DO SUCCESSFUL ENTREPRENEURS OWE A DEBT TO SOCIETY?

• Author: KANE, TIM D.

"Consumers receive more economic benefit from using products than entrepreneurs earn from producing them."

"TODAY, multimillionaire John Doe established a foundation to provide financial support for worthy causes. After arriving in America 62 years ago, he built his fortune in manufacturing. Apparently, Mr. Doe realized the time had come to give something back to society."

Mr. Doe is fictitious, but we have all read or heard stories with the same message: Once people become financially successful, they have a moral obligation to give something back to society. The notion that success creates an economic obligation to others is not only misguided, it seriously undermines the public's understanding of, and support for, the free market which provides economic opportunity and the prospects of financial success for all.

This wrongheaded idea that people incur a debt to society by virtue of being successful is based upon four fallacious assumptions. First, business activities are fundamentally exploitative. Second, free-market transactions are a zero-sum game in which one party wins and the other loses. Third, actions motivated by self-interest are harmful to society. Fourth, income, like rainfall and winning lottery tickets, is randomly distributed and completely unrelated to individual merit or productivity.

An examination of each of these fallacies in detail reveals that, when government vigorously polices the market to prevent the use of force and fraud, the process of accumulating financial wealth requires successful people to create more wealth for others than they do for themselves. Indeed, rather than incurring a debt to society and the obligation to give something back, economically successful members of society are owed a debt of gratitude for providing the jobs, goods, and services that enrich Americans' lives.

Business is exploitative. On their list of most admired occupations, the media usually rank environmentalists, social workers, and employees in the not-for-profit sector near the top and businessmen and women near the bottom. Yet, where do we get the basic necessities of life--food, clothing, and shelter? The answer is, from businessmen and women who, in order to obtain necessities for their families, must first respond to our needs by producing the kinds of products we want in the form, color, variety, and price we demand. Their reward--profit--supplies their purchasing power, and this reward is only conferred when consumers voluntarily select their products in the marketplace. Entrepreneurs who fail in this effort are financially punished and often driven out of business, while those who succeed are handsomely rewarded. The consumers' ability to switch from one seller to another makes exploitation unlikely. Consumers wield the power to determine which producers survive and which do not.

What about those who unselfishly devote their lives to public service? Don't they put our interest ahead of their own? Aren't their activities more noble because they serve the public interest?

There are conflicting opinions on virtually all public policy issues--even within the same Congressional district. For example, consider a bill to provide $10,000,000 in Federal research money to the XYZ Corp. The president of XYZ could afford to spend almost $10,000,000 in lobbying efforts to make sure the grant goes through and still realize a net gain. On the other side of the coin are the nearly 120,000,000 individual tax returns from which the $10,000,000 is taken. The $10,000,000 expenditure represents a mere 8.5 cents...