Suny purchase
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Brush Fire
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Burning the Dying Plants
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Matthew
Ettinger-Curnan
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3/25/2014
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Have
you ever heard the term “Brush Fire?” What does this phase instill in your
mind? To me I imagine a fire burning out the dead and dying plants in an
ecosystem. Burning the plants that could not compete with the surrounding
plants, the plants that just could not obtain as much energy as their
competitors. Withered from the lack of nutrients and water. Withered and taking
up valuable space in a limited environment. Ready to be lit to make room for
better competitors. If you could not guess, this is a metaphor. A metaphor for why
the government should not intervene in the event of a business failing. What I
am trying to illustrate is that businesses fail for a reason and should be
allowed to fail to make room for better businesses. When the government
intervenes in the economy by providing, for example, bailouts to failing
businesses or putting limits on how business can be conducted it slows the
development of new businesses and business models and is a mark of crony capitalism.
Favoring some over others and providing a few with resources intended for many.
Let’s start by
addressing property rights, because it does tie into this. What is a property
right? The class text book, Institutional Economics, defines it as a bundle of
protected rights of individuals and organizations to hold, or dispose of,
certain assets. What this means is that individual people have the right to
associate or disassociate with particular, possibly profitable, interactions on
their own accord. People are allowed to do whatever they want with this interaction,
as long as it does not infringe on the rights of other people. What is very
important about property rights is not only the right to own the positive
effects of this interaction but also take responsibility of its negative
effects. That means no direct involvement from the governing forces that give,
or allow, you those rights. If said governing forces does favor a particular
businesses this upsets the naturally regulating process of an evolving economy
that is facilitated using success and failure of said interactions or
properties.
Now I will discuss
the importance of having a governing system that protects no particular property holder but the idea of having an economic system that
supports continuous competition amongst said property holders. Capitalism
should be viewed as a constantly evolving system that has no particular
business or product at its core. For the capitalistic system to work properly
and fairly over a long period of time every property holder must remain in a
state of constant uncertainty. I should say that the governing forces making
laws should keep a mindset that is aware of the effects of imperfect knowledge
on property holders within the market. Is aware of how property holders’
imperfect knowledge, of what is to come in the future as well as what other
property holders know, is a driving force behind economic growth and progress.
It keeps each property holder in a state of unrest, giving each property holder
an incentive to make innovation, to engage in information search in order to
compete with their competitor. In no way should the governing forces protect a
particular property holder because of benefits that it provides said governing
forces. This is corruption of the role the governing force is meant to play.
Basically the governing force should set simple rules that allow and enforce
the rights of property holders, and then remand indifferent to everything that
propagates out of this system. This means having no direct involvement in the
interactions of the economy. Ironically
most property owners involved in this system will not enjoy such a system of
unrest and indifference towards the individual property owner and will more than likely try to impose
their own interests on the policy’s set by the governing system. In the hopes
of ensuring their own survival over others. When this is done successfully it
is known as crony capitalism. To put it simply it is an “I’ll scratch your back
if you scratch my back” scenario between a business and the government. The
business, in fear of losing their competitive edge on the market, will offer a
politician, governing authority, law maker, whichever way you want to put it, a
sum of cash to in act a law that will prevent other competitors from entering
the market. This action spits directly in the face of true capitalism. When and
if this business feels like they may be losing their competitive edge, which
should remain be a constant feeling I may add, they should invest their money
into innovating a new product or business tactic. They should not invest said cash into the governing authority’s power
over the market. The very idea that this is legal and continually occurring is
absurd to me and goes against everything that the idea of capitalism stands
for. As I have said before, this is not real capitalism, it is crony
capitalism. It is a false free market that favors whoever has power over the
market at a particular moment in time. Whoever is willing and able to dish out the cash to enact laws that will prevent the
market environment from changing.
If governmental forces become
directly involved in the affairs of the economy, that is by providing
limitations on what can be and cannot be done in order to protect a particular
way of conducting business it greatly reduces the drive for property owners to
create new or durable business models. When governments do impose regulations
on the economy it is assuming that it knows how the economy is going to
progress through time. As in what technologies and information will be thought
of or discovered, respectively, that will improve or create new, previously
unheard of ways, of doing business. I will use a couple of examples to
illustrate my point. Everyone knows, or has heard of the government bailout of
General Motors. General Motors in 2009 filed for bankruptcy because of its
inability to turn a profit. For whatever reason General Motors could not
compete with other Car producers, maybe due to it not producing cars that its
consumer base wanted, maybe because it did not have the profits available to
pay its work force their agreed fixed rate. I think it must be a combination of
the two. Whatever the specifics are they do not matter for the point I am
making. The bottom line is that General Motors, or Government Motors as some
have been calling it, could not compete with other car manufactures using its
particular business model. General motors should have been allowed to fail, or
at least had the option to fail lurking behind its every decision. Think about
this, do you think a capitalist is going to try very hard to come up with
lasting, long term business models if in the face of failure it can turn to the
government and ask for a hand out? I think not. Also if you have been paying
full attention this goes against the very idea of what it means to have
Property rights! Apart of having property rights is not only being able to
enjoy the profits of your risks and hard work but also suffering the loss of
the risks you took! This is not what General Motors did, at all. Now we have a
business that is still alive with no incentives to change its behavior, as in
create innovations capable of competing on the long haul. I am sure it will
again and again, if it does not improve its business model, run into issues due
to its inability to change to new competitors, factors, information,
technologies, ideas in the market.
Some people may
argue with this view point and say that the government had to bail out General
Motors in order to save American jobs. What these people do not realize is that
new opportunities for new businesses do arise once a giant business has fallen.
What about this new and upcoming car business that has been getting a lot of
attention recently. The company called Tesla, that produces electric cars. If
General Motors had failed, like it should have, Might Tesla have had a larger
growth then it is currently experiencing? The collapse of any large business
leaves a huge consumer market open for new property owners to take advantage
of. The collapse of GM would have provided the incentive for people to
reevaluate their own business models, their products, and their knowledge about
the world. As well as make room for new business to spring up and take
advantage of the missing giant. The government should not have used its power,
that is intended for the betterment of the public, to save a failing
business.
Risk, Reward and
Failure are essential parts of any evolving system. No one, not even biological
evolution, has perfect knowledge. Therefore no system can be designed that will
survive forever without having to be up dated or eliminated by a better
competitor. Allowing currently powerful businesses to lobby, pay off, the
government to protect their place in the government is crony capitalism.
Governmental forces, powers or authorities protecting particular businesses
like hired guards, this is cronyism to me. These businesses are not protected
from failing for the American people’s lively hoods, incomes, job sources, they
are protected because they have the cash to pay off the government. Sometimes a fire in the forest is the best
thing that forest needs; it gets rid of all the dying trees to make room for
the saplings. There is no favoritism in natural, biological evolution, whoever
can compete is allowed to compete, so we must emulate this process in our own
affairs to prevent a larger collapse that may affect the entire system on the
long haul and not just those in power at a particular point in time. This is cronyism; the government did divert resources intended for public
use for particular individuals gain. This is
not true capitalism.
·
Murphy, Robert P. Did Deregulated Derivatives Cause the Financial Crisis? www.FEE.org. March 02, 2009
·
Kasper, Wolfgang. Streit, Manfred E. Boettke,
Peter J. Intitutional Economics:
Property, Competition, Policies. Edward Elgar Publishing, INC. 2012.
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