Tuesday, July 24, 2012


At the beginning of chapter one of my book, The Myth of the Free Market, I tell the story of Montana farmer Lynn Cornwell. I begin by explaining how Mr. Cornwell was such an ardent opponent of the inheritance tax that he showed up on a tractor in Washington, D.C. in 2000 to dramatize how paying the inheritance - or estate - tax was breaking the American family farm. The estate tax is essentially what the offspring of the wealthy owe on their inherited wealth after they receive their first tax free million.

It didn't matter that the American Farm Bureau could not produce one case where a family farm had been lost as a result of the estate tax. Mr. Cornwell was opposed to the estate tax and didn't like the idea of the Paris Hilton's of America having to pay taxes on wealth that is essentially handed to them. 

But there was a problem. The Cornwell Ranch received hundreds of thousands of dollars in federal subsidies, which placed it in the top ten percent of Montana ranches that received federal handouts between 1996 and 2000. Ironically, the wealthy Montana rancher who balked at paying taxes on inherited wealth - arguing that the grim hand of the state undermined the logic of the market - had no problem asking for taxpayer funded handouts from the federal government. Nice. 


I bring up the issue of wealthy businessmen securing taxpayer subsidized handouts because Mitt Romney's new television ad features an offended (but subsidized) businessman quizzically asking, "My father's hand didn't build this company? My hands didn't build this company? My son's hands aren't building this company?"

So what inspired the "offended" businessman - who has also received tax payer funded subsidies - to mockingly claim that his business was not built by his family? Check this out.

President Obama spoke at Roanoke, Virginia on July 13 about the government providing services like infrastructures, security, parks, libraries, legal infrastructures, and an educated workforce. You know, all the things that make our markets work. Specifically, President Obama said: 

If you were successful, somebody along the line gave you some help…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.
The Romney campaign, however, decided to cut out the "roads and bridges" part of President Obama's speech. Mitt Romney wants voters to believe that President Obama was simply saying "it may be your business but you didn't build that ...".  Unfortunately, for certain people, this kind of campaigning works. Sigh ...

In fact, the Romney campaign has teamed with Fox News, Rush Limbaugh and the right wing noise machine to spread the lie that President Obama was telling business owners that they didn't create their own business. In reality President Obama was trying to explain that there are services and infrastructures that they didn't build, which have made their successes possible.

The point is, as I point out throughout my book, the state creates the conditions under which wealth is created. Is that so hard to understand?

Apparently, it is.

Indeed, currently I am responding to people on Facebook who believe some kind of homo economicus exists, and that non business people are drags on society. This happens because they don't know history, and have very little understanding of what stabilizes markets in the modern world. I won't go into the details here (read my book), but a bit of history helps to illustrate how the state has made the wealth creation we see in America today possible.

Simply put, we need to keep in mind that the government cleared the way for American settlers in the 19th century with war and what we would call genocide today. 

The government then made possible the transfer of land to "homesteaders." The capturing and confiscation of one's property and transferring it to another group would be called socialism today. History tells us that this is simply our "pioneer" period.

At the end of the day, God's hand, Manifest Destiny, and the "magic of the market" had nothing to with the wealth creation that was made possible by these developments. It was all planned and done with the brute force of the state. Getting property rights right (through the state) followed. Excluding blacks and women from the marketplace (through custom, law, and simple racism) helped skew market rewards by effectively keeping one half of the population from participating fully in the market. And on it goes ...

Yet, for our free marketeers today, there has been some kind of mystical fairy sprinkling magic fairy dust throughout America since our founding. So, no, you didn't build your business on your own.

The ignorance on all of this is - or should be - embarrassing.

- Mark


R. M. said...

Did you hear about FOX asking two little girls with a lemonade stand if the government helped them?



R. M. said...

Dr. Martinez! Here's a good one for you! Romney said the same thing to Olympians with the same meaning Obama was trying to get across.


"Running a business you can do on your own. Running a 400m race, that takes a village!" - The Daily Show

R. M. said...