What is "the social contract" of which Krugman and Elizabeth Warren speak?

[Update]: Sheldon Richman, editor of The Freeman, offers another perspective on Elizabeth Warren and her now-famous words. Between what we are hearing from Washington and Michael Moore's latest veiled call for violence against people who make less money than he does, one can bet that private capital investment in this country is going to be stunted for years.

From what I can tell, the Keynesians and the Depublicans (or maybe the Remocrats) have declared war on private capital. The rest of us will pay dearly for this, and I will say that the U.S. economy NEVER will recover as long as the present gang of thieves holds power. [End Update]

Paul Krugman makes millions of dollars a year. While I am not privy to his actual income numbers, I have been told by a very reliable source that it is in the millions. Furthermore, he has no children and a wife who also earns a high income. The guy clearly makes more money than he needs to live, and many poor families could live well if Krugman were willing to give them a "big hunk of it." (If the man has a charity by which he feeds the hungry, I am not aware of it.)

Thus, we can conclude that Paul Krugman -- if we wish to consistently apply his words, and the recent words of Elizabeth Warren -- is responsible for making other people poorer. Krugman makes a lot of money, and according to Krugman, one only can make money at the expense of others who are worse off, so by Krugman's own admission, he is violating a "social contract."

That is not what Krugman would say, and I am sure that if government agents were to seize his property and most of his holdings, he would scream bloody murder, but that is for another post. Instead, I want to zero in upon this notion of the "social contract" that suddenly seems to be the rage among the Left.

In a recent meeting that has gone viral on YouTube, Elizabeth Warren, the Harvard law professor who President Obama unsuccessfully tried to appoint as a de facto "banking czar," now is running for the U.S. Senate in Massachusetts. This is that quote that the people from Moveon claimed was perhaps the most important thing EVER said:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there – good for you.

But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory….

Now look. You built a factory and it turned into something terrific or a great idea – God bless! Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

At one level she is right, but no one I know claims that a person has gained wealth by no one's efforts but his own. However, we need to read between the lines of what both Warren and Krugman are saying, and we can find something much more sinister and economically ignorant than what their supporters would like to admit.

When I heard Warren's quote, the first thing that came to mind was the scene in "Godfather II" when Don Fanucci tells a young Vito Corleone that Corleone must let him "wet my beak." In other words, Fanucci was telling Corleone that the neighborhood was his own territory and if Corleone wanted to do business there, he had to pay up -- or else.

Call it what you will, but Fanucci was presenting his own version of "the social contract." Given that Murray Rothbard on more than one occasion likened government to a criminal gang or a mafia, I would say that the "social contract" of which Warren and Krugman speak falls into that category, something neither of them ever would acknowledge.

Yet, what was Warren saying? She was making the claim that entrepreneurs -- people like Steven Jobs -- somehow reap ALL of the gains of their commercial success, and that the ONLY way that other people outside the successful entrepreneur can gain any benefit at all from that successful company is through taxation. That is it. According to Warren, companies like Apple might sell products, but they benefit only the company Big Wigs.

While the Usual Suspects applaud these words, I cannot help but think of the story of "The Little Red Hen," who prepared bread by growing wheat, making flour, and baking the loaf, all while others looked on and did nothing. In the end, the Little Red Hen shared the bread with her chicks.

In the Elizabeth Warren/Paul Krugman version of "The Little Red Hen," however, the other animals could claim that their very presence at the farm was the REAL reason that the Hen could make bread in the first place. The animals might say that since they did not knock down the wheat or burn down the hen house, that it was THEY who were responsible for the Hen's success.

As for "marauding bands," who is Warren kidding? Has anyone ever seen a police raid (and especially from the Feds) on business firms. Please don't tell me that these "law enforcement" raiders are orderly and respectful. They behave exactly like "marauding bands, and all-too-often it is discovered afterward that there was no good reason for the violent raid in the first place.

The word from Krugman and Warren is this: entrepreneurs gain success ONLY at the expense of the people who really are responsible for the entrepreneurs' success in the first place. Entrepreneurs, in their view, really are parasites for they drain the "community" of its rightful wealth.

Now, I agree that many Wall Street firms have gained wealth through political favoritism and from bailouts, but since Krugman and Warren actually supported the bailouts of those banks and financial houses, as well as the bailouts of GM and Chrysler, I'm not sure why they are complaining. The Austrians wanted those entities to bear the costs of their entrepreneurial errors, and permit those firms whose principals had not made the bad choices to be able purchase the assets of the firms that failed, but because the Austrians have wanted the "banksters" to bear the costs of their errors, Krugman and others have claimed that Austrians are "enemies of the people."

Do people have obligations to their neighbors? I believe they do, although the "social contract" of which Krugman and Warren speak is a "contract" that demonizes people who have taken risks and been successful and goes well beyond any relationship and responsibilities that I would be willing to support.

I'm sorry, but the notion that everyone else should have a claim to the income of Steven Jobs -- or even Elizabeth Warren and Paul Krugman -- because of a "social contract" they claim exists is nonsense. But I will go further; Steven Jobs has contributed much more to the well-being of people in this world than Krugman, Warren, and all of the other leftists in the world combined.

Elizabeth Warren and Paul Krugman want us to believe that the Political Classes ultimately create wealth, and that the parasites are people who saved, invested, took risks, and took an idea and were successful in business. This is not a "social contract;" it is turning reality upside down.