It has become obvious that in recent years, we are beginning to see significant shifts of the economy. With rapid growth, characterized by record Dow Jones numbers, we see that we have not only overcome the 2000 and 2001 recessions but we are better off than ever. Yet according to numerous people polled taken on many studies spanning all political spectrums, people rate the economy as "fair" at the very best. With Dow numbers pushed well over 12,000 points, people should be excited at this unbridled growth. They are not. Why is this?
We have also witnessed several reports of corruption, missing money (to the amount of over $9 billion USD), and fraudulent businesses. There has been an increasing lack of responsibility among many businesses. Almost entire industries in the US are at the end of their rope. It has become frequent to hear of how the automotive and airline travel industries are almost going bankrupt. Throughout the world, international automotive and airline firms are doing very strong. Why is this?
It comes down to two things: capitalism and corporatism.
We as Americans perceive the nation to be based entirely on capitalism. If this were to be true, the two firms in danger would have two choices: restructure or fail. Despite years of poor returns, the government has been pumping millions of dollars (into the billions actually) to help keep these industries afloat. The fact that the government is always there to put a few figures of tax breaks and subsidies to keep these firms running is what is causing these very problems. Firms that depend entirely on these breaks realize that they do not need to run well or efficiently. They know that the government will be there to give them money.
Corporatism as a definition tends to be industries supported by government or through government funding. These businesses do not have to depend on the breakneck speed and force of a competitive market. The majority of their money comes from government funding. They are safe. This automatically eradicates the competitive but beneficial aspect of capitalism. The aspect is the competition. A corporation should stay on their toes to deliver quality products at acceptable prices that benefit both corporation and consumer. If not, they will ultimately fail because there are numerous firms nipping at their heels, wanting to be the strongest. Darwinism at its finest, a business requires this. Competition and individual growth not only benefit themselves but everyone around.
Corporatism in design eliminates competition. The government will tend to support a handful of firms through generous funding. Not only this but legislation will pass that support these firms and undercut others. This making it tough or impossible for competitive firms to even get a chance to get started. It discourages competition and growth.
How firms get picked in the corporatist government tends to be through reasons other than merit. It might be close friends, lobby groups, and campaign financing. The best and brightest example of this was Enron. A business that was handed billions of dollars of subsidies in the 1980s and 1990s but happened to be the most poorly run business of all time, collapsing spectacularly when a year ago, it had record highs in the stock market. How did this business even get acknowledged was through friendly connections. In a capitalist society, if there were subsidies, it would be given to a firm who can deliver an acceptable service at the best possible prices. Firms would compete, fiercely in fact, for these contracts in a capitalistic government. In a corporatist government, there is no competition. Your friends
will hand you contracts at padded pricing.
The flaws of a corporatist government is relating to the government as a central source of power. It no longer serves its constituents or even a common good. It service is to lift up friends through cronyist directives. This harms every facet of society: constituent, business, and government. The government now posesses immense power that it can wield as often as it would like to support friends and discourage others. There has never been a society that has flourished under an anti-competitive economic society and there most likely never will. The government grows in power and continues to unleash its power for everything. It is not a surprise that since 1980, the government has grown to mammoth size, spending as much money as possible that benefits as few people as possible.
In essence, a corporatist government becomes an authoritarian government. It now has the power to destroy businesses with shady legislation and can allow corrupted businesses to chug along, or if there is a scandal, to get off the hook with little or no punitive damages. Does capitalism and constituents benefit from these friendly deals? They do not under any circumstances. This is why the health of many firms is very unsteady. The reason is that these firms got their revenues not because they provided the best services. It is no different than promoting a third string sports player as a starter. The third stringer may hold their own briefly but eventually, they will collapse. We have already witnessed this with several firms and we can expect more of them to follow suit. Many of these businesses were most likely buttressed with generous government payments.
So what should we do? The most important step is to be aware. We as taxpayers have an obligation to know what our elected representatives are doing. If they are doing secret moves, it most likely will harm us overall, rather than help. It is our duty to keep tabs on them, to ensure that we benefit as well. The elected representatives are here to serve us, not a lobbying group. Secondly, we should try to support businesses that have a capitalistic rather than corporatist approach. We should reward firms that believe in the success that comes from competition without begging the government for a billion dollars a year to prop up lagging sectors of their firm. Thirdly, we must promote the idea of competitive success instead of the idea of a handout. It has become myth that the biggest leachers are welfare recipients but they pale in comparison to poorly run businesses with their hands out, despite the total salaries of their Board of Directors being higher than $150 million a year.
One method will lead to success not just for businesses but for all people. One method will lead to overspending, corruption, and inconsistent quality. It is obvious what the best choice is. Now we should make sure other people know it too.
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