August 8, 2020
WE BUILT THAT:
On "You Didn't Build That" (Donald J. Boudreaux, August 7, 2020, AIER)
During a July 13th, 2012, campaign stop in Roanoke, Virginia, President Barack Obama (in)famously dispensed this tidy bit of information to successful businesspeople: "You didn't build that." Immediately, the president was misinterpreted. He was mistakenly said by many to have accused hard-working restaurateurs, intrepid founders of construction companies, and risk-taking financiers of Apple and other profitable corporations of not really building their enterprises. Yet what Mr. Obama in fact said is that successful business people could not possibly have become successful without the help of many others - including especially, in Mr. Obama's mind, government officials.
Mr. Obama is correct that no person's success in a market economy is literally "self-made." (The first person I encountered - it was decades ago - who explicitly identified the silliness of the "self-made man" myth is Thomas Sowell.) Mr. Obama is correct also that every business in America relies upon roads and bridges constructed by government, as well as upon other government projects such as state-supplied education and research funding.
Taxpayers Helped Apple, but Apple Won't Help Them (Mariana Mazzucato, March 08, 2013, Harvard Business Review)
Over the years. U.S. taxpayers have been very good to Apple.Many of the revolutionary technologies that make the iPhone and other products and services "smart" were funded by the U.S. government. Take, for instance, the Internet, GPS, touchscreen display, as well as the latest voice-activated personal assistant, Siri. And Apple did not just benefit from government-funded research activities. It also received its early stage finance from the U.S. government's Small Business Investment Company program. Venture capitalists entered only after government funding had gotten the company to the critical proof of concept.Other Silicon Valley companies, like Google, have profited in a similarly immense fashion: Google's algorithm was funded by the National Science Foundation. Many of the "new economy" companies that like to portray themselves as the heart of U.S. "entrepreneurship" have very successfully surfed the wave of U.S. government-funded investments. Hence, one secret to Silicon Valley's success has been its active and visible hand, in stark contrast to the Ayn Rand/Adam Smith folklore often bandied about. [...][I]t's a capitalism impossible to conceive of without the U.S. government, which through DARPA and other initiatives stands out worldwide for its astoundingly positive track record in funding true innovation. This includes the government's most recent claim to fame, its steadfast financial support of (controversial) shale gas and fracking technologies, begun over three decades ago during the otherwise much-maligned Carter Administration.Indeed, as the clean-tech sector demonstrates, the venture capital industry is proving itself more risk-averse than U.S. government agencies. The latter are the ones funding the capital-intensive and highest-risk projects. Even development banks in emerging economies, like China and Brazil, are doing more than Silicon Valley-type "entrepreneurs."In a business context, the U.S. government is often portrayed as providing a safeguard against market failure. But that traditional understanding must be widened to include the active and often catalytic role which the U.S. government's risky investments have had for technology-based corporations. Elsewhere, I have called this role, which entails creating and shaping markets more than "fixing" them, "the entrepreneurial state."
Likewise, it's fun when folks pretend that the rapid development of a Covid vaccine is a tribute to our private sector, when the reality is the opposite: Fact Sheet: Explaining Operation Warp Speed.
Posted by Orrin Judd at August 8, 2020 8:50 AM