Tuesday, January 4, 2011

Third Front Tear

Some people are winners, and some are not. The winners are not always winners. Sometimes they lose, and sometimes those who lose become winners. The winning-losing dichotomy is fluid, dynamic. One of the great entrepreneurial stories is the twice-failed Walt Disney’s ultimate success while building an entertainment empire. So, not all winners always win, and not all those who lose are perpetual losers. Each of us has moments of victory as well as times when we fail.
So what justifies government choosing winners and losers by means of grants, loans, subsidies and tax policy? Clearly the free market is equipped to determine which enterprises are worthy of surviving, and which ones are not. There are a number of reasons that a business might not be successful. Perhaps the timing of the product or service is off---too soon before public awareness and acceptance or too late after the demand had ceased. Individual entrepreneurs may have brilliant ideas or terrific business plans, but be lousy managers or operators. The business concept might be innovative and in-demand, but the product, service or distribution model may be flawed. Finally, everything associated with the enterprise could be at maximum proficiency, but the overall domestic or global economy could undermine the value and thus, abort the startup. As we can see, there are numerous variables that can impact a business’s success or failure at any given time.
When government intervenes in the marketplace, it distorts the usual pattern of who succeeds and who does not. Incompetent managers with government grants or subsidies may be able to survive whereas fully competent ones may not because of the advantage their competitors enjoy due to taxpayers largesse. In this instance the government props up the weak and hamstrings the capable. Some folks become alarmed about the governmental process for determining whom to underwrite and whom to ignore. Their angst is misplaced. The concern should not be about the criteria or the process, but about the constitutionality and the wisdom of such practices.
Many people view the government’s intervention as an economic issue. It is only in the micro-economic sense as it affects individuals and businesses. When government manipulates the natural market, it is more related to social policy and political goals than to economics. Ohio’s efforts in this regard may prove illustrative. Ohio provides tax breaks and underwriting for solar panel manufacturers for three reasons: One, political leaders want to establish Ohio as a “cutting edge” leader in the solar energy industry; and two, Ohio’s political powers view solar panel manufacturing as a source of jobs to replace the massive number of manufacturing positions that have been lost in recent years; and three, the political elites of the Buckeye state (and their environmentalist supporters) have determined that “green” is good and should be encouraged. Maybe so, but not with my tax dollars. Many of those people who have lost their jobs in manufacturing might have been able to keep them if government hadn’t overregulated and overtaxed their former industries. Add to that mix a senseless trade policy and it’s no wonder that jobs were vaporized.
Government’s short-sighted, do-good meddling in the market helps a few businesses, a few companies or a commercial sector for a short time while abusing other sectors, companies and enterprises. For example, one of the subsidized solar panel manufacturers (Toledo) has just opened a plant in China. Even the grants, subsidies and tax breaks weren’t healthy enough to sustain and limit the operation of the business to a stateside presence. I want my tax money back. Government cannot start businesses, operate businesses or recognize the elements that divide successful ones from the unsuccessful. Government does have an uncanny knack for radically screwing up the natural marketplace whenever it intervenes. Some gifts are better left untouched.

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