is forced to pay.

Yet these complexities do nothing to justify the claim that provision by government of some goods and services creates among citizens indebtedness to the state.

Donald J. Boudreaux

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Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

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