Mises Daily: Monday, November 02, 2009 by Chris Brown
We live in ludicrous times of rewarding good appearance for evil action. President Obama is awarded the Nobel Peace Prize while his war efforts intensify. But those who are true promoters of peace need attention, for they will never likely receive such ostentatious recognition for their noble efforts. Such individuals are those who take risks in a world of uncertainty, and who save or borrow capital to start a business. Such entrepreneurs promote peace by serving the customer better than the next entrepreneur through voluntary transactions in the market, rather than commanding bureaucracy in government.
As part of my entrepreneurship courses, I have students who want to start their own business listen to new entrepreneurs discuss their background, their reasons for starting the business, and of their effort to establish the business. Students usually find these speakers fascinating and inspiring, but also come away with a sense of the enormous amount of effort, capital, risk, and uncertainty that is involved in starting a business. Many of these students decide they no longer want to start their own business. They realize that entrepreneurs, too, have a boss: the customer. Mises put it this way: “Ownership of the means of production is not a privilege, but a social liability.”
One speaker, a recent founder of a small Mexican restaurant (which are not common in Australia), saved his money over 20 years and then took out a bank loan of AU$1 million dollars, with his house and car as collateral. It took him over a year to write a business plan, find a suitable location, develop a menu, hire employees, and create marketing materials before he could open to the public.
Some of this time was wasted dealing with local-council–government officials, to whom he had to pay AU$25,000 just to open his restaurant. Delays in approval by government bureaucrats meant paying rent of AU$7,000 a month for several months on an empty restaurant. This entrepreneur said dealing with local government was the most difficult and discouraging battle he had to face. (Getting credit from banks, he said, was not a problem.)
This entrepreneur still works seven days a week, from morning until evening, to get the business established. After six months, and still not at a break-even point, he realized his business is only as good as the next day’s sales. As Mises said, “There is no security and no such thing as a right to preserve any position acquired in the past.” (Human Action, p. 311)
He knows he has to continually innovate through better quality products and services, better management of operations and resources, and more accurate pricing. He also realizes his competitors next door are trying to do the same.
Students inevitably ask him if he would do it again, knowing how difficult it is to establish a business, and after having some of the myths surrounding entrepreneurship contradicted by the founder’s experience. “Definitely,” he confidently responds, “… if you see the risk perhaps you shouldn’t start the business. I was so passionate about Mexican food I saw an opportunity.” This founder is passionate about serving customers Mexican food — an action so simple, so peaceful, and so far removed from force and war.
Such efforts, in my opinion, are not merely bordering on heroic, but are no doubt worthy of a peace prize. I cannot help but point out how absurd it is — in contrast to the voluntary, coordinating, and peaceful actions of entrepreneurs — for virtually any political bureaucrat to receive an award that has anything to do with peace. It is the seemingly small efforts of millions of hardworking, passionate entrepreneurs who make it difficult to understand why a peace prize still goes to someone who lives off the fruits of entrepreneurs’ efforts. Not only does President Obama depend on the force of taxes for his position, but he also decides how much and what to spend on with others’ money. Government merely consumes the efforts and capital of individuals. To award a political bureaucrat for this is to add insult to injury.
President Obama is not only engaged in foreign wars with some nations; he is engaged in economic wars with nearly every nation, including his own, through trade barriers and inflation, which often lead to actual war. Ludwig von Mises provided great insight on this issue. Mises realized the link between foreign trade wars and foreign wars. When countries are trading freely and frequently there is less need to protect them with soldiers and go to war over resources. When entrepreneurs are allowed to engage in production and exchange, the economic incentives to initiate war and conquest are minimized. Mises put this idea succinctly when he wrote: “War is the alternative to freedom of foreign investment as realized by the international capital market.” (Human Action, p. 502)
Murray Rothbard also recognized the likely outcomes of political intervention versus the market process:
It would be almost inevitable for such an autistic world [exchange involving coercion without receiving anything in return] to be strongly marked by violence and perpetual war. Since each man could gain from his fellows only at their expense, violence would be prevalent, and it seems highly likely that feelings of mutual hostility would be dominant. (Man, Economy, and State, p. 101)
Contrast this with the individual sovereignty found in the marketplace. Entrepreneurs only reap profits by offering something that individuals will buy voluntarily. They obviously cannot force anyone to buy their product. If they knew ex ante that their product had guaranteed demand, there would be little risk. And if entrepreneurs do not satisfy the consumer, they take a loss. Sustained losses (without government support) lead to the entrepreneur shutting down unprofitable operations. Government, paradoxically, rewards its losses with more funding and more labor.
In contrast, about the likely social outcomes of the market process Rothbard wrote,
On the other hand, in a world of voluntary social cooperation through mutually beneficial exchanges, where one man’s gain is another man’s gain, it is obvious that great scope is provided for the development of social sympathy and human friendships. It is the peaceful, cooperative society that creates favorable conditions for feelings of friendship among men. (Man, Economy, and State, p. 101)
The more entrepreneurs can engage in peaceful and coordinating actions that try to satisfy demands of consumers, the less likely war is made. Surely, noble entrepreneurs who contribute to the peaceful and voluntary exchange of property as part of the coordinating market process are worthy of peace awards. Political bureaucrats, who act as parasites on the rewards of such entrepreneurs, should be disqualified by their very nature.