Discovery

JULY 2012 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES Economic freedom: a heated debate For more than 20 years, Flint Hills Re- Economic freedom means people are As Harvard economist Benjamin Fried- sources’ has provided free to make their own economic choices man put it: “Economic growth almost realistic training opportunities for rookie under a beneficial rule of law. Their always fosters greater opportunity, firefighters from area fire departments. property is protected and they can lead tolerance of diversity, social mobility, Government policymakers, by contrast, their lives without undue government commitment to fairness and dedication seem to have had much less effective interference. They can start a business, to democracy.” training when it comes to dealing realisti- sell their property or work for whomever Downwardly mobile cally with economic firestorms. they please with a minimum of govern- ment interference. Economic Freedom of the World is an an- Ever since the economic meltdown that nual, non-partisan study published by the Working families and the most vulner- began in 2008, governments have spent . It compares 141 coun- able – including the poor, aged and dis- trillions of borrowed and newly created tries using 10 key measures, such as the abled – are far better off in nations with money trying to avoid economic disaster. freedom to invest, degree of corruption a high degree of And yet, recent and level of government spending. economic freedom. reports from the An estimated 80 percent of the The U. S. used to be near the very top of It’s no coincidence European Union, world economy is now slowing. the rankings, but fell from third place in that citizens of Asia and the Source: Bridgewater 2000 to number 10 in 2009, and is likely United States have confirmed ongoing South Korea have to fall even farther. problems with high unemployment, slug- much higher incomes, literacy rates and With an overall score of just 76.3 (out of gish growth and – in most cases – swell- life expectancies than those living in 100), the U.S. is no longer considered ing deficits. An estimated 80 percent of North Korea. They also enjoy a much economically “free.” Rather, it has fallen the world economy is now slowing. cleaner environment. into the “mostly free” category. Consequently, the debate over how to Challenges “Restoring the U.S. economy to the status solve these problems is heating up again. Even with so many demonstrated ben- of a 'free' economy,” says this year’s report, Many are calling for further government efits, the principles of economic freedom “will require significant policy changes to intervention, especially the imposition (see page 4) are under attack. reduce the size of government, overhaul of higher taxes and the spending of even the tax system, and transform costly more borrowed (or created) money. Out-of-control government spending, destructive regulations that stifle innova- entitlement programs. A better way tion and job creation, and cronies who “By boosting growth in the private sector, , chairman and CEO of count on the government to keep them such freedom-enhancing policies are the Koch Industries, sees a better solution for profitable, are all undermining economic best hope for bringing down high unem- many of these problems: greater eco- freedom and the ability of entreprenuers ployment rates and reducing public debt nomic freedom. to create value for customers and society. to manageable levels.” “Long-term, widespread prosperity,” Koch Too many critics ignore how economic As they have for nearly 50 years, Koch’s says, “is only possible in free societies. freedom generates economic growth, shareholders support policymakers of any This is why the fight for economic free- which means much more than just the political party who support these kind of dom is so important.” creation of new jobs. market-based policies and initiatives.

this issue… Growing in pg 3 Economic freedom: what it means pg 4 2012 EH&S awards pg 6 College grad seeks job pg 7 Postal Pipeline

On the cover: Rookies from the St. Paul Fire Department receive I just returned from Japan, where I vis- training at Flint Hills Resources’ Minnesota refinery. ited the affected area. There, I asked the FHR has provided realistic training opportunities to area governor and the mayor what would be fire departments for more than 20 years. their messages to our American friends. They told me: “Please tell Americans I read your Discovery newsletter with thank you for all your support. We are interest, which is how I recently discovered now recovering, but it will take more your ranches and the success of those. Photo courtesy A.R.C. time. Please do remember us. Trade I wanted you to know about the success with us. Invest in us. Visit us.” of our Boys & Girls Club programs and Last year, KII donated a total of $1 million to the American Red Cross and Salvation Army to help fund Your outstanding support meant a lot to how we are truly making a difference in relief efforts in Japan. us, and the Japanese people will never the lives of many kids. forget it. From the bottom of my heart, With one year having passed since the Collectively, our kids maintained above a I would like to say arigato-gozaimasu great East Japan earthquake and tsunami B average throughout the last school year, (meaning thank you very much). disasters, I would like to express my and a 3.2 GPA in arts and sciences. sincere appreciation for Koch Industries’ Members of our Koch-funded Oppor- Ichiro Fujisaki generous support and donations toward Ambassador of Japan to the U.S.A. tunities Through Economics program Japan’s reconstruction efforts. Washington, D.C. participated in the national Stock Market Game both semesters. Each semester, our We would like to thank the FHR-Pine club had a team ranked in the top five for June 28 – Three Koch Aviation pilots recently retired after Bend team for taking the time to meet a combined 70 years of service. Capt. Vincent “Wink” Carlson our region (out of more than 250 teams). with us and providing valuable informa- and Capt. Don Janke were based in Wichita. Capt. Larry Starke Workstations for anatomy, biology, tion concerning competitive advantages. (shown below) was based in Atlanta. All three received a technology and puzzle-solving have been The information shared was invaluable to traditional water cannon “salute” after making their final landing. added to the science and technology the success of our final presentation and program. K-12 members have heavily paper for our Strategic and Operational utilized these workstations, which are Planning class at Argosy University. an alternative to internet browsing and Flint Hills Resources has developed into a fun way to gain exposure to science, an asset to Minnesota and all surround- technology and logic. ing areas. It is clearly a positive role model These are remarkable improvements to all industrial sites. from where we were in January of 2009. We were especially impressed with the Jeff Jacobs responsible processes and the ingenuity Chief professional officer resulting in above-standard performance To “like” and follow Koch companies and leaders – including Georgia-Pacific, , Flint Hills Boys & Girls Club of South Central to ensure a clean safe environment. We Wichita, Kan. Resources, Matador Ranch, Koch Pipeline and stressed this in our presentation. Charles Koch – visit Koch Industries’ Facebook page. The Koch Industries business model is Letters and other submissions become the property of Koch admirable and has a proven track record. Industries, Inc., and may be reproduced in whole or in part, This is reflected in the quality of its including your name, for any purpose and in any manner. employees, core values and the ethical Letters may be edited for length or clarity. practices it prides itself on. Discovery July 2012 | Volume 18 | Number 3 We were all amazed and inspired by the qual- Editorial board Questions? Comments? ity standards which make FHR and Koch Philip Ellender Contact: Rod Learned Industries the great businesses they are. Rich Fink 316.828.6136 Jeff Gentry [email protected] Dale Gibbens June 17 – Boys and Girls Club members visiting the Koch Publication design: Eileen Kownslar, Dave Aune, Greg Guest Amber Vogts campus participated in a paper airplane competition as a way Charles Koch Alexander Gandah and Anuli Okolo Koch Creative Group Jim Mahoney of learning how entrepreneurs solve problems through rapid Argosy University Dave Robertson www.kochind.com prototyping and innovation. Eagan, Minn. ©2012, Koch Industries, Inc. Koch is an EOE. M/F/D/V 2 International News

NexeN ™, l’azote change d’époque...

le progrès azoté

France is the EU’s largest food producer. Nexen™ debuted in France in April. AGROTAIN® stabilizers help Nexen™ fertilizer deliver more nitrogen.

France – François Hollande, the newly iary helped pioneer a new generation of at least 19 times since 1976 and more elected president of France, has plenty of more efficient with the added changes are on the way. economic worries these days. benefit of reduced emissions. Even so, the French subsidiary of Koch Economic growth has stalled, unemploy- French farmers (and their government) Fertilizer is moving forward with plans ment remains high and his nation’s credit have long been interested in the develop- for major expansion in France. rating has been downgraded. He must ment of fertilizers that can boost crop In addition to the launch of Nexen™ also deal with the future of the euro zone, yields while also doing a better job of fertilizer, the company is looking into which seems very uncertain. protecting the environment. AGRO- the development of terminals at strategic There is, however, one segment of the TAIN® helps achieve both goals. locations serving Western Europe. French economy that remains relatively In April, Koch Fertilizer introduced Koch Fertilizer is also pursuing expansions strong: agriculture. Nexen™ fertilizer to France. Like Koch in Latin America and the Pacific Rim. Advanced Nitrogen® fertilizer, made in France is the European Union’s largest Something better agricultural producer and one of the the U.K., Nexen™ features a patented world’s largest food exporters (second AGROTAIN® stabilizer that reduces “Farmers today demand something better only to the United States). Last year, it nitrogen loss to the environment. than 50-year-old fertilizers,” said Chase had an agricultural trade surplus of more Growing regulations Koch, senior vice president of Koch than €10 billion. Agronomic Services, the producer and Farmers aren’t the only ones with an in- distributor of AGROTAIN® stabilizer. With hundreds of thousands of farms terest in these new products. The United producing everything from grain to Nations’ Food and Agriculture Orga- “Technology does exist in the agriculture grapes, it comes as no surprise that nization has commissioned studies of industry today, such as high-yielding France is the largest market for fertilizer fertilizer stabilizers, as has the European plant genetics and GPS-guided equip- in Western Europe. It consumes 7 mil- Union (which spends half of its annual ment. However, there are few options in lion tons of nitrogen fertilizer per year. budget on agriculture). nitrogen fertilizer, the most important crop input. That demand has drawn the attention Many regulators in the EU would like a of Koch Fertilizer, one of the world’s single set of fertilizer “rules” that can be “Nexen™ fertilizer is a step-change innova- largest producers and marketers of applied to all countries at all times. As tion that offers added benefits not avail- fertilizers, including high-performance it is, almost every member nation has a able in fertilizer, plus logistics AGROTAIN® and AGROTAIN® PLUS different set of standards. and application advantages,” Koch said. nitrogen stabilizers. In January, the European Commission “In the few months since Nexen™ fertilizer Stabilized fertilizers are high-perfor- (the executive body of the EU, responsible was launched in France, the business has mance products incorporating a special for proposing legislation) was presented seen an overwhelmingly positive response treatment that increases the amount of with a study that recommended several from all channels in the value chain. nitrogen retained in the soil and available ways to “fully harmonize” the use of fertil- “This product could change the future of for the crop by as much as 58 percent. izing materials across Europe. the French fertilizer market. Just 15 years ago, experts were saying As with many other industries, fertilizer “We are also implementing plans to take there was “no technical breakthrough in producers are faced with a constantly Nexen™ fertilizer beyond France.” sight” that would result in such products. changing regulatory landscape. In France, That was before a Koch Fertilizer subsid- fertilizer regulations have been revised www.kochadvancednitrogen.com 3 The importance of economic freedom Do you think the government – or any- These are not idle questions. They are one else – should be able to arbitrarily real-life issues involving economic free- take away your home? dom that will affect the future of Koch Is it okay with you if the value of your Industries, thousands of other businesses savings is cut in half due to the govern- and millions of employees. ment’s policy of quantitative easing? Requirements Do you mind if someone else runs up a As mentioned on page 1, economic debt for $50,551 in your name, without freedom requires an environment where your permission, then leaves you on the individual and property rights are pro- hook to pay for it, with interest? tected by a beneficial and impartial rule If you care about issues such as these, of law. Freedom to trade for needs and then you care about economic freedom. wants is also essential. That $50,551, by the way, is the portion Government also greatly contributes For almost 50 years, Charles Koch has been an outspoken of the federal debt owed by every citizen to economic freedom when it ensures advocate for economic freedom around the world. of the United States. sound money and remains relatively Nationwide, 92 applications for major small. Ideally, every government should If you look at total unfunded liabilities GHG projects have been submitted by a limit itself to those activities that actually (which includes promises made for wide variety of industries, but only half contribute to societal well-being, such as future payments) the total is a sobering that many permits have been issued. the protection of persons and property. $1.05 million per citizen. Of those 46 permits, 33 are being held up Looking at each of these requirements What’s at stake by challenges, many by non-governmen- and then reflecting on what’s happening tal organizations that want to eliminate What the media have called “the worst in the U.S., Europe and around the world certain industries and sources, economic recovery…ever” – especially leads to a simple conclusion: economic such as fossil fuels. when it comes to new housing con- freedom is under attack. “We see the need for these projects,” Ra- struction – has Rule of law zook said, “but if there are long delays in affected several getting permits, we don’t know whether Requirements for Koch businesses. Koch Industries is considering billions of dollars’ worth costs will have esca- Even so, Koch Economic Freedom of capital lated or if the need companies still Advancing economic freedom is investments will still be there. 1 Individual and property rights provide jobs for in the U.S. It’s frustrating.” more than 50,000 the most effective way to advance 2 An impartial and beneficial rule of law to grow and In order to be employees and 3 Freedom to trade for wants and needs improve its human well-being across society. competitive, Ra- full-time contrac- 4 Sound currency businesses. - Charles Koch zook said, “it’s not tors, including Why make those investments if new laws enough to know we 5 Limited government more than 15,000 or regulations further punish energy- can eventually get a permit. The timing union members, intensive industries? should be efficient, without such delays.” and are looking to fill more than 2,400 open positions. “We have potential projects at many of “This kind of excessive regulation guaran- our facilities,” said Brad Razook, presi- tees the long-term decline of U.S indus- According to an independent study, Koch dent of Flint Hills Resources. “These try,” Charles Koch said. “It’s no wonder employees and the additional jobs they would generate hundreds of millions of that many businesses aren’t hiring. support pump more than $10 billion in dollars in construction jobs, equipment total compensation into the U.S. economy. “If the government would be less intru- purchases and other services. When sive and not needlessly impede, then What happens to all those jobs if the gov- completed, they would also result in people would be able to innovate and ernment and its allies succeed in destroy- lower emission rates. create real value using fewer resources.” ing or diminishing Koch, not to mention “But government regulation of green- Freedom to trade many other companies? house gases creates great uncertainty. What happens to dozens of communi- Only one refinery GHG permit has Economic freedom is rooted in the prin- ties if major operations are shut down been granted during the 19 months ciple of free and fair trade. because of excessive (and often highly since that provision of the Clean Air Act This is why Koch Industries actively partisan) regulations? went into effect.” opposes quotas, tariffs, subsidies and

4 mandates – and any other Most elected officials have a strong incen- Preserve the pillars laws or regulations that distort tive to spend taxpayer money (even when Rising tax rates and a dramatically higher the market – even when they there isn’t any to spend). The more they national debt are just two reasons why the benefit Koch businesses. succeed in funding popular projects, the U.S. is steadily falling on the annual index “If other businesses can pro- more likely they will be re-elected. of economic freedom. duce better products for less, To get that money, governments typically But it doesn’t have to be that way. they should be free to do so rely on four things: direct taxes, indirect “If we really want to make the world a without government interfer- taxes, borrowing and monetizing the debt. ence,” Charles Koch said. better place,” Charles Koch said, “we must Direct taxes, such as an income tax, are constantly work to preserve the pillars of “The idea that the free market obvious. Taxpayers usually know they’re freedom, prosperity and opportunity.” is okay for others, but that my paying them and how much they cost. Koch believes that one of the biggest business should have govern- These taxes tend to steadily increase over ment help – which is the es- obstacles to recovering economic freedom time, even if just by “bracket creep” due is lack of courage. sence of cronyism – continues to be one to inflationary pressures. of the most destructive notions around. Indirect or “hidden” taxes – “This behavior not only undermines our such as the gasoline tax in the economy, but our culture and political U.S. or Value Added Taxes on systems as well.” production in Europe – are not Regardless, the U.S. government has as obvious. Few people have instituted burdensome tariffs and quotas any idea of what those tax rates on imports of ethanol and sugar, major are or how much they add up subsidies and mandates for solar and to during the course of a year. wind energy projects, as well as onerous When direct and indirect taxa- permitting requirements on projects that tion are no longer sufficient to generate greenhouse gases. cover spending, governments When a government skews the market can borrow from investors this way, it ends up costing consumers (including other nations) by billions in higher prices for goods and issuing bonds that are paid services, as well as higher taxes. back with interest. Sound money? But they can also “borrow” Michael Hofmann, who will retire as from their own central bank, Koch Industries’ chief risk officer in which has the power to create Koch jobs (and those they support) generate more than $10 billion in U.S. payrolls. October, has spent years analyzing global money at the flick of a switch. finances. He is profoundly concerned by According to Hofmann, this is how the “When your government is big and what he’s seen in recent years. U.S. financed about 75 percent of its powerful and determined to maintain its power, it takes courage to stand up and do “The U.S. Federal Reserve, the Bank of trillion-dollar-plus deficit last year – by what’s right in the face of political pres- England, the European Central Bank and borrowing from another part of govern- sure, cronyism and even threats. the Bank of Japan have, between them, ment, the Federal Reserve, which essen- drastically increased the world’s available tially created the extra money. “If businesspeople don’t have the cour- money to record levels. This has set the “Many governments encourage this kind age to stand up for what they believe, stage for serious inflation and even bigger of perverse behavior because they are big ultimately they won’t have a business, debts down the road.” borrowers,” Hofmann said. “In reality, and neither will anyone else – at least one they are defaulting on their debts, because worth having. they are paying back investors with cur- “We always strive to act with integrity, Quantitative Easing rency that is worth less due to inflation. even if it’s politically unpopular. That’s why we continue to fight for economic When a central bank purchases financial “They don’t want to call it defaulting or monetizing the debt. They prefer to call it freedom and insist that all of us at Koch assets with new money that has been – myself included – abide by our MBM® created at will for that purpose. ‘improving liquidity,’ because that sounds like something positive. They also want us Guiding Principles.” to believe it’s only a temporary measure.” www.youtube.com/econfree | www.freetheworld.com 5 2012 EHS Excellence Conference

Larry Surginer, who retired as an IN- VISTA safety director on June 30, was honored for his 45 years of exceptional service with at least 10 different Koch companies or affiliates. During that time, Larry developed and This year’s Environmental, Health and implemented several best practices and Safety Excellence Conference for Koch programs that have become standard companies, held in Atlanta, May 8-10, set across Koch, including safe work records for attendance, diversity and – permitting, confined space and energy most importantly – knowledge sharing. control, and behavior-based safety. There were 456 attendees at the biennial In his opening comments, KII chair- event. Of those, 45 were from interna- man and CEO, Charles Koch, remarked The Matador Ranch team was recognized for its water tional locations as far away as China. that: “Achieving excellence in EHS and conservation efforts. (L-R) Charles Koch, Bob Kilmer, “Besides having almost 100 additional at- all areas of compliance is more impor- J.D. Russell, Tim Washington, Randy Lair and Dave tendees than in 2010, we also had a more tant today than it ever has been in the Robertson. Not shown in the photo above are Matador diverse audience,” said Anne Monine, KII’s history of our company. team members Mickey Beshirs, Janie Campbell, Gilbert director of environmental excellence. “There can be no doubt that Koch Indus- Guerrero, John Martin, Linda Roy, Shane Taylor, Kim “We saw solid respresentation from EHS, tries has been singled out for even greater Woolsey and Les Woolsey. operations, legal and public and govern- scrutiny due to our commitment to ad- The Matador Ranch team began develop- ment affairs.” vancing the cause of economic freedom. ing its new water conservation program by Award winners “That is why we can’t afford any mistakes asking a wide variety of experts for advice. in this area of performance.” Eight awards were presented at the con- Among those contacted were several ference, including one each for Georgia- Not a drop to drink universities, the Samuel Roberts Noble Pacific, INVISTA, Koch Exploration, When he was a teenager, one of Charles Foundation, the U.S. Department of Koch Pipeline and Matador Ranch. Koch’s summer jobs included working on Agriculture’s Natural Resource Conser- Two of those were international award- the Matador Ranch in the Rolling Plains vation Service and the Parks & winners. Koch Exploration is of Texas, where a seven-year drought Wildlife Department. based in Calgary, . INVISTA’s made conditions almost intolerable. Then came the hard work of sorting Maydown site is in the U.K. “The ground was so dry and hard we through and implementing what was Flint Hills Resources won two awards, one couldn’t drill postholes,” recalled Koch. learned, a process that took many months. each for its Pine Bend, Minn., and Corpus “And dust storms turned the sky abso- For ranch manager Bob Kilmer and the Christi, Texas, facilities. lutely black.” Matador team, the reward for all that For the first time, a lifetime achievement In extreme conditions like those, when hard work came when they were able to award was presented at the conference. ranch profits are down or nonexistent, it simultaneously increase livestock pro- can be difficult to fund water duction while improving wildlife habitat development and improve- management, watering ability, watering Award Winners ment practices. retention and water quality. FHR – Pine Bend...... control equipment reliability Sixty years later, the Matador Plenty of others have noticed that suc- cess. The Matador’s natural resource FHR – Corpus Christi...... C6H6 emission reduction initiative Ranch is once again faced with a serious, multi-year drought, stewardship efforts have now won local, Georgia-Pacific...... DSL Complete and Green by Design recovery program but is doing so armed with state and national awards. INVISTA – Maydown...... Site energy intensity reduction much better knowledge of In addition, the ranch hosts field visits Koch Exploration Canada ...... Safe winter roads how to conserve water while to share what the team has learned with improving the environment. neighbors, helping them become better Koch Pipeline ...... Eagle Ford pipeline expansion That knowledge came from stewards of their land and wildlife. Larry Surginer...... Lifetime achievement following MBM® Guiding “I’m still praying for rain every day,” Matador Ranch...... Conserving water at the Matador Principle Six, which says, Kilmer said, “but I feel a lot better about in part, “seek and use the our ability to work with what little water best knowledge.” we have.” 6 Looking Back

Noteworthy

The Road to Freedom – How to Win the Fight for Free Enterprise – Arthur C. Brooks Friedrich von Hayek’s classic book, The Road to Serfdom, describes the dangers of giving Fred Koch’s diploma from M.I.T Fred’s first engineering job Fred Koch in 1924, when he was governments too much economic control was presented June 12, 1922. was in Port Arthur, Texas. working for Charles de Ganahl. over the lives of citizens. Brooks, president of the American Enterprise Institute, believes Americans are already in College grad seeks job…and more “virtual servitude to an ever-expanding unac- countable government.” Ninety years ago this summer, when Fred It was Charles de Ganahl who gave Koch That government, “has created a protected Koch graduated from the Massachusetts his first big opportunity by hiring him as class of government workers and crony cor- Institute of Technology, he wasn’t at all chief engineer for that project. porations that play by a different set of rules worried about finding a job. Fred’s job was to design and build a refin- than the rest of America, That’s because 21-year-old Fred had ery from the ground up – a task that took and has consequently left already accepted an offer to be a research him more than a year to complete. the nation in hock for gen- engineer for the Texas Company. Fred’s success in England gave him the erations to come.” His first assignment was at Texaco’s refin- confidence to tackle several other large His solution is to make a U- ery in Port Arthur, Texas, near Houston projects in the decades ahead. turn toward free enterprise, (where he had attended the Rice Institute Fear of failure promoting individual liberty for two years before transferring to M.I.T.). Like most entrepreneurs, Fred Koch while still retaining a safety Fred Koch wasn’t in Port Arthur very long knew what it meant to fail. His attempts net for society’s most vulnerable citizens. before he became dissatisfied. “The way to develop fiberglass products, corporate This, he argues, is a moral issue, not just an up the ladder in that large organization aircraft and multi-use real estate projects economic one. looked very steep and difficult,” Koch said. were all unsuccessful. If the United States doesn’t make a turn- After just a few months, Fred decided In his later years, as he began handing over around soon, Brooks warns that it will find to move to Kansas City, Mo., where he management of the company to his son, itself in one of two places. worked as a chemical engineer for Gaso- Charles, Fred Koch warned a class of busi- line Products Company. It was not long The first is existence as European-style social ness students about the common misper- before he left that company to try his democracy, with even bigger government, ceptions of being an entrepreneur. more taxation and less personal freedom. hand as an independent consultant. That Koch knew that many of them assumed The second is as a bankrupt nation facing the decision truly put Fred Koch on the path to becoming an entrepreneur. “you can come to work when you please, bleakness of long-term austerity. leave when you please, take a vacation “It takes a great deal of soul searching to Brooks believes the first inevitably leads to when you please and theoretically you are pull away from a secure job and go into the the second, as is already being seen in Ireland, your own master. Greece and Spain. unknown waters of business for yourself,” Fred later said, “particularly when you “As a matter of fact, you will probably work “In America, the road to serfdom doesn’t have had very little experience and feel longer hours and take fewer vacations. But come from a knock in the night and a jack- that your knowledge is inadequate. you won’t realize that. booted thug. “However, youth, initiative and courage “Whether you work for yourself or some- “It comes from making one little compromise will take care of a lot.” one else,” Koch added, “do not be afraid to the free enterprise system after another.” to work overtime. Always give more than Even so, Fred Koch struggled in Kansas you agreed to. City until he was contacted by an M.I.T. “The free enterprise system brings what all classmate, Carl de Ganahl, whose father, “If you are a clock watcher, it shows that people truly crave: earned success. That is Charles de Ganahl, a Texas-born entre- you are simply not interested in what you what I believe the Founders meant by the preneur, wanted to build an independent are doing.” pursuit of happiness.” refinery in England. And probably not an entrepreneur.

Too True Too - Arthur Brooks 7 Charles Koch Perspective Chairman and CEO, Koch Industries, Inc.

In 1990, the year before the collapse of Devil’s bargain Cronyism enables favored companies to the , I attended an econom- reap huge financial rewards, leaving the Citizens who over-rely on their govern- ic conference in Moscow. rest of us – customers and competitors ment to do everything not only become alike – worse off. Like my father during his visits to the dependent on their government, they end U.S.S.R. in the early 1930s, I was aston- up having to do whatever the government One obvious example of this involves ished and appalled by what I saw. demands. In the meantime, their initia- wind farms. Most cannot turn a profit Simple necessities, such as toilet paper, tive and self-respect are destroyed. without the costly subsidies the govern- ment provides. Meanwhile, consumers were in short supply. In fact, there was It was President Franklin Roosevelt who and taxpayers are forced to pay an aver- none at all in the airport bathroom stalls said: “Continued dependence on [gov- for fear it would be stolen. Visitors using age of five times more for wind-generat- ernment support] induces a spiritual ed electricity. the facilities had to request a portion of and moral disintegration fundamentally tissue from an attendant beforehand. destructive to the national fiber. To dole We see far too many legislative propos- When I walked into one of Moscow’s out relief in this way is to administer a als that would subsidize one form of giant department stores, there was next narcotic, a subtle destroyer of the hu- energy over another, penalize certain to nothing on the shelves. For those man spirit.” emissions from one industry but not shoppers who were another, or place protective tariffs that Businesses can become dependents, too. hurt consumers. lucky enough to find If your struggling car company wants a something they actu- government bailout, you’ll probably have Legacies ally wanted to buy, to build the government’s car – even if it’s Karl Marx famously said: “From each ac- the purchase process a car very few people want to buy. cording to his abilities, to each according was maddening and to his needs.” time-consuming. Repeatedly asking for government help undermines the foundations of society The result of this approach is not equal- Although the gov- by destroying initiative and responsibil- ity, but rather a lowering of everyone’s ernment provided ity. It is also a fatal blow to efficiency standards to some minimal level. universal healthcare, and corrupts the political process. I never met anyone Some people worry about the disparity of who wanted to stay When everyone gets something for noth- wealth in a system of economic freedom. in a Soviet hospital. ing, soon no one will have anything, be- What they don’t realize is that the same Medical services cause no one will be producing anything. disparity exists in the least-free countries. might have been “free,” but the quality of Cronyism The difference is who is better off. care was notoriously poor. Under the Soviet system, special traffic Under economic freedom, it is the Reality check lanes were set aside for the sole use of people who do the best job of producing My experiences in the Soviet Union officials in their limousines. This wors- products and services that make people’s underscore why economic freedom is so ened driving conditions for everyone lives better. important for all of us. else, but those receiving favored treat- On the other hand, in a system without Nations with the greatest degree of ment didn’t care. economic freedom, the wealthiest are the economic freedom tend to have citizens Today, many governments give special tyrants who make people’s lives miserable. who are much better off in every way. treatment to a favored few businesses As a result of this, the income of the No centralized government, no matter that eagerly accept those favors. This is poorest in the least-free countries is one- how big, how smart or how powerful, the essence of cronyism. tenth of what it is in the freest. can effectively and efficiently control Many businesses with unpopular products Elected officials are often asked what much of society in a beneficial way. On or inefficient production find it much they would like as their legacy. I’m never the contrary, big governments are inher- easier to curry the favor of a few influential going to run for office, but I can tell you ently inefficient and harmful. politicians or a government agency than to how I would answer that question. And yet, the tendency of our own compete in the open market. I want my legacy to be greater freedom, government here in the U.S. has been After all, the government can literally greater prosperity and a better way of to grow bigger and bigger, controlling guarantee customers and profitability by life for my family, our employees and more and more. This is why America mandating the use of certain products, all Americans. And I wish the same for keeps dropping in the annual ranking of subsidizing production or providing pro- every nation on earth. economic freedom. tection from more efficient competitors. www.economicfreedom.org 8