This issue features an essay by George Gilder on "The Enigma of Entrepreneurial Wealth". Adapted from his forthcoming book, Recapturing the Spirit of Enterprise (ICS Press, 1992), the article challenges the view, popular in many quarters these days, that capitalism "would work better without all these superrich capitalists." On the contrary, Gilder argues, any attempt to redistribute America's entrepreneurial wealth would have a devastating effect on the living standards of everyone, especially the least fortunate among us. "The single most important question for the future of the poor of America is how we treat the rich," he writes. "If we smear, harass, overtax, and overregulate them, our liberal politicians will be shocked and horrified to discover how swiftly the physical tokens of the means of production collapse into so much corroded wire, eroding concrete, scrap metal, and jungle rot."
I can't think of a more appropriate forum for Gilder's essay than the annual Inc. 500 issue. As in years past, our 1992 presentation of America's fastest-growing private companies is chock-full of statistics that dramatize both the individual achievements and the collective contributions of the people whose companies are on the list. For example, there is the five-year growth rate of Kingston Technology, a blistering 117,122% -- which is all the more remarkable when you consider that it was accomplished without a cent of debt or outside equity. As a group, moreover, the 1992 Inc. 500 have directly created more than 64,000 jobs in the past five years, and that figure doesn't include the jobs they have fostered in the vast network of companies they do business with, and in the communities where their owners and employees buy homes, shop, and pay taxes.
Along the way, the men and women of the Inc. 500 have generated substantial wealth -- in the form of equity -- for themselves, their investors, and, in some cases, their employees. Starting with few resources -- more than half the founders on this year's list launched their companies with less than $30,000 -- they have built businesses collectively worth hundreds of millions of dollars today. They have done it with courage, hard work, ingenuity, and intelligence. Theirs is a quintessentially American process of wealth creation, and it underscores the folly of the debate over redistributing our nation's entrepreneurial riches, as Gilder points out. America's real wealth is embedded in the intelligence and imagination of its creators, and thus their financial wealth cannot be separated from them without destroying its value in the process. This, Gilder argues, is the great lesson to be learned from the failure of socialist systems around the world.
Gilder's essay is as timely as it is provocative. And yet, even as we find ourselves nodding in agreement, we are left with the haunting fate of those excluded at every turn from sharing in the rewards of entrepreneurial capitalism.
So what can be done to improve their lot? The first step, I'd argue, involves facing up to a simple truth that constantly eludes those who shape policy and public opinion in this country -- politicians, intellectuals, and journalists alike. It eludes them, I believe, because they are so far removed from the day-to-day toil and untidiness of capitalism. That simple truth is this: the concentration of wealth they find so alarming is the consequence of something much more powerful at work in our society. I'm talking about the concentration of know-how.
The poverty that is threatening the very fabric of our society is, at its root, a poverty of economic knowledge. The traditional admonition of one generation to the next, "Get a job," has been replaced with the more complex and bewildering mandate, "Go out and create a job for yourself." As a result, whole segments of our population are at risk as never before. The devastation wrought by this intellectual poverty can be observed most starkly in the numbers of at-risk children in our nation's inner cities. But the truth is that all our children are at risk, even those who attend the best public and private schools. For none of our children are being prepared to take their place in a world in which job security as we've known it is gone.
Nor is the next generation alone in facing that danger. Many of our workers, blue-collar and white-collar alike, are at risk as well. To survive and prosper, they will have to develop skills and attitudes vastly different from those required of the people who worked in the offices and on the shop floors of the past.
What the men and women of the Inc. 500 possess in abundance is not so much the talent to build great companies as the skills and attitudes necessary to make their own way in the world, to take care of their own economic needs. That is no small feat in an economy whose only constant is change, and more change.
From that perspective, you could say that the time has indeed come for a debate about the redistribution of entrepreneurial riches in this country. But the debate should not be about redistributing financial wealth. Rather, politicians and policymakers should be focusing on the need to redistribute basic economic know-how from the few to the many.
Pulling off such a transfer of economic technology would, of course, be a huge undertaking, but it is just the sort of project with which we Americans have a lot of experience. Wasn't this, after all, the basic idea behind the Peace Corps -- channeling America's technical know-how to people in developing countries? Surely if we can orchestrate such a campaign of education and support around the world, we can do something similar here at home.
There is no greater legacy we could leave behind than that of having helped all our citizens provide for themselves what even the most powerful organizations on earth can no longer provide for any of us: individual economic security.