Thursday, December 4, 2008

The "Market Economy" Game

Can there be any doubt in anyone's mind that we are engaged in the final working out of the petty details of a people's state? Yesterday was a turning point for me as I watched the Senate gear up for the kill, and today the knife started to perform its delicate, subtle dance of death.

The before-lunch finale on CNBC was an interview with DemRep Senator Shelby from Alabama. In the course of the conversation the good Senator managed to say a few things about how we, meaning the government, ought to just let "market forces" play out and if that meant the death of the three remaining US automobile companies, well so be it. At this point the reporter asked about the large number of auto builders in Alabama -- enough to make Alabama the foreign car manufacturing capital of the US. "How did that happen?" the good reporter asked. "Didn't Alabama give the companies a tax break?" "Yes, indeed," said the good Senator Shelby. I am paraphrasing here from my memory, “The states are really competing for companies, and we happen to be good at it. Any industry that'd like to come to Alabama, y'all come on down and talk to the Governor's office."

What does this mean? It means that what the government does to make it easier or harder to start and operate a business is now considered part of the "market economy."

For example, the Big Three Auto Makers were called to task on CNBC for not changing their manufacturing plants to accommodate quick changes from the tooling required for trucks to that needed for vans to that needed for SUVs, as the foreign manufacturers are. Leave aside any difference in quality (for which this inability may account), who would be more likely to have the cash reserves or highly rated credit standing to do that? A company hog tied with US regulations and tax structure, or a company with tax incentives?

And what about the cost of supporting unions? If you look on the UAW site you will see that every automotive product built by a US manufacturer is built by a union member. Toyota is the only non-US manufacturer with union members; they build two of Toyota's models.

The question is this: if, indeed, the US builds an inferior product, is that because the companies don't care? Or is it because they are fighting to stay alive in an atmosphere so hamstrung by regulation and government distortions that they can't do anything else?

"But don't worry, you'll find a way, Mr. Rearden." someone says to Hank Rearden as the economy collapses around them. Rearden's realization that the game is now rigged against him is part of his journey to freedom.

But there are no Hank Reardens in the automobile business, and I know of only one in the banking business -- John Allison (who has retired to study and write on Objectivism) -- that is likely to see what Rearden saw. When the forces of reality are such that blindness makes you wealthy and there is nothing left to do but grab as much as you can for as long as you can, is it any wonder that companies begin to attract the only thing that is available -- a CEO that runs to the government for a handout?

Yes, ladies and gentlemen, I believe that we have gone that far.

2 comments:

Kevin Currie-Knight said...

Good post. I agree much with the sentiments.

Another thing you might mention is the idiocy of any program where the government bails out companies competing in the market. It is tantamount to (a) forcing the public to contribute to a company they obviously did not support enough to sustain; (b) immunizing companies from threat of failure - a key motivator for businesses; and (c) by definition, guaranteeing that the public's money is going towards a losing cause.

I really don't give Rand that much credit for having foreseen this, though, as many economists, like Hayek, had foreseen dangers like this. And if we want to talk of prescience, Sinclair Lewis's "It Can't Happen Here," was much more dead on.

Thomas Rowland said...

Kevin,

Thanks for stopping by and please accept my apology for getting this moderated so late.

Yes Rand was not, and did not claim to be, an economist. Her biggest legacy, I believe, will be in epistemology, and I do suggest you read her book on the subject.

AF

Welcome

This blog is dedicated to the occcasional jotting down of my more extended essays. My profile will tell you that my areas of formal training are piano performance and philosophy. I have, therefore, the advantage of being an educated layman in economics history, painting, sales, business.

Here is the premise on which my blog is based: A is A. Many consider this an empty, meaningless statement because it is self-evident. But I regard it as powerful for that very reason. It is self-evident that a thing is what it is. In the context of this blog, another way to put it is this: wishing, praying, and government micro- and macro-managemennt will not make it other than it is.


Enjoy