The result of this class conflict is an America in danger of coming apart. “Liberals must take seriously Americans yearning for social cohesion,” writes Peter Beinart in the Atlantic Monthly. But despite the efforts of liberals like Beinart and Lilla, the Left faces obstacles to stitching America back together. The wealthiest and most energetic segments of the Left are committed to multiculturalism on the one hand and transnationalism on the other. What is more, the Left rejects the natural rights theory of the American Founding at the core of our tradition.
What has traditionally held Americans together is the idea that each of us is made in the image of our Creator and that we are endowed with certain unalienable rights. But not only that idea. We are also held together by the culture that emanates from the intermingling of dynamic peoples and unchanging principles. To combat identity politics, we must emphasize an American nationalism based on both a commitment to the ideals of the American Founding and a shared love of our national history and culture—a history and culture of individual freedom and religious pluralism, resistant to centralized authority and ever expanding into new frontiers and new possibilities.
The American people are united by our creed of freedom and equality, also by our habits, our manners, our national language, our territorial integrity, our national symbols—such as the National Anthem, the Flag, and Pledge of Allegiance—our civic traditions, and our national story. We should tell that story forthrightly and proudly; we should guard the symbols of our heritage against attack; and we should recognize that the needs of our citizens take priority.
We should also remember the words of a great American nationalist, Abraham Lincoln, at the close of his First Inaugural Address:
We are not enemies, but friends. We must not be enemies. Though passion may have strained it must not break our bonds of affection. The mystic chords of memory, stretching from every battlefield and patriot grave to every living heart and hearthstone all over this broad land, will yet swell the chorus of the Union, when again touched as surely they will be, by the better angels of our culture.
4 - ENTREPRENEURS
“Finally, we will stay true to what FORBES has stood for since B.C. Forbes founded the magazine in 1917: free enterprise and free trade, lower taxes and smaller government, and, above all, championing the entrepreneur.”
Forbes Magazine’s end-of-year message, December 2016
I define the entrepreneur as one who envisions and creates a more advanced and cheaper good or service with the potential to sell in greater numbers to more people for more profit. While we tend to think of entrepreneurs as those coming up with revolutionary and breakthroughideasthat make the inventors and developers immensely rich, these individuals are rare. Bill Gates comes to mind. The extremely numerous and more common things all around us, such as cheaper yet better-built houses, were also the products dreamed up by entrepreneurs. Again, they were drivenbyprofit motive; these people became affluent through their productivity, and many people benefited.
Now, while in my definition above I see entrepreneurs all over, from small business owners with great ideas and much success to the Bill Gates of the world, I do recognize that of newly registered businesses that reach $100 million in revenue, only one in 500 makes that grade. And a mere one in 17,000 will attain $500 million in revenue. These numbers from The Founder’s Special Sauce, Chris Zook and James Allen, The Wall Street Journal, 12-19-16. Despite their rarity, these firms are the bedrock of the U.S. economy. This article refers to their company’s study (Bain & Company) where, over the last 15 years, founder-led companies delivered shareholder returns three times higher than those of other S&P 500 companies. Looking for common traits, they saw insurgency where the founding team declared war on its industry on behalf of underserved customers, plus an obsession with how customers are treated bordering on compulsive. The third finding was companies steeped in the owner’s mindset.
No matter what the new or improved good or service is, it always takes capital to develop it. In the case of new developments in Silicon Valley, the amounts of capital can be massive. Where does this capital come from? From individuals saving the income beyond their basic needs. This savings becomes the source of investments that are then free to go into making more production. The reason why lower taxes enhance economic growth, is that the more money left over from earnings that isn’t extracted by the government and spent, is available for investment. In the capitalist system, the invested capital can go wherever the capitalist believes will make him the most in return, but the marketplace will judge whether the investment becomes profitable or not, and if not, the penalty is harsh; loss, or worse, bankruptcy. The government doesn’t need market discipline to guide its spending; if it runs out of money, it just extracts more from the real economy. Thus, when the government spends, the government spends without market discipline, and it frequently spends wastefully.
To the populist cry of “make the rich pay their fair share,” this mantra ignores the fact that those with the most money have the most means to fund investments that grow the economy. Besides the fact that the rich, through our progressive income tax (which means the higher the income level, the greater the rate of taxation) pay most of the tax in the country, economic growth is necessary to create jobs which benefit everyone. High taxes decrease economic growth.
It’s easy to get sucked into the trap of despising the 1%, the rich, as if they somehow got there unfairly. I can say this because I once felt that way. I grew up in a professional household. My dad was an attorney. Though my parents’ political philosophies were extremely conservative and I came to ascribe to the same philosophies, and I felt that businessmen were slightly tawdry and might have compromised morals. I was proud to be a professional, a doctor, and to be above the messiness of the commercial world. I could then work in the cleanliness of the sheltered section of the economy reserved for doctors and lawyers. The post-WWII world I grew up in with law and order allowed me to bask in our rule of law, and our superior morals, for they would be needed to keep check on the commercial side of the economy.
In my early adulthood, I admired Barry Goldwater and was fond of Ronald Reagan; I loved their conservative ideas of keeping the capitalistic flames alive. With the threat of communism rising around the world, I was aware of the creeping socialism throughout our society that, if left unchecked, could someday cause our country to merge with evil communist forces abroad.
But my mindset began to change with the influence of Reagan. First, his optimism and hope were contagious. Second, his push to grow the economy meant that we would be able to pay for the cost of maintaining freedom and our way of life. In my later years, the ideas of Steve Forbes began to influence me greatly. Today, Steve Forbes’s words on capitalism, freedom, free enterprise, and entrepreneurism ring loud and clear. So, after reading Forbes’s essays in Forbes Magazine and reading some of his books, and then books like those of Jude Wanniski, George Gilder, and John Tamney, the importance of the entrepreneur becomes so evident as to make me ashamed of my original naïveté. To wit, all of our cultural advance in the economy, the ever-increasing wealth of us all, and with my luxury of free time from the labors of life to read and think and ponder hopes and dreams, it becomes so obvious now. None of this was possible without the entrepreneurs that opened up and made the future possible for everyone else. What the wealthy first enjoyed, though once rare and expensive, is now cheap and abundant for all the rest of us. This process is extremely active and dynamic, and not ridged and static. And it all occurs in the private and real economy, which is everything except government.
I’m not anti-government. We must be protected from our enemies and those who wish us harm. And we need law and order and the protection of our property and our rights. But the government must be efficient and thrifty, and though supplying some type of safety net for the unfortunate and the disabled and the ones down on their luck, the government must be held accountable. Waste and corruption, ever-present and always trying to r
aise its ugly head, must be contained and weeded out.
Wanniski has written about the wisdom of the electorate being smarter than any one person or political leader, or pundit. He muses that this is so because while most only vote for people they know something about and whom they have developed an opinion, most tend not to vote for those unfamiliar to them. It’s like, if I didn’t read up on the judges on the ballot, let those more knowledgeable on judges pass their judgment with their votes instead. While the greatest number vote for the presidential candidates and fewer vote on the school board list, the electorate usually gets it right. I’m not sure whether that accounted for Truman’s win over Dewey in 1948, but I’ll have to say, Truman, despised in my neighborhood then, stands today up there with the greatest of presidents.
So, with the same type of thinking, I say the marketplace is wiser than any one person, company, or government official. Through price signals, the marketplace’s market discipline will weed out the bad and unworkable ideas and reward the successful and useful ideas. And all this is handled efficiently by the entrepreneurs. But again, what I think people miss is that entrepreneurs are very common. We wrongly think the term “entrepreneur” is reserved for the likes of Bill Gates, and almost everyone else is the workers toiling away at static, unchanging jobs in unchanging industries. But this thinking is dead wrong. The only thing constant in the economy is change, and everything is always changing. The economy is never stagnant. It is always very dynamic. The mindset that entrepreneurs are rare is terribly wrong. Entrepreneurs are everywhere. They build better homes. They sell us cheaper cars. They supply us with all our goods and services, which are forever evolving into better, cheaper, and more numerous new goods and services. For those dealing in commodities, competition lowers the price of their goods and services to where most leave the business and go elsewhere. For the few dealing with the new, innovative and creative and way-out-there things that as soon as the rest of us see them, we know we must have them, these individuals become extremely wealthy. There are not a lot of them, but they spearhead the rest of us into the future. They build on the shoulders of those before them, and all of us benefit immensely.
Steve Forbes, in writing the foreword for George Gilder’s Wealth and Poverty, has a much greater eloquence than I ever will, and I paraphrase his writing:
Everyone admires great artists—painters, architects, poets, playwrights, but the most creative artists for the last two centuries have been the entrepreneurs. And how are they regarded? As robber barons, exploiters, parasites, polluters, and looters. When a company reaches a certain size, it becomes an object of assault by government, and countless pressure groups professing to enhance the interests of the people. …commerce is perceived as a some-what grubby, less-than-exalted undertaking. It is portrayed as something of a Faustian bargain: businesspeople succeed by appealing to our baser instincts; they are motivated by greed and too often they bend the rules. But hey, they give us more material things, so we tolerate their less-than-moral activities. If you succeed in business, you should then atone for your sins by giving your riches away. Think of the words “giving back.” Not giving but “giving back.” They imply that you took something that did not belong to you in the first place. Yet commerce and philanthropy are two sides of the same moral code; both are about meeting the needs and wants of others. …Capitalism does all the things that advocates of big government claim they are trying to do; uplift the poor; expand our sense of humanity; break down xenophobic barriers between groups of people and between nations; encourage cooperation, altruism, and creativity; and let everyone, as Abraham Lincoln put it, improve their lot in life. …Government and their allies are doing all they can to smother entrepreneurial creativity. …They do so through the endless array of taxes, rules, and regulations that have the creators of wealth spending more time ensuring bureaucratic compliance than expanding their existing businesses or founding new enterprises. …The trouble is that governments are about the here and now—or the past. They totally lack the entrepreneur’s vision of what might be. …Economists ill-serve themselves by describing economics as being about the allocation of scarce resources. …Free markets are about the constant process of turning scarcities into abundances, making today’s luxuries into tomorrow’s commodities and necessities. … Gilder understands the intangibles of capitalism. Wealth comes from ever expanding pools of information. The greatest source of wealth-creation is the human mind. Entrepreneurs don’t need all their money to meet their basic needs. But the reason they should be able to continue to own the wealth they create is precisely because they are better stewards at reinvesting that capital—and thereby multiplying it for the benefit of us all—than government bureaucrats are. …Gilder also discusses the crying need of our modern era: sound money. Stable money conveys priceless information to entrepreneurs and consumers. A government that undermines the basic value of money is the equivalent of a hacker introducing a virus that corrupts information on your computer. If you read Gilder, you will grasp that capitalism is about optimism, creativity, and flowering of the positive impulses of the human mind.
Let me end this section by separating the realm of the entrepreneur from that of big business; corporations and “Wall Street.” They are not synonymous. While some in the huge corporations may be entrepreneurs, as well as some on Wall Street, to a large extent, they are conglomerations of bureaucrats and committees of workers. Their organizations may grow and prosper if they are efficient and supply needed goods and services. But they account for very little job growth. The vast majority of job growth occurs in the small entrepreneurial firms, often with the founder still in charge.
The days of the Democratic Party being of the laborer, and the farmer, and the “little people” are long gone. The Republican Party being the party of Big Business is also gone. I’d say the division of the electorate sizes up the full spectrum of ideas out there and divides more along the lines of ideas advocating either capitalism or socialism, and everything in between.
5 - GIANTS OF ECONOMIC THOUGHT
Adam Smith — 1723-1790, Scottish. Smith was a professor, public speaker, and writer at the University ofGlasgow who marveled at Britain’s economic prowess and spent time watching merchants on the docks receiving shipments from all over the world. He came up with the concept of “comparative advantage,” whereby whoever in the world with resources at hand could produce things best and at the lowest price, benefited buyers everywhere. He attributed wealth and prosperity to the division of labor. He would lecture on the cause of national wealth being labor and not the nation’s quantity of gold or silver, which is the basis for mercantilism. He published his work Wealth of Nations in 1776. He did everything but name “supply and demand,” a term left to others after him, but he coined the phrase “invisible hand.” He and similar succeeding thinkers developed what we now call the “classical theory,” and the heart of this is Say’s Law, which is that “Supply creates its Own Demand.”
Karl Marx—1818-1883, German. While Adam Smith presented a “growth” model, Marx was not concerned with growth, but with contraction. Underneath sarcasm and rage in Capital and the Communist Manifesto is an admiration for the efficiencies of the laissez-faire growth model (live and let live). His view is that the super efficiency of capitalism led to periodic crashes and contraction, and, to restore equilibrium, the masses take the brunt of the contractions. Thus, they must react politically to defend themselves against the cycle of pain and pleasure. The proletariat takes matters into its own hands to smooth out the cycles. This model submerges individualism into collectivism, and the means of production must, therefore, be owned by the state. Marx and other thinkers like him deny that there is any connection between an individual’s self-interest and economic welfare for all.
John Maynard Keynes — 1883-1946, British. Keynes studied business cycles, and over the years, held various positions in the British Treasury and was a director at the Bank of England. In 1933, he published The Means t
o Prosperity, which contains one of the first mentions of the multiplier effect. A copy was sent to the newly elected President Franklin D. Roosevelt and other world leaders. In 1933-1934, he corresponded with and met Roosevelt, and they admired each other. In 1936, he published The General Theory of Employment, Interest and Money, his magnum opus. In this, he argued that demand, not supply, is the key variable governing the overall level of economic activity. He thought that the total demand, which equaled the income in a society, is defined by the sum of consumption and investment. When there is unemployment, he recommended first increasing expenditures for either consumption or investment. Without government intervention to increase expenditures, an economy can remain trapped in a low-employment equilibrium, thus came the idea of spending on public works. Demand management simply involves increasing government spending, via deficit finance, in recession, and increasing government taxation (to reduce the deficits) when the economy “heats up” in a boom. Savings are anathema to an economy that is faltering, and rich people save more than do poor people. So, taxing the income of the rich and distributing the proceeds to the poor, who will spend rather than save it became the goal.
Milton Friedman — 1912-2006, American. 1976 Nobel laureate in economics. In the 1960s, he became the main advocate opposing Keynesian government policies. He theorized that there was a natural rate of unemployment, and argued that employment above this rate would cause inflation to accelerate. He promoted what became known as monetarism, and argued that a steady, small expansion of the money supply was the preferred policy. His ideas on monetary policy, taxation, privatization, and deregulation influenced the Federal Reserve’s response to the global financial crisis of 2007-2008. He was an advisor to President Reagan and British Prime Minister Margaret Thatcher. He advocated policies such as a volunteer military, freely floating exchange rates, abolition of medical licenses, a negative income tax, and school vouchers.
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