I have confessed before that I admire the entrepreneurs who have been called the robber barons.
Carnegie and steel, Rockefeller and oil, J.J. Hill and railroads, Morgan and money. These men and others from their 19th century world competed lethally. On the production side they sought to reduce costs. They battled for customers, they trampled competition and they manipulated prices. Still though, asked to choose between condemnation and admiration, I choose the latter.
Each fueled our economy. We got a capital goods sector, a transportation infrastructure. We got the foundation that let us build from consumer goods to services to our technological revolution. We got bigger homes, longer lives, refrigerators and cars and TVs and an educated populace. We had a rising economic tide that raised all boats.
And that takes me to an article in the New Yorker Magazine. Focusing on hedge fund billionaire Leon Cooperman, the article spotlights a response to President Obama’s message to the affluent about giving more to US society. In a letter to President Obama, Mr. Cooperman asks instead that the President focus on the unifying power of initiative and achievement that has inspired generations and propelled economic growth.
Mr. Cooperman’s comments took me to Adam Smith. Rather than a benevolent government, Smith focused on how wealth is spread by self-interested business people.
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” (Wealth of Nations, Book 1 Chapter 2)
More specifically, Professor Smith explained how self-interest leads to voluntary exchange through which all benefit:
“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.” (Wealth of Nations, Book 1 Chapter 2)
And that returns us to the most affluent slice of our society. As with Carnegie, Rockefeller, Morgan and their brethren, might we support self-interest (and accept its opportunity cost) in order to fuel the economic growth from which rich, poor, the middle class and government benefit?
Sources and Resources: I do suggest a firsthand look at The New Yorker article on Mr. Cooperman and his letter to the President. As for Adam Smith, do read some here and here so that you can decide how you feel about his ideas. Finally, Stanley Lebergott’s Pursuing Happiness provides a brief and readable picture of our 20th century material progress.