Makers and Takers

In the early 1900s, the German sociologist Franz Oppenheimer introduced an underappreciated distinction. Oppenheimer described two approaches to acquiring wealth: the “economic means” and the “political means.”

I call those who take these approaches, respectively, Makers and Takers. (Or Traders and Raiders, if you like.)

Through economic means, you generate value through your labor or exchange your labor’s fruits for another’s. The political means is more or less the forced appropriation of the fruits of someone’s work. Stealing, raiding, or committing fraud are obvious ways to take the fruits of another’s labor. But there are subtler acts, such as externalizing costs, which means foisting them on others without their consent.

When a polluter legally puts gunk in the river you live on, he’s a taker because if a company saves money by dumping this way, others pay the cost in the form of smell, dying fish, or cleanup. Another neighbor, a farmer, might have lower yields from poisoned fields. When a bank executive lobbies for a bailout or a green interest group bellies up to the subsidy trough, that’s political means, too. Ordinary taxpayers not only pick up the tab but have to function in a less competitive landscape.

The Takers live at the expense of the Makers.

Society starts to unravel when the political means outpace the economic means, which is when the takers take too much. In keeping with our biological metaphor, we know that too much parasitism can lead to imbalances in an ecosystem.

Organizations have internal rules, strategies, and processes, which some refer to as their DNA. The organization expresses this DNA via colleagues’ actions as it goes about daily business. In the marketplace, these organizations live or die by their capacity—sustainably—to take in more energy (revenue) than they expend in the process (cost). Those that generate revenue over costs grow and spread, while those that don’t wither and die. Unless that is, the ruling class injects animation fluid into such firms and props them.

It’s tempting to dust off our hands and end the analysis there: The market is an evolutionary environment in which organizations (people working together) create value or die. But to understand the situation with any subtlety, we have to return to our discussion of Makers and Takers. In other words, to get a grip on the sort of evolutionary selection pressure at play in pre-collapse America, we have to understand how some firms generate profit. In short, too many use political means. These firms become zombies that gobble up smaller competitors.

Those using political means improve their lot by taking from others in collusion with authorities. Firms that generate a profit through the economic means don’t shift costs; they satisfy customer desires and internalize costs. And they create wealth. Firms that generate a profit by the political means displace costs and collude with the state to put a regulatory boot on upstarts, or otherwise take corporate welfare. They destroy wealth.

The former make real profits, while the latter make paper profits. The former improves our lives and moves our economy forward, while the latter creates little or no net value and exists at the expense of other firms and taxpayers.

The beauty of free and voluntary exchange between two parties—without coercion—is that each has, by definition, to leave the other party better off. If either party doesn’t see value in the transaction, it won’t happen. In exchange, we are creating value for each other. In some cases, one might question another’s judgment or challenge their values, but the transaction is worth it to them. That means Maker companies are leaving everyone they touch better off. As long as they conduct all of their business transactions strictly in this manner – with customers, vendors, employees, and all other stakeholders happy – they are operating through economic means, and their profits are justified. Their existence is prosocial.

But most of the West has been overrun by Takers. This is not sustainable.