Tuesday, September 24, 2013

Henry Blodget 's Full Blunt Force Attack on Ayn Rand

In a post titled, This Selfish Ayn Rand Business Philosophy Is Ruining The US Economy, co-founder of Business Insider, Henry Blodget writes:
Forbes contributor Harry Binswanger, who is a disciple of the writer Ayn Rand, argued this week that people who make $1+ million a year are so valuable to society that they shouldn't pay any taxes. 
Far from these million-dollar earners paying more taxes, Binswanger argued, the rest of America should "give back" to the 1% by thanking them for their service to the country and rewarding them by exempting them from taxation.

This argument is the logical extension of an argument that many American entrepreneurs and investors make, which is that they are the country's "job creators" and therefore deserve almost all of the country's income and wealth. These "job creators," this argument goes, should pay their employees as little as possible and keep every penny of profit for themselves. After all, they deserve it: They're the ones who "create" the jobs that sustain the country.

It's no surprise why this argument is popular among entrepreneurs and investors: Instead of making them feel selfish about taking such a big share of the country's wealth for themselves, it actually makes them feel magnanimous. If they weren't "creating all those jobs," then most Americans would have nothing to do!

Unfortunately, this argument is both startlingly selfish and economically wrong.
What actually "creates jobs" in an economy is a healthy economic ecosystem, one comprised of entrepreneurs, investors, employees, and, critically, customers. 
Successful entrepreneurs do play a valuable and important role in this ecosystem: They start companies that develop products and services that people want, and they guide the companies that produce them.

Successful investors also play a valuable and important role: They provide the capital necessary for companies to invest in new products and services.

But without talented employees who make a company's products and services, and — just as important — without financially healthy customers who buy them, entrepreneurs and investors can't create any sustainable jobs.

So to suggest that entrepreneurs and investors deserve all the credit or compensation in the economy is absurd.

First off, I believe Binswanger was attempting to respond to those who state that businesses need "to give back to society." He was pointing out that those who are capitalists and entrepreneurs are the blank canvas artists that launch businesses that benefit all of us and that no other "give back" is necessary. (On the other hand, if Blodget wants to give back to me for visiting his site, he can Fed Ex a check  anytime.)

Ayn Rand never wrote that laborers weren't important. It is a total Blodget distortion.

From Atlas Shrugged:

“Any work is creative work if done by a thinking mind.”

Rand never suggested friction between employees and employers. She saw the true dangers of government group think versus the individual:

"A government that initiates the employment of force against men who had forced no one, the employment of armed compulsion against disarmed victims, is a nightmare infernal machine designed to annihilate morality: such a government reverses its only moral purpose and switches from the role of protector to the role of man's deadliest enemy, from the role of of policeman to the role of a criminal vested with the right to the wielding of violence against the victims deprived of the right of self-defense. Such a government substitutes for morality the following rule of social conduct: you may do whatever you please to your neighbor, provided your gang is bigger than his."
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“Man—every man—is an end in himself, not a means to the ends of others; he must live for his own sake, neither sacrificing himself to others nor sacrificing others to himself; he must work for his rational self-interest, with the achievement of his own happiness as the highest moral purpose of his life.”
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“I swear by my life and my love of it that I shall not live for the sake of another man nor ask another man to live for mine.

There is nothing anti-worker in the works of Rand, at all.

Blodget has no idea what he is writing about. He doesn't understand Rand's writings and he doesn't understand that wages are set by supply and demand. He writes:
Mr. Binswanger argues, the employees are just "trading" their labor for the entrepreneur's money. That's the employees' decision, and they don't deserve a penny more than they get.
That's one way of looking at it.
The other way of looking at it is that employees are members of a team. And that, as members of the team, employees should not be paid as little as possible but, instead, share in the value they help create.
That, for what it's worth, is the way I look at it.
I would like Blodget to show us just how much out of whack are the salaries he pays his workers versus market rates.

And, of course, this is Blodget, so we have a bit of Keynesian nonsense about the importance of the customers in an economy:
What actually "creates jobs" in an economy is a healthy economic ecosystem, one comprised of entrepreneurs, investors, employees, and, critically, customers.
Customers are a given. And they are always around since we live in a world of scarce resources. It is entrepreneurs, capitalists and workers that meet the never ending demands of consumers. Only in paradise would things be different.

It is shocking Blodget doesn't get these fundamental points.

12 comments:

  1. Robert, the Forbes article in question is very deserving of criticism, but for a completely different reason.
    Harry Binswanger is a crony sympathizer and claims we all owe something to The Goldman Sachs and Warren Buffet:

    "Imagine the effect on our culture, particularly on the young, if the kind of fame and adulation bathing Lady Gaga attached to the more notable achievements of say, Warren Buffett. Or if the moral praise showered on Mother Teresa went to someone like Lloyd Blankfein, who, in guiding Goldman Sachs toward billions in profits, has done infinitely more for mankind. (Since profit is the market value of the product minus the market value of factors used, profit represents the value created.)

    Instead, we live in a culture where Goldman Sachs is smeared as “a great vampire squid wrapped around the face of humanity.” That’s for the sin of successful investing, channeling savings to their most productive uses, instead of wasting them on government boondoggles like Solyndra and bridges to nowhere."

    http://www.forbes.com/sites/harrybinswanger/2013/09/17/give-back-yes-its-time-for-the-99-to-give-back-to-the-1/

    Either this guy is so willfully ignorant that he has never heard of primary dealer banks, or he is up to something.

    I'm surprised libertarian writers weren't all over this on day 1. The Randites need to be denounced and corrected at every opportunity or we will never see the end of smears that equate them with libertarianism.

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    1. Harry Binswanger is a crony sympathizer, If I remember correctly, Rand held the naive view that businessmen were the most persecuted class. Rothbard and others had to point out the cronyism that existed.

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  2. This argument is the logical extension of an argument that many American entrepreneurs and investors make, which is that they are the country's "job creators" and therefore deserve almost all of the country's income and wealth.

    Got that? The COUNTRY, United States of America, has a pool of "income and wealth," and the entrepreneurs and investors have taken more than their fair share.

    These "job creators," this argument goes, should pay their employees as little as possible and keep every penny of profit for themselves. After all, they deserve it: They're the ones who "create" the jobs that sustain the country.

    No one actually makes this argument. It's a straw man. Most profit is re-invested, not spent by entrepreneurs and investors on personal consumption.

    It's no surprise why this argument is popular among entrepreneurs and investors: Instead of making them feel selfish about taking such a big share of the country's wealth for themselves, it actually makes them feel magnanimous. If they weren't "creating all those jobs," then most Americans would have nothing to do!

    Again with the straw man argument, and again with "the country's wealth."

    Blodget is a socialist and, like most every other socialist, he is incapable of refuting the actual arguments of those who advocate for laissez-faire capitalism, and must resort to straw man arguments and imaginary constructs like "the country's wealth."

    Alas, I do agree with the above commenter (3:47 p.m.) that Binswanger harmed his own credibility by putting forth crony-capitalists Warren Buffet and Lloyd Blankfein as exemplars of capitalistic heroism.

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    1. My comment @BI:
      Jeez, are you drunk Blodget? Ayn Rand is ruining the Economy? Have you ever considered that this Economy has been under the boot of the Fed Reserve/Wall Street Banks & Crooks forever and yet you blame a long dead novelist who wrote about the horrors of Crony Government/Corporate power. You really are one of the dumbest financial bloggers around!
      See "Henry Blodget 's Full Blunt Force Attack on Ayn Rand" @ economicpolicyjournal.com

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    2. "Binswanger harmed his own credibility by putting forth crony-capitalists Warren Buffet and Lloyd Blankfein as exemplars of capitalistic heroism."

      Huh?

      Elsewhere, in the comments to his article, Binswanger back pedals a bit, saying Goldman Sachs isn't quite 'lily white'!

      This does not 'harm' his credibility, it waves an enormous flag that shouts "I'm a bankster shill."

      I am no socialist. I have been somewhat sympathetic to Rand's ideas, and I do know that Binswanger is a leading light in that community.

      The thing is: Binswanger MUST know something of the Morgan, Warburg and of course, Rothschild legacy. MUST know something of the central banking archipelago that spreads out from the BIS.

      Central banks and their private owners ARE the state. Making and breaking governments and insider knowledge of their plans is central to their operations. Elections are just theater in which 'the people" get to choose who will be the next fall-guys.

      I do not believe Binswanger is ignorant of this stuff. It is utterly antithetical to his espoused philosophy. The conclusion is inescapable -- either he is grotesquely, pathetically deluded or he is in the pay of international bankers.


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  3. Customers are always around since we live in a world of scarce resources? That's like saying we have plenty of water because we have a drought..

    Scare resources means customers are not a given. The customers need resources to purchase products. When resources are scares, customers are scarce and a going out of business sale sign quickly follows. Go run a business and then you'll find out why managers say "the customer is always right."

    No serious person defends Ayn Rand. Her ideas are something college kids argue about, not adults.

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    1. I think that it's a fair comment that Rand is introductory reading but she stands out as an unabashed defender of the individual and is fun to read on that account. In any case, Objectivism is the Mariana Trench of thinking compared to the intellectual fantasies of fairy tale Keynesian.

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    2. If JerryW is the baseline of "intellectual" thinking for the commies, we have nothing to worry about.

      How someone can be that ignorant, and be PROUD of their ignorance, is amazing. Another product of government skools!

      Fitz

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    3. Customers are always around - unless everyone has died, and we do live in a world of scarce resources. Both of these facts are empirical, that you would attempt to debate them is curious.

      Your analogy is ridiculous and of course does not work, you really have no understanding of how a market operates. Customers always exist because scarce resources are by definition difficult to obtain, and thus customers must seek them out via market behavior and voluntary exchange. In a world of infinite resources "customers" would not exist since they could have anything they wanted at any time. A better analogy would be we have plenty of jackets due to the cold. No, the cold does not produce the jackets, it creates a demand for them that an entrepreneur identifies and addresses.

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    4. Jerry, are you ever going to respond to the numerous criticisms of your ridiculous posts on this site? If you refuse to respond I hope that Bob Wenzel bans you from the site. There is a marked difference between having people of different viewpoints speak, and outright trolls that continuously post nonsense in an effort to waste everyones' time. If you never respond you are *clearly* a troll.

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  4. But... my customers ARE 1%'ers! And their business for me is helping me get there too. Blodget seems to think "customers" are not? He's is just a "fixed sized pie" socialist that thinks that if one person does not have, onother took it from them.

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  5. blodgett sucks. He is a hack as is that website which is a ultra liberal, wall st. lovefest.

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