Alex Chafuen. Businessmen and the Free Society

A speech Businessment and the Free Society by Alejandro A. Chafuen, President of Atlas Network delivered in Vilnius on November 16th, 2016.

Milton Friedman acquired well-deserved fame with his book Capitalism and Freedom, but for some he gained reprobation. Especially for what he wrote about against the concept of corporate social responsibility. He argued that social responsibility was a subversive principle. For Friedman the entrepreneur’s only role is to earn money. He clarified that these gains have to be within a rule of law framework. But he did not assign any role, or special responsibility, to entrepreneurs to help build this fair legal framework.

This point is important because the relevant period of profit maximization in countries with high corruption and weak rule of law might be, and usually is, very short. It can lead to businesses practices that lead to produce, pollute, and leave! But Friedman’s thinking was not so simplistic or “selfish.” During the last decades of his life, Milton Friedman decided to create a foundation where he would devote most of his strategic thinking and to which it would give all the money he earned and saved.

Going back to responsibility. As an analogy with his world of academics, especially with those working in positive sciences, Friedman could have come with the same reflection and question: is it the responsibility of the scientist, as a scientist, to get into the battle for ideas? To work to build a just legal framework for a free society? I think his answer would have been NO. The commitment must be personal. His decision to create the Milton and Rose Friedman Foundation for Educational Choice [now EdChoice], in order to promote greater educational freedom in primary and secondary schools was the result of his personal social responsibility.

During a luncheon speech at a meeting of the Mont Pelerin Society in Vancouver, Canada, not long after the fall of Soviet Russia, in front of an audience of hundreds of proud intellectuals, and several Nobel laureates, I heard Milton Friedman tell them: “You intellectuals and professors believe that you can change the world with your ideas. The truth is that you alone can do very little. If it were not for the wealthy businessmen who decided to support your cause, the battle would have never been won.” He mentioned a select group of entrepreneurs including Antony Fisher, the founder of my organization, but also others like Richard Mellon Scaife, John M. Olin, Randy Richardson, Earhart and others. I think if Milton would have been of the Austrian school, he would have asked us to remember also Frederick Nymeyer (1897-1981), who inspired by the books of Ludwig von Mises, tried to convince the University of Chicago to create a think tank in that great university to be directed by Mises.

These entrepreneurs, soon after seeing success in their businesses, used their profits to support the battle of ideas, each with their own style, and all, helping “intellectual entrepreneurs,” academics, and means of dissemination.

Let me tell you about one of these great leaders, Antony Fisher. Fisher lived the last decades of his life in the same apartment building as Milton Friedman, I still remember the address, 1750 Taylor Street, in San Francisco. Fisher’s story is fascinating and has been told on several occasions. He was born in high society but as a young man suffered family tragedies. His father was killed by a sniper in Gaza. With his only brother he decided to enter the Royal Air Force (RAF). Unfortunately in the “Battle of Britain,” his brother died when his plane was shot down.

These two incidents, in my opinion, impacted Fisher so much that when he read a condensed version of the Road to Serfdom, by F.A. Hayek, describing the ideas that motivate socialism and National Socialism, he decided that he, as an entrepreneur, should do something to avoid reaching the fateful destiny. He went to see Hayek with the intention of receiving his blessing to enter politics. Hayek, however, advised him differently “politicians follow public opinion. To change public opinion, you have to work on ideas.” Fisher listened and hired those whom some say were the last two liberal economists left in England: Arthur Seldon and Ralph Harris. With them he founded the Institute of Economic Affairs.

Looking for the model of the organization to found, Fisher visited the Foundation of Economic Education (FEE). FEE was created by Leonard Read, someone with great talent to communicate with entrepreneurs. The mission of this organization, based near New York and now in Atlanta, was to educate the lay person, about the importance of free economy. Read had been president of the Los Angeles Chamber of Commerce, and he attracted to the board not only some of the most relevant businessmen of that time, from the president of General Motors, to Warren Buffett’s father, but also the presidents of major universities like Columbia. One of the entrepreneurs he attracted was J. Howard Pew, the founder of SUNOCO (Sun Oil Company). Pew was chairman of the board of a “small” university, Grove City College, for 40 years. That college hired a disciple of Ludwig Von Mises, Hans Sennholz, who built an economics department which to this date, remains committed to Austrian economics and the entire college is devoted to teaching the principles of human freedom. Many freedom champions studied there, Larry Reed, today at the Foundation for Economic Education, the Chairman of State Policy Network (an Atlas Network for the US), and the president of the Institute for Justice, graduated from Grove City. I was also lucky to go there, and now I am a trustee, and share a board with many talented entrepreneurs who believe that it is their responsibility to help build the institutions of the free society.

The greatest “patron” today in the world of free-market ideas is Charles Koch. His foundation donates to more than one thousand efforts in universities and study centers. In some, Koch and his associates control the board, but he also recently started supporting efforts at the Catholic University of America. His major grant, of ten million dollars, went to the university’s center and department that focuses on ethics and business. That center works within a framework that respects the Social Doctrine of the Catholic Church. But most of his support goes to Centers that promote more individualistic versions of capitalism.

I imagine the experience of their father marked the Koch brothers. Fred Koch had discovered a new process for refining oil. Immediately he was the target of the attacks of more powerful capitalists, who brought all kinds of lawsuits to stop him. Fred Koch packed up and went to Stalinist Russia, where he built his first large industrial plants. It did not take long for Koch to become aware of the Stalinist horror. He returned to the USA, and was one of the founders of the John Birch Society, which had as a mission to combat, among other things, Socialism. Today the Kochs donate to efforts in all areas relevant to political and social change.

The motivations of the entrepreneurs who decided to enter the intellectual battle are all very different. With Fisher, it was personal tragedy, engaged in combat against the Luftwaffe the Nazi Air Force, and Hayek’s book, The Road to Serfdom. A recent example of a businessman who realized that he should be responsible for building and protecting the institutions of the free society is Nicolás Ibáñez, Mr. Walmart of Chile. The last impulse that took to him to act perhaps was to feel identified with the book The Fatal Ignorance, by Axel Kaiser. In that book, which was a finalist for the Atlas Fisher Book Award, Kaiser shamed businessmen for not doing enough to help promote a free economy. Some such as J. Howard Pew in the USA or Francois Michelin were inspired by their faith. Pew by his Calvinism, Michelin by his Catholicism. Also guided by his very particular spiritual vision, the great investor John Templeton, destined all his fortune to create a foundation which would devote most of its funds to discover new spiritual realities. A smaller portion, is focused to promote free economy and indirect solutions to poverty. He understood and stressed that the free economy is essential for a free society. Without a free economy, he would have never been able to create such amount of wealth (his foundations grew to $6 billion), for him and for his clients.

To a lesser extent, another investor, Derwood Chase, created a foundation to support think tanks in the United States, and a handful in Canada and England. The foundation donates an average of about $750,000 distributed among 50 organizations. To avoid administration costs, only donate to overhead expenses. And in order to avoid deviations from the libertarian ideology, the board, in which I am from the foundation, nominates a select group, so that from the outside it judges whether the foundation is fulfilling the intention of the donor. “Donor Intent” the donor’s intention, is one of our sacraments to live the principle of integrity in the world of philanthropy.

Several authors, especially in the statist field, have written books and studies showing the influence of these entrepreneurs by investing in ideas. The common narrative from the left is that these businessmen, Scaifes, Bradley, now the Kochs, created artificial barriers that blocked the natural triumph of the social-democratic, and technocratic, welfare state. They are the “Masters of the Universe.”

In some cases, not many, successful entrepreneurs decided to enter into the battle of ideas through political action. Sebastián Piñera, is the best known in Chile, Mauricio Macri, in my native country, Argentina; Bloomberg in New York, and now Trump and Fiorina in the United States. But in the case of Trump, and that of Berlusconi in Italy, they seemed motivated more to achieve power, to lead change, than for a particular ideology.

At the other extreme, we have those who do not want any glory, those who prefer to be anonymous, donating as the Gospels recommend. I will only describe them broadly. A businessman in the southern United States, convinced that oil would become a very desirable commodity, decided to offer the landowning peasants an advance and a percentage of what he could negotiate with the big oil companies. He became very wealthy and the family operates today in Canada. Much of the fortune goes to typical charitable works but a good portion goes to the battle for free economy. Most think tanks in the United States and Canada received anonymous support from them during the early years of activity (often through Atlas). Today they continue to support directly the best think tanks. The surname of the donor family never appears recognized. They prefer to pass unnoticed.

Even under the most difficult circumstances, and countries, one can find businessmen and businesswomen who decide to lend a hand. In my native Argentina we always had at least a handful of entrepreneurs who never gave up. In my youth I received the support of Gregorio Pérez Companc, a businessman in the oil sector. He gave me what seems today a small donation for travel, but that grant was decisive in order to finish my book on the Christian roots of free economy. He was also the main private donor for efforts at the Catholic University of Argentina to study Hispanic American contributions to economic thinking.

The Argentina case showed that it is not enough to have experts. But we need more. I will never forget Milton Friedman’s response when we made him a proposal to come to Argentina: “In Argentina there are more than enough people who can push things to be done well, many studied under me and my colleagues at the University of Chicago, if they do not, it is because they do not want to.” And concluded “that I come from outside, will not help.” He went to Peru, Chile, Mexico, but never Argentina. The role of think tanks with experts that not only conduct but that also try to implement and help in reforms is essential. Despite that it is a much larger country, many Argentinean free-market think tanks developed a completely confrontational attitude toward government officials. Only in the last decade we saw a few think tanks working in a more pragmatic manner, not bending the truth, but trying to apply reforms that would be acceptable to a larger population. The current president, Mauricio Macri, came from an industrial family and supported and was chairman of Fundación Pensar, a think tank, not as good as LFMI, but good enough for a country that has been trapped in a third way economic system that has turned one of the most prosperous economies of the world, into an example of what you need to avoid. Argentina now has a chance, only a chance, but without the patient job of having a think tank that developed specialized human capital, in different areas, education, health, municipal reform, Argentina today would have no chance.

I think that one of the major problems in life is to deny reality. Many blame outside problems for their plight. But you do not have to make them worse by your own mistaken policies. Do not get me wrong, outside threats exist, and some think tanks have to focus on them. If I go to South Korea and I ask my typical question “what is the biggest threat to the free society in South Korea” their answer is “the nuclear program of North Korea.” So I understand that if I ask the question in the countries in this region, you would likely answer “Putin’s Russia” “Russian Kleptocracy” so entrepreneurs and intellectual entrepreneurs can’t negate this issue. But the best way to deal with the threat, beyond proper military and police readiness, is to have strong and thriving economies. And for a thriving economy you need a strong rule of law, based on respect for private property and freedom of contract, so I hope more entrepreneurs and intellectual entrepreneurs address these issues.

When people negate reality, they are bound to be surprised. Recent elections in democratic societies have surprised many, but especially those who spend their time mostly with people like themselves. A good entrepreneur has to follow the market as it is, not as he wishes it to be. Thinks happen for four factor: ideas, incentives, leadership, and providence and luck. Putting aside theological differences, for providence you pray, for luck you cross your fingers. Those are personal matters, and entrepreneurs and intellectual entrepreneurs can choose to pray or cross their fingers. But the latter does not work very well. The recent cover of a magazine of my elite “The Economist” with a hand showing fingers crossed in favor of Hillary Clinton, is a telling example that relying on luck is not very effective.

There is a market for ideas, and to understand it, you have to study it as it is, not as you would like it to be. Not everyone lives in Brussels, London, Washington, New York or Hollywood. I sometimes see my friends of liberty only speaking with friends of liberty. They know all the freedom champions across the globe, and go to their meetings, but they seldom know, or care about their neighbor. I know better Latin America than Europe, but in many cases I see friends who can’t build a small party even for city elections, meeting with similar friends in other countries, who can’t even convince more that 2-3% of the population.

LFMI is a different case. They are not isolated from civil society. They contribute in the field of ideas, in the field of incentives, and in the field of leadership. Leadership matters. It matters a lot. And in the intellectual battle, business talents, both material and strategic, will be fundamental to maintaining Lithuania in its path to freedom. Thank you for your work, and thank you, especially, to the entrepreneurs in this room who think that it is your responsibility to support LFMI.