October 1, 2014 by JImbo
I found this book a fascinating historical take on the “Big Business” tropes that pervade our media and educational system. Many of the assumptions that people are brought up to believe are simply wrong.
The premise of the book is that there are two basic different kinds of big businessmen: Entrepreneurs and Cronyists.
The Cronyists live on government handouts and lobby the government to create artificial monopolies or barriers to trade in order to make a buck.
Those are the ones you hear about all the time. The cable companies today would be a fine example. Or the utilities. They can be as inefficient and expensive as they are ONLY because the government stops all competition to them.
The Entrepreneurs actually ENCOURAGE competition. It makes their product better in the long run. They like a challenge and they intend to compete on quality of product and low price. The computer companies (until recently) were like this, and the car companies that don’t get government bailouts.
The Entrepreneurs don’t lobby government much. Their products to compete have to be a LOT better than the Cronyists who get subsidies and special deals from their government buddies.
They are the ones who often try to convince us that we NEED government, or that there are so many jobs that “private industry couldn’t or wouldn’t do.”
Much like the whole “Illegals only do jobs Americans won’t do” argument, it is flawed and disingenuous from the start. Americans won’t do the jobs for pennies on the dollar, no. Americans won’t become essentially slaves, no. But they WOULD do the jobs if they paid decently.
Similarly, the argument that things like railroads or space exploration are solely government duties is wrong. It’s based on fallacies put forward by the few companies IN those industries that don’t want competition.
One example given in the book is the railroads. There were three government-subsidized railroads and one private one. The government subsidized ones were paid by the mile a set price, so they built as many twisting, winding miles of cheaply built track as they could to line their pockets.
The private builder took no government money, built straight high quality rails and lots of “feeder” lines to towns along the way. He created a network of towns connected by rail to then foster trade and commerce along.
The government railroads weren’t paid for feeder lines. So, they didn’t build them. The cheap track fell apart quickly (along with bridges and other things.) Soon the upkeep of those lines was very high, with very little income from the towns along the way to make money.
The rates for the government railroads shot through the roof, while the private builder could charge very low rates on a high quality railroad. The government railroads said he was “unfair” to them, so they needed even MORE government subsidies to compete.
So, more and more laws were passed to subsidize the government rail lines and punish the private one to make it “fair.” This made the government lines even more expensive and only forced the private business to raise their rates… by law.
In the end, the customer and taxpayer lost.
Was that “fair?”
(Sound like Detroit bitching about foreign car makers to you?)
I’d highly recommend the book, even if you’re not a fan of big corporations. it might give you a bit of a different perspective. There are plenty of instances in the book of mega-corporations (without government propping them up) falling to small innovators and competitors who took care of companies. The “too big to fail” companies usually only exist because the government KEEPS them that way.
If customers are given free choice to choose their providers on the open market (ahem… not the “utilities”) then they often cause the big corporations to fall and support the “little guy.”
You aren’t told that. Why? Because government and the big businesses being subsidized are very good at staying in power. Politicians and Cronyists both hate competition.
You can see it today in the Space Race. For years there were a handful of “approved” NASA contractors. Then, some free market was opened up in the sector. Not much, but enough.
They went from “only approved contractors” to the “Here is the goal…. meet it for us” model. Setting a goal first, instead of politicians approving the COMPANY first, and THEN the project… made a huge difference.
There are a handful of companies now sending payloads into space outside of the government monopoly. Prices are dropping sharply. Reliability is going up. Just the other day SpaceX delivered I believe it’s FOURTH load of supplies to the International Space Station.
Free markets do work, IF you let them. Check out the book, even you Statists out there. I’d look forward to a debate on the sacred “government only” monopolies.
Outside of the court system and the Army, I really don’t see where we need much more. If you need something done, put a bid out. Then let people do what they know how to do.
If they can’t or won’t do it… ask yourself why. Is it a worthwhile goal? Is there a reason to build a “bridge to nowhere” or fly to Pluto “just because?”
Rockfeller ran his oil company “as God intended.” He offered low prices because he wanted the poor people to have cheap heating oil in the winter and light to read at night to improve their minds.
Andrew Mellon both in private and public life wanted low costs and low taxes to encourage prosperity, which he said would help the poor even more than the rich, since a few dollars to the Rich meant little, but to the Poor they meant much more.
Today, the owner of SpaceX, Elon Musk has long said the goal of his company is to get him a place to retire on Mars. He really seems to mean it. He wants to see people on Mars.
You don’t hear that kind of talk from politicians. You don’t get there with government handouts and chasing the dollar. You get there with vision and innovation.
That’s missing from our history books. They teach the BAD stuff done, most of it by government subsidized cronyists. They fail to fully appreciate the GOOD stuff that business has done and continues to do for people.
What if there were no Wal Mart. I still remember going to 8 different stores for one product each on shopping day. You can still do that… for specific things. However, Wal Mart offers convenience.
You don’t HAVE to shop there. There is no law that says that (unlike many other industries.) People shop there because they WANT to. It’s convenient.
How can a politician ever decide what is good for you better than YOU can?