July 18th, 2012

Barack Obama, Business Owners, and the Social Contract

Earlier this week, conservative circles throughout the country ignited with activity in response to a quote by Barack Obama, in which he stated, “If you’ve got a business, you didn’t build that. Somebody else made that happen.” This anti-business position rightly provoked proponents of free enterprise and called down condemnation on the flawed thinking that supports such a statement.

But as is commonly the case, the criticism is superficial at best, and many of the critics are just as much to blame.

Such a small quote should not be separated from its context, and so it’s important before continuing to review the surrounding remarks that encapsulate the earlier quote. Here is what Obama 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. If you’ve got a business. you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.

This is not a completely radical idea isolated only to the man who now calls himself president. A similar view has been expressed by Massachusetts Senate candidate Elizabeth Warren, who has stated:

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 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.

Obama himself espoused a similar view several months ago: “I believe in investing in basic research and science because I understand that all these extraordinary companies that are these enormous wealth-generators — many of them would have never been there; Google, Facebook would not exist, had it not been for investments that we made as a country in basic science and research,” Obama said. “I understand that makes us all better off.”

On the surface, these quotes are not incorrect. Indeed, nobody can produce and profit without the assistance of others, whether through exchanges in the marketplace, information discovered in previous years, or inventions created by long-dead individuals. As eloquently explained in the must-read I, Pencil by Leonard Read, even the simplest of objects cannot be produced without resources, information, and skills provided by other people. We create as a community; the marketplace of ideas and products is an interdependent chain of productivity and progress. We are all indebted to others for what we know and are able to do.

But just as Obama’s brief statement needs the context of his preceding remarks, the ideas in his statement need context as well. He did not simply recognize the inherent interconnectedness of the marketplace to encourage people to help others, or to praise the phenomenal goods and services the market has offered humanity. He was not recognizing the interdependence of a free people working together for the common good. Instead, he was demanding dependence, incorrectly suggesting that everything the market has produced—every technological wonder, every medical breakthrough, every discovery or invention or service—has come not despite the government’s interventions, but because of them—and that because of this relationship between the market and the state, the state is essential and to be praised for its past efforts and better funded for its future ones.

Let’s boil this down even further. Both Obama and Warren’s statements directly suggest that businesses would not be able to succeed at all were it not for the infrastructure provided by the government, be it roads or the internet. This erroneous claim implies that were it not for the good graces of the state and its compulsory collectivism, innovating individuals would never have discovered nor created similar things. We are told that without tax-funded research and development, no private company or group of individuals would have created a World Wide Web, or built roads.

This is simply not true. Such statements are a manifestation of confirmation bias, arguing that because the state has for so long been involved in building infrastructure (among other interventions), no other reality could ever be true. It is an attempt at system justification, whereby the mere presence of the state is used to justify its actions, creating a never-ending cycle of interventions.

The state already demands a high price for using its ill-gotten infrastructure. Demanding a higher percentage of one’s wages is nothing more than thievery. And calling out the relationship of the serf to the state is, at a minimum, an attempt to reinforce the relationship and convince the slave of the virtue and permanence of his status by simply pointing to his chains.

But when the chains don’t suffice, the state makes reference to the “social contract”—a mystical document nowhere transcribed nor translated for the masses. Like the clergy of old who claimed the divine authority to interpet the scriptures for the illiterate and ignorant congregants, today’s political elite point to this supposedly binding contract to defend their positions. With its terms and conditions nowhere defined, the social contract is in theory a binding agreement by which all individuals must subject their lives, liberties, and property to the state’s agents—they who are able to interpret and thus enforce the contract. When the socialists claim that a slave’s chains are not sufficiently tight, they forcefully fix the perceived problem while justifying their actions on the basis of this contract—one which was apparently implicitly agreed upon by the slave simply being born.

This is utter nonsense, and is an argument embraced by socialists in both major political parties. Indeed, conservatives and liberals alike justify the existence and interventions of the state. This is especially evident amongst so-called conservatives in relation to business incentives and government-owned or -subsidized businesses that aim to spur economic growth through government intervention. This simply does not work—it’s like trying to increase a person’s health by stealing his grocery money.

Nobody who accumulates wealth from their success in the market will claim that they built their business alone, or that others didn’t help make that happen. Those who profit best recognize that their achievements have come from satisfying the demands of willing consumers as part of a voluntary exchange, and that their hard-working employees have aided in the company’s productivity. Without the help of others, men would be nothing more than isolated savages.

Thus, the premise of these socialists is dead on: we produce and profit with the help of one another. No man is an island. But their conclusion is dead wrong, alleging that the state’s intervening middleman is both justified and to be credited for any success that occurs. Growth, innovation, and the moral progress of society come in spite of the state’s infrastructure and interventions, not because of them.

10 Responses to “Barack Obama, Business Owners, and the Social Contract”

  1. July 18, 2012 at 1:33 pm #

    Now this is what I want to see. Now, to use a quote from President Hinckley, “take whatever good [they] have and let’s see if we can add to it”. So, lets take this correct, appropriate premise and create a different structure that can support the correct conclusion. I understand that you’ve created the Libertas Institute. I hope to see it become the place where good premises and ideas are turned into alternative, working solutions

  2. July 18, 2012 at 7:06 pm #

    I find it incredibly ironic that Obama points out that all of us are helped, molded, and influenced by the people around us, but also argues that the most influential people around him are mere acquaintances of no consequence. No man is an island. I guess that means Obama is no man.

  3. July 19, 2012 at 1:09 pm #

    This post is an expression of belief that has no basis in fact. That’s fine for religion, but faith-based economics and politics are a recipe for disaster.

  4. Jim Davis
    July 21, 2012 at 2:06 pm #

    Well put Connor, as usual.

  5. July 23, 2012 at 1:18 pm #

    And if you want to get right down to it, if all Obama wanted the government to do was fund roads, research cold fusion, and build sewer systems there would be a lot of people in agreement.

  6. Steve
    August 4, 2012 at 12:55 pm #

    You hit the nail on the head.

  7. September 19, 2012 at 1:43 pm #

    Ok Obama, then let that someone else do all the work and I get the paycheck.

    Just like someone else made your election happen.
    By the way why would anyone care what the Liar in Chief says. Gov did not INVENT the internet nor did it any of its instrumental part taking was for business to make a profit off the internet. Simply pathetic.

  8. September 19, 2012 at 1:47 pm #

    The Internet was a project of DARPA, a federal agency. This idea that we all are just individuals who don’t need or want the government to do anything for us or anyone else is ridiculous. If you want a weak government that stays off your back, move to Somalia and see how you like it in practice.

  9. October 15, 2012 at 12:32 pm #

    “The Social Contract”

    What a ridiculous concept! At least in the context that it is implied by Obama, Warren, and many of today’s political talking heads.

    I never entered into any sort of agreement with the government. I did not consent to taking on any responsibilities of said “contract”. I do not OWE anything to the government, or to society.

    The only thing society can demand of me, is the very thing that I demand of them, which is this: “Do no harm to me, and I will do no harm to you. When cooperation of time or resources is beneficial, let that cooperation be consensual, and let persuasion be the means of achieving my consent”

    Can a slave be born into a “contract”? Of course not. Just because we are not wearing chains of iron, doesn’t change the principle in the least bit. We cannot be born into a contract, or involuntarily added as one of the parties of the contract.

  10. October 15, 2013 at 4:25 pm #

    No, you did not enter into a contract with the government. You entered into a contract with all of your fellow citizens. The government is just our chosen system of order and service delivery. Slaves don’t count which Rousseau discusses in the book (The Social Contract).

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