Where Did My Capitalism Go?

Maybe someone does, but not I.  Who knows…there might be some venture capitalists out there willing to shell out the money to fund GM through its failure, but at this point we won’t get the chance to find out.  Under the lead of President Obama, the US and Canadian governments will assume a “70% equity stake” in the company during and after it emerges from the bankruptcy it declared on Monday.

And here’s the kicker:  Obama has said that he has no interest in running GM!  Anyone solidly grounded in capitalistic principle would insist as the majority stakeholder in a company that not only should their views be heard, but as the majority, they should direct the business of the company.  Well Adam Smith help us if the US government gets in the drivers seat of the largest car manufacturer in the country.  And that’s what’s already happening…the administration is appointing personnel to handle the restructuring of GM, and demanding that the company support its subsidiary Chrysler.

I would be fine with private investors rallying together to fund GM through its time of crisis.  They could pool their own money or the money of additional willing investors, and prop up the company in an effort to get it back on its feet.  What’s happening now is far from that.  This decision to fund a bankrupt company isn’t even being routed through Congress (in effect, the US taxpayer isn’t being consulted on the use of their money).  What’s happening now is the execution of a Presidential order directed at funneling taxpayer money towards salvaging a failure.

It was always my belief that the role of the US government was to allow the free market to ebb and flow on its own.  If a business achieved success it wasn’t due to some political influence, but rather the effectiveness of the business and their ability to compete in the marketplace.  If a business fails at its aim, that entity doesn’t deserve a place in the market under its current structure, and it must redirect/reorganize itself if it wants to succeed.  The US government has no place saving a failing company from its ultimate fate because its role is to remain neutral and absent from the free market.  This move sets a dire precedent for future “bailouts”, or as we should call them “takeovers”.

While some will argue that such a takeover of a company needs to happen in order to save jobs, this sentiment, echoed by intrusive politicians everywhere, goes against all that the capitalist system is founded on.  The value of your work is proportional to the value of the product you create.  Once demand for your product reduces in the marketplace, the need for the skill to create that product also reduces, driving down  demand for the worker in that given job.  This may seem cold-hearted, but this same principle also drives the ingenuity of the capitalist, specifically American businessmen and women as the US has historically been the country where the independent thinker has had the opportunity to thrive and prosper economically.  Whether you’re the CEO of a car company or a worker on the factory line, you have a mind that allows and pushes you to see the complexities of the world and determine what the market needs. To not see the failure of one company as a spark that ignites new ideas (and new ventures) is to let the brilliant fire of capitalism extinguish.

The issue of credit has been hard to avoid lately as we tread through this economic crisis.  Once recent initiative set forth by the Obama administration, having to do with consumer credit, caught my attention.  It deals with new rules and regulations on credit card companies (we’ll call them CCCs for simplicity) and it’s meant to protect the consumer from unfair credit issuer practices.

One of the main facets of the proposed “credit card users bill of rights” is the stipulation that credit card issuers be limited in the amount and frequency with which they can raise interest rates.  I don’t know about you, but every agreement that I’ve signed with a CCC has always stated that the credit card issuer reserves the right to raise interest rates at any time without notice.  Does the government not think that we read these agreements?  Maybe some people don’t.  Those are likely the people that would welcome an initiative of this kind by the current administration.

As a customer of a CCC, you are already entitled to certain rights…they’re clearly stated in the agreement or contract you sign when you initiate your business with that company.  For instance, you have the right to cancel your card, to dispute a charge and to pay your balance through any method you choose.  You even have the right to not pay the full amount of your balance, as long as you pay interest on the difference.  The rights of card owners, and rules they must abide by, vary between CCCs (this is why the consumer should do his or her research before deciding on which card to choose).  Varying rules and rights encourage competition between CCCs and force them to accommodate the consumer to gain their business.  A good example of this is the plethora of rewards programs that CCCs have implemented over the past decade, and how that has become a major consideration for most consumers when choosing a credit card that suits them.

Owning a credit card is not a right…it’s a business agreement.  The borrower signs up with a CCC to purchase a service.  The terms of that service are spelled out in the agreement that the borrower signs before any service is rendered.  If either party fails to uphold their end of the agreement, the other party can seek damages in a court of law.  It is the duty of the potential borrower to read the agreement they sign and know the stipulations of being a credit card holder with the company they choose.  It is not the government’s job to protect the willful signer of a contract that:

a) can’t read

b) doesn’t understand what they’re reading or

c) doesn’t care to read what they’re signing

The problem is that some people within the government, and some of the citizens that elected those people into office, feel that the above is the government’s job (some would even say their duty).  I guarantee you it is not.  The government exists to protect people’s rights, not their privileges.  We have the ability to engage in contracts between ourselves and other parties, and the duty lies within the signers of those contracts to uphold their contents.  It’s your responsibility to know what you’re getting into when signing a credit card agreement, and to know the consequences of your and the card issuers actions.

Without a determined focus on maintaining responsibility for our actions, and full knowledge of the contracts in which we engage, the respect for personal and corporate responsibility that the government holds for its citizens and businesses will continue to decline; leaving an open door to more anti-capitalistic reform and increased restrictions on personal liberties.

I’m not usually one to write out my thoughts and feelings for everyone on the Internet to read, but I’m at the point where I feel compelled to share my thoughts about the current state of the world.  Your line here is, “Why should I read another blog about some random dude’s opinion?”.  My answer:  you should read this blog because I’m going to say what you’re thinking.  If I don’t uphold that promise, you can feel free to comment about it (or just leave), but I’ll make myself clear from the start:  this blog is directed toward people who are witnessing capitalism slip away, and who are willing to do anything they can to save the free-market principles they hold dear.

Now, you might say that we haven’t truly had a free-market for quite some time…and you’d be right.  But what’s happening now is an acceleration toward government intervention into all things business, from the small shop owner to the global corporation.  Honestly, I don’t think that there was much of any acceleration away from free-market principles in last decade, but due to the current global economic situation, our world’s governments have responded by going into takeover mode.  This is a knee-jerk reaction…or just plain reactionary, in the political sense.  The governmental idea is to immediately fix what’s broken instead of allowing a greater, long term shift back to true value by allowing the economy to right itself.  With this solution, we’ll see (we are seeing) a movement away from the free market to a situation where value is agreed upon, and influenced, by politicians and governments rather than a contract between the seller and buyer.  We’re entering a period of time where the government will decide who will be allowed to thrive (or fail) in the market, who will perform what task in what organization, and who will be privileged enough to receive a loan.  We’ve already seen examples of these travesties of economic principle occur in the past few months.  The goal now is to put our heads together, and determine a way forward that decelerates the current movement, and places us back on track toward the capitalism that we’ve misplaced.

I see this site as being a gathering place for people of like mind, and sound capitalist principle.  Here we’ll discuss ideas, criticize and respond to criticism, comment on the topics of the day, and determine a course for the future of capitalism in the world economy.

Andrew