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Government didn't build that

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Tuesday, April 22, 2014, 9:00 p.m.
 

A student recently asked what I thought of President Obama telling rich people “you didn't build that.” I don't think much of it.

It's true that Mr. Obama was talking not about private businesses and factories but about the infrastructure, such as roads and bridges, that increases the profitability of private businesses and factories. It's also true that the typical entrepreneur doesn't build and operate the infrastructure he relies upon to get his goods to market, to educate his workers, to maintain law and order, etc. (I say “typical entrepreneur” because there are exceptions, such as Dan Spivey. With private money, he laid a fiber-optic cable from Chicago to New Jersey to increase the speed at which his financial firm in New Jersey received information on the prices of assets in Chicago. Mr. Spivey did build that!)

But these truths don't support the conclusion that Obama and other progressives draw from them. That false conclusion is that successful business people don't deserve all of their profits.

Fact is, a great deal of infrastructure is built privately. FedEx, for example, is infrastructure: It's a combination of vehicles, warehouses, organizational knowledge and other specific capital that businesses and households rely upon to transport freight and packages. Without FedEx, many businesses would be less profitable or even nonexistent. Some online retailers, for example, might be unable to compete successfully against brick-and-mortar stores.

Of course, FedEx isn't a road or a bridge. But so what? FedEx, no less than a road or bridge, enhances our abilities to pursue our private goals. When you start to reflect on what is infrastructure, you see that infrastructure isn't only those things supplied by government.

And you then also see that our world is filled with lots of privately built infrastructure: FedEx, privately built oil and gas pipelines, private schools, private insurance companies, privately built skyscrapers. This list goes on and on.

All of these privately built and operated pieces of infrastructure are financed by the voluntary payments of the businesses and households that use them. When Amazon.com pays FedEx $11 to deliver a book to my home, both Amazon and FedEx gain. Each company gets value in exchange. And no one owes the other anything more.

FedEx has no grounds for lecturing Amazon founder and CEO Jeff Bezos that, because his company depends on FedEx, he owes FedEx more than what he already paid for FedEx's service. The fact that Bezos didn't build FedEx, yet relies upon FedEx for his company's success, does not mean that Bezos owes his success to FedEx.

FedEx supplies an important input (package delivery) to Amazon. Yet even if it's true that without this input, Amazon would go bankrupt, FedEx did not build Amazon. Jeff Bezos did. Amazon is the product of Bezos' entrepreneurial vision. Had Bezos been less visionary, less willing to take risks or more lazy, Amazon would never have been created or would have failed. Nothing that FedEx does would have changed that.

The same is true for the government that builds roads and bridges. These structures might be very important, but their existence does not mean that government is responsible for business people's successes.

Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.

 

 
 


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