America prides itself on its individualism when it comes to wealth.
The majority of U.S. millionaires and billionaires made their wealth themselves rather than inheriting it from their parents. It’s all about bootstraps and Horatio Alger and Steve Jobs — guys who worked hard, had great ideas and never gave up.
But the presidential election is casting wealth creation in a new light. In a speech on Saturday, President Barack Obama said that government, rather than self-determinism, creates the foundation of large wealth in America.
Here is the line that will no doubt become the flashpoint and anger many entrepreneurs:
“If you’ve got a business — you didn’t build that. Somebody else made that happen.”
And here is the full excerpt:
There are a lot of wealthy, successful Americans who agree with me — because they want to give something back. They know they didn’t — look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there. (Applause.)
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.
Obama is not the first to make this argument. In fact, some business founders themselves have argued that the wealthy owe a large part of their success to government. Jack Bogle, the founder of Vanguard Group, have said that when people tell him they built their wealth themselves he says: “I don’t know many people that have done that. But tell me, how did you arrange to be born in the United States of America?’
“Our birthright has created enormous wealth and stability of property," Bogle continued, "and for us to think that we don’t want to pay our fair share of the costs running this nation when our young citizens, let us not forget, are dying in wars out there trying to protect democracy and the nation we built up, it seems to be quite outrageous.”
There are some obvious counterarguments. Being born in America may bring huge benefits, but it doesn’t guarantee success. And the number of millionaires and billionaires is exploding overseas, in many countries without American levels of infrastructure, education and research spending.
A rational, less political analysis might suggest that creating large wealth involves a host of factors all coming together at a perfect moment — a person with the right skills, right idea and right time in the economy, making the right personal connections and working obsessively to bring their idea to fruition. And, as any rich guy will tell you, luck plays a significant role.
But Obama has raised a polarizing question, and one that gets to the heart of the political differences between the two parties.
Do you think the rich owe their success to government?
-By CNBC's Robert Frank
Follow Robert Frank on Twitter: @robtfrank