Submitted by Pater Tenebrarum – The Acting Man Blog
The Left’s Distorted View of Charles Koch
DUBLIN – We met Charles Koch 40 years ago. In the meantime, he has gotten rich and accumulated enemies.
The leftists seem to think Koch – the CEO of Koch Industries, the second-largest privately held company in the U.S., and a big political donor – is a manipulator, pulling strings, passing out his money, and rigging the system for his own benefit.
They must not have met him. As we recall, he was a nice fellow – upright and sensible, with an earnest and well-meaning disposition.
Charles Koch: not a crony – on the contrary, a lifelong opponent of statism and its corruption.
Photo credit: Bo Rader / MCT / Landov
The circumstances that put us in contact with Charles were that we used to run the National Taxpayers Union – a grassroots organization that lobbies government for lower taxes – and he was eager to help.
He offered advice and some financial support. From memory, he withdrew when he saw that we would be unable to halt or even slow down the growth of big government. Charles went back to his business. We went on to start one of our own. Now, four decades later, Charles has written a marvelous book, Good Profit.
On the Road Again
We spent the weekend back in Normandy, France, renovating an old farmhouse. The weather was delightful – cool and clear.
Now we are on the road again… taking a son, Henry, on a magical mystery tour of our own little business world. We’re visiting friends, partners, and colleagues in Europe. Last week, we went east – to Germany and Switzerland. This week takes us west – to Britain and Ireland. (More about that trip as it develops.)
Meanwhile, stock market investors continue to play a dangerous game. European Central Bank chief Mario Draghi gave out the word last week that he would expand the ECB’s already €1.1 trillion ($1.2 trillion) QE program. That is to say, he proposed to shift more of the world’s wealth to people like Charles Koch.
Central bankers justify this larceny as a “stimulus measure.” But since there is neither any serious theoretical nor experiential evidence that QE stimulates the economy, we have to assume he knows that what he is up to is theft. The grandest larceny in history.
There’s no mistaking the purpose: A man who points a gun at you and pulls the trigger can be presumed to want to kill you, despite the fact that his psychiatrist may later testify that it was “just a call for help.”
Central bankers claim to be helping the world economy. They admit that the gains are “unevenly distributed.” (They rob savers and hand the loot to debtors.) But this inequality, say central bankers, is the price we pay to get the economy growing again.
But it’s not new wealth – instigated by the central planners – that is being unevenly distributed. It’s old wealth that’s stolen from some people and given to others.
In big, round numbers, the U.S. stock market added about $12 trillion to stockholders’ wealth over the last seven years. The U.S. economy added only about $1 trillion.
We’re speaking in very general terms. But there was only about $1 trillion in new wealth to divide up. But the wealthy scored $12 trillion. Where did the money come from? It had to be existing wealth… and it had to come from someone.
But Draghi is not the only stickup man at a central bank. The U.S., Britain, and Japan have been at it, too. And rumors are flying that China will undertake its own QE program.
A quick reminder of how it works… Central banks can set short-term rates more or less directly. They do this by buying and selling short-term bonds from banks. In return, they reduce or increase the level of banks’ reserves. This affects the rate banks charge one another to borrow these reserves, setting the “base rate” for lending throughout the economy.
But central banks have less of a purchase on long-term rates under so-called conventional monetary policy. So instead of buying short-term bonds, as is usual, they go into the marketplace to buy long-dated bonds. This extra demand is supposed to raise the price of long-term bonds, thus lowering their yields (bond yields move in the opposite direction to bond prices).
This is supposed to make it easier for consumers to borrow and spend and for businesses to borrow to expand production. It is also supposed to keep mortgage rates low – stimulating the important housing industry.
We’ve already spent a lot of time explaining why QE doesn’t work for the economy. But it DOES work (at least in the past) to boost asset prices. It is a fraud and a failure as a way to stimulate Main Street commerce and industry. But it is a delightful flimflam for Wall Street.
QE puts in a giant bid for financial assets. Was there really any doubt about what the result would be? Not in investors’ minds. They are pleased as punch… and already bidding up the market in anticipation. Imagine instead that they set out to buy up the world’s financial newsletter outfits. You wouldn’t expect us to complain, would you? But that is the difference between us and Charles Koch.
Real Business, Real People
Hardly anyone resents Al Gore’s fortune… or his political influence. Because he comes by both in a scammy, but popular, way. He takes positions in “green” energy projects and then lobbies the feds to provide subsidies and tax incentives.
Nor does anyone seem bothered that Bill and Hillary Clinton gained $125 million in net worth while supposedly devoting their entire adult lives to “public service.” Not that we’re faulting them; they peddled their influence and got a good price for it.
Al Gore (he who brings blizzards and freezing weather wherever he goes) and the two Clintons – cronies and influence peddlers the Left loves for some reason. They are part of America’s expensive nobility.
Photo credit: Doug Mills / AP
But Koch has the misfortune to come by his money honestly – providing goods and services to people at fair prices – and the strength of character to resist chicanery, even when it serves his own interest.
For more than half a century, Koch Industries has given the world fuel, chemicals, industrial materials… the basic products and services that make a modern economy work. The company is based in Wichita, Kansas, and employs more than 100,000 people around the world. And according to Forbes, Charles and his brother David – the executive vice president of the family business – are worth about $90 billion combined.
The most important Koch companies. The Koch brothers are giving honest jobs to more than 100,000 people and make their money by voluntary exchange. If not for people like them, there would be nothing for the cronies to loot by political means (that would be nice, but unfortunately, we’d also be in the stone age).
Neither in Wichita nor in Koch Industries will you find the glamor of Hollywood, the gee-whiz wonder of Silicon Valley, or the honeypot bonuses of Wall Street. Koch Industries is a real business run by real people producing real products for real buyers.
And a very successful one. If you had theoretically invested $1,000 in it in 1961 (it is not a public company), you would have $5 million today, a return that Charles says is 27 times more than what you would have gotten from the S&P 500. His new book explains how he did it.
Great wealth is forgivable… even admirable… in America. Free enterprise, too, is laudable, when it is described in campaign speeches and high school civics classes. But practicing it is unpardonable, and promoting it is widely considered to be immoral.
Think how easy it would be for Charles to stash his principles in a safety-deposit box somewhere and enjoy his money. Think how important he could feel too, if like Sheldon Adelson, he used his money to buy politicians rather than alienating them.
Sheldon Adelson runs a big business as well – but contrary to the Kochs, he is buying politicians en gros
Photo credit: Denise Truscello / Getty Images
And think how much public praise he could garner by saving whales or reducing carbon emissions… and maybe hiring a transgender person as spokesperson for his business. He could easily spend a billion dollars on a worthy cause without having to move to the economy section on his next flight out of Wichita.
Instead, Charles asks no favors from government. He is no crony. He wants no corporate welfare. No bailouts. No special treatment. All he wants is to be left alone to be able to work, to produce, to innovate, and to serve his customers. Too bad that’s against the law.
Charts by ECB, St. Louis Federal Reserve Research