March 17, 2014 by Liberty
There is a common misconception that rich businessmen love the free market because it’s allows them to use their money to tromp all over everyone and everything. The only thing stopping these evil shells imitating human beings are the regulations and rules of government. This is a great plot for a movie but statistically, it’s just not true. Political party has virtually nothing to do with financial situations.
In fact, rich businessmen tend to be the biggest supporters of government intervention. Government intervention is one of the most powerful tools that business people have. The removal of government is not all rainbows and butterflies when you’re running a large corporation. In fact, it introduces some of the free markets biggest challenges
Failure Is Not An Option
When a company fails to make a profit consistently in the free market, the company goes down. There is only so long that a company will exist while it’s losing money. Some men and women will suffer when a business fails. The ones that will suffer most are the men and women most invested in that business. Employees may lose their job but the ones with the money to invest can lose their life savings. That makes them the greatest beneficiary when government intervenes.
The government is willing to bail out some of the biggest companies in the world when they stop making a profit under the pretense of saving the employees but the ones profiting most are not the employees. The owners and investors get millions more invested in their company to keep them afloat despite not making a profit. The second their business got too ugly and poorly run for free market investors, the government filled the gap. Government is good for bailouts.
That being said, even if a corporation fails, the government is still there to bail them out. Bankruptcy allows the owners of corporations to collapse a business and still go home with a personal profit at the end of the year. Bankruptcy and bailouts allow businesses to take ridiculous risks without facing any of the personal consequences. Business owners know that they can always abandon the debt if they fail. Banks know that government bails them out if the businesses they invest in fail to thrive. It’s a cycle of malinvestment.
It’s Not Always More Efficient. Sometimes, It’s Just More.
People love to talk about how the evil corporation Wal-Mart takes over small towns. It ships cheap and low quality goods from China. It undercuts all local businesses. It bribes people when necessary. Basically, Wal-Mart is one step above the antichrist on your evil-o-meter.
Wal-Mart can get away with undercutting all of its competitors by buying huge quantities of products for low prices. These types of efficiencies allow them to compete unbelievably well with small businesses that can’t hold or sell boatloads of product. But, did you know that Wal-Mart used to be known for it’s amazing customer service?
If you’re a little older then you probably remember that Wal-Mart used to have a reputation for a customer first attitude. The employees actually pretended to care about the customers (what a concept!) That was a first in the big box store industry. Think about the last time that you were at Wal-Mart. Were you unbelievably impressed with the customer service. I certainly wasn’t blown away. It wasn’t bad but it wasn’t notable either.
Wal-Mart lost it.
For every efficiency that a company gains for getting bigger. It loses a different advantage. Wal-Mart has too many stores for it to properly manage it’s customer service. I still go to smaller businesses for a number of products for that reason. I may want my cans of beans at the cheapest price but I also want amazing customer service when I’m buying something more expensive.
Customer service isn’t the only thing that big businesses lose. Innovation becomes a slow process. While a small business can flip it’s business model overnight, Wal-Mart would need years to do it. That makes competing in the free market a real challenge. People don’t always like big box stores either. Many people wouldn’t sell there property to a Wal-Mart for any price. Eminent domain comes to save the day.
That’s just one area that government steps in and helps big business. Wal-Mart and other big businesses don’t have freedom in the market. They have challenges.
Big businesses put huge amounts of money into regulating their own industries. The more regulated an industry becomes, the safer it is for a big company. Big companies have the money to invest in following regulations. It’s their smaller competitors that don’t like the regulation. One new regulation can be the difference between a small business standing up to compete and it floundering and failing due to legal costs.
One great recent example of this is a phone app that allowed people to “taxi” each other around a major city. The competition caused prices for those rides to drop well below the standard taxi rates. The big taxi businesses in town could have used this service to find it’s own customers. Instead, they chose to head to the city for regulation.
The taxi companies told the city:
It’s not safe to have them driving. (As opposed to all those wonderfully trained taxi drivers I’ve riden with swerving in and out of traffic. Oh, and ignoring the fact that the app drivers still have a license to drive the car.)
They could be rapists! (Oh, and I’m sure all those smelly, dirty, and angry taxi drivers I’ve ridden with are just dolls.)
Naturally, the government pretends that these are legitimate concerns and obliges with the regulation as usual for their own political gains.
Big business is not a fan of the free market. The free market allows them to fail. With a government running the economy, businesses are allowed to dominate an industry through government protection and favoritism. While businesses might have to deal with some headaches, it always pays off for them in the end. It’s the little guys that suffer when government steps in.
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