Entrepreneurs: The Real “Peace Prize” Winners

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.

Guest post by Chris Brown, a lecturer at the Australian Graduate School of Entrepreneurship at Swinburne University. He also centrally plans the Austro-libertarian blog. Cross-posted at mises.org.

14 thoughts on “Entrepreneurs: The Real “Peace Prize” Winners

  1. sometimes known as the McDonalds Theory after Thomas Friedman. Penn and Teller also has a video on the same ‘trade prevents war’ theme.
    Does that mean that aid agencies such as Oxfam who are anti free trade, are actually encouraging conflict?

  2. On closer inspection, the causal connection of trade preventing war falls apart. Historically, the usual model was “raid or trade”, e.g. the Vikings and the various East India companies. They were in it for a profit either way, and they just did whichever was more cost effective; for instance, I have heard that the first three English East India Company ships all made a profit even though the first two didn’t even reach India and do any trading, because they conducted piracy in the Indian Ocean (mostly against the Portuguese, who had driven Arab traders off the same way earlier). And, of course, the Dutch East India Company was also in the monopoly game, using force to stop other countries getting access even when it was getting its direct gains through trade; the Dutch traders who came together to form it had done so for that very reason. Later, those and other companies (e.g. in Africa and Borneo) went on to operate as tax collecting governments too, when that became convenient.

    Not only is there no separation, trade gets favoured when violence pays less, and vice versa – and at least certain kinds of war like raiding can end up paying better. It’s not a question of trade driving out war because it inherently pays better, it’s only a marker of what the very same actors opt for on those occasions when it happens to pay better. The main driver of any negative correlation between war and trade is whatever makes peaceful interaction make more sense. Though I suppose that wartime disruptions to trade make a smaller causal effect going the other way…

  3. I applaud Obama’s war effort. The “trade prevents war” meme is not applicable to Afghanistan and to Iraq trade should be opened up but security is a concern. Afghanistan and Pakistan need to be won and Iraq needs to be finished off. I understand the concern with Karzai as a reliable ally, but one way to get blow back decades later is to leave people when they need help. The time to decide peace over war is before the conflict begins, not after.

    We can be very thankful that Obama and other G20 rulers decided against a Smoot Hawley approach to the fallout of the GFC. That would have been disastrous both immediately and strategically in the future.

    I think of particular concern is how China as a sovereign State is tying up African resources in exclusive trade deals for aid. It isn’t colonialism, but it sees the same monopoly rights emerge.

  4. “It isn’t colonialism…”.

    Oh? What they are doing (and South Korea, in Madagascar) is just precisely one of the techniques in the repertoire of colonialism, which forms a continuum – it is easy to move along that continuum and start using more than one method. In fact, this particular technique was heavily used on just the countries which are using it now!

  5. “Afghanistan and Pakistan need to be won and Iraq needs to be finished off”

    That’s a totally unrealistic fantasy. For starters, what incentives are there for the military goods manufacturers, corporate contractors and military expansionists to wind down operations with some sort of peaceful conclusion?

    Also, Brzezinski’s writings over the past decades (Obama’s advisor and probably, although not disclosed, someone who has shaped Obama’s geopolitics since Columbia University attendance) plus the PNAC documents gives one a more realistic perspective of what’s unfolding.

  6. P.M.L.,

    If you want to, a military power can go about colonialism through the most bloody ways and treat the locals like serfs.

    Let’s call it quasi colonialism.

    Damian,

    I bet you are a ‘root causes’ kind of guy. Do you understand that one of the three main gripes bin laden had (the other two being unreasonable about US bases in Saudi and Israel) with America directly relates to finishing off a war?

  7. Mark,

    Who gives a toss what an ex CIA asset like Bin Laden says. Again, if your not familiar with what people who do have backing and influence like Brzezinski’s say, your in total darkness.

  8. Instead of a dick measuring contest, how about you explain your point of view.

    Mine is that you have two options – total committment or no engagement. A total pull-out is something I sympathise with, but given the circumstance I think it is risky, irresponsible and a broken promise.

    I think the backlash may be significant. You might want to dismiss this as “something an ex CIA asset said” but it is something that millions of ordinary young men might think.

    I don’t think the risk of the blowback is worth it and it outweighs the current anti US sentiment which was largely a preconceived idea by those who hold that view.

    Afghanistan and Pakistan were justified. Policing actions was frustrated and unfortunately military force was required. Iraq was a gamble that required a lot more luck to work the way the Hawks wished it to.

    All I know is you are following someone who criticised Iraq. So did I. You’re not telling me why blowback is a non issue. I could also discount Brezezinski’s view as an “ex Carter advisor”.

  9. Mark,

    A dick measuring contest? what’s up with that?

    Your obviously committed to a very juvenile frame of mind on this so your flurry of hysterical nonsense here can’t be taken seriously.

  10. Mark,

    What fairytale do I have, why is it a fairytale and how is Murray Rothbard connected with the fairytale? Please elaborate. I’d actually love to be enlightened by the blowback theorist now since the evil Rothbard has now become involved.

  11. All you’ve done is invoke Brezezinski and say “you lose”. I’m not interested in arguments from authority (or a game of name dropping – hence the “dick measuring contest” – usually a fairly well understood term), but of course I am going to pay more attention to Brezezinski than a non-expert like myself.

    If only you’d tell me what his thesis on this actually is.

    Sorry about Rothbard. If we don’t have to discuss how Rothbard told us all to be pacifists blah blah blah, then good. I’m quite happy when the sillier parts of Rothbard are rejected.

    Disputing blowback in any way (you seem to be inferring this) seems highly selective since you’ve inferred that a massive military-industrial complex exists. Why are military operations subject to unintended consequences in one instance and not another?

  12. Mark,

    What’s to apologize for? I’m not Murray Rothbard, although I’m sure he would have passed comment on Rockefeller/Brzezinski/Trilateral Commission ambitions.

    If you equate suggesting someone refer to the stated opinions and objectives of Obama’s foreign policy advisor (or Bushes PNAC crew) with the act of “name dropping” then you might want to stop prattling on about this blowback nonsense and stop recklessly slandering anyone not impressed by superficial buzzword theory pushing.

    You stated these wars should be/could be ‘won’ and then terminated. Then you invoke some Osama Bin Laden nonsense in tandem with some confused rational as to why your proudly not a ‘pacifist’.

    If you would only inform yourself it would be immediately clear how ridiculous all these utterances are.

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