If it’s impossible for a successful business to fail, then Enron, Washington Mutual, Bear Stearns, Arthur Andersen, Lehman Brothers, Goldman Sachs and so on did not happen.
If I have the right to protect myself and my property, and something you do will harm me, then you aren’t allowed to do that, right?
I said nearly. As in, the grand scheme of things. The amount of times a very successful business fails is so nominal that it qualified my statement in my honest opinion. And these companies, as with other “too big to fail” companies would never have been that big without the government’s aid to begin with.
Allow me to explain this more clearly. In the case of Enron, they would never have been able to grow so large in a free market society. I’ll refer you to the monopoly video I posted earlier that explains this concept quite eloquently.
In the case of banks, well, in a free market society they would not be of the fractional reserve flavor. The money they handled would all actually exist and be backed up by a steady commodity such as gold. Make sense?
Please just write out your line of logic here so I can show you where you’re off. That is, before I continue trying to guess at where I think you’re going with it.
I keep writing it out but you somehow keep ignoring it or not getting it. Am I not explaining it properly?
When a business fails (you state that businesses, by and large, can’t fail, but don’t bring any evidence do the table–your monopoly video is not evidence and heard several lies in just the first minute of the video), other businesses that rely on that business fail in a sort of domino effect. This is especially true of big companies. A business fails and I suffer because of it.
Now, you state that big companies won’t exist because, somehow, the “magic” of the “free market” wouldn’t allow it. Color me surprised to hear this but…HOW?
Let’s say that there’s a business selling computers. This is in a completely free market nation. I create a competing business selling computers. They’ve been in the market longer than I have and have a larger customer base. I get customers, sure, and I’m getting customers at about the same rate as the original business go them, but I’m behind. I’m not making as much money as the other business but I’m moving up. The other business sees me gathering a clientele but I’m faltering because there is only a limited pool. Meanwhile, the other business is able to expand and I cannot yet. I am now having troubles staying afloat so the other business agrees to buy me out. At first, I decline, but eventually, my business is faltering to a point where I can’t survive. They can afford to undercut me. Finally, I agree to be bought out.
Now let this happen hundreds of times with hundreds of competitors. Every time an upstart comes up, the growing business quashes them, buying them out. This is a monopoly. Without government. Now, with this monopoly power, they can begin “coercion”. They aren’t making enough money to suit them so they begin to raise prices. The businesses that buy from this business have no choice but to pay the inflating prices.
Your monopoly video lies when he says that no one can provide complaints for monopolies. There is a major one: Coercion. If a business controls a specific market, they can do most whatever they want, charge whatever they want.
If I’m the only provider of loaves of bread, then I can charge $20 for the loaf of bread. If another business tries to start up selling bread at $1.50 a loaf, I just buy them out. I get any customers they had and I get rid of a competitor. This is especially true on necessities such as food, gasoline, utilities, and so forth.
Next, your monopoly video person lies when he states that the government coerces you into paying for things whether you use them or not. That’s not the case. AT ALL. It’s just not true. I don’t have to say anything beyond that. It’s just wrong. And the government isn’t a monopoly because a) They’re not a business and b) They don’t stop competition. (See FedEx, UPS, DHL, etc vs the United States Postal Service)
One of the biggest complaints against the health care law in the United States is that it puts health insurance companies out of business and forces everyone onto a government plan. This is just so wrong that I can’t believe that anyone believes this. I don’t know what else to say about that.
As for your quips about the banks, how do you deal with runs?
You seem to think that you can simply buy out any competitor. A company can refuse to be bought out, and if he’s charging a lower price for the goods in question customers may flock to the new vendor. It’s how Standard Oil managed to fight off a German cartel before being broken up as a monopoly- they bought up a bunch of the German’s cheap oil and sold it in Germany for a lower price than the cartel could do because they were running losses in America. The above business model you refer to is called “predatory pricing” and has been more or less thrown out by any serious school of economics.
Ah, that’s a mighty big “if” you got there. A larger business can afford to undercut the smaller competition because of the economies of scale and bulk pricing. Wal-Mart can charge less for a product than a mom-and-pop shop. Therefore, people will “flock to” Wal-Mart over the mom-and-pop shop.
What? If a company wants to survive, it has to be able to market itself on something. Higher quality goods, cheaper prices, whatever. If it simply charges higher prices and tries to subsist by saying “we’re a small business, corporations are evil” then they will sink. I mean, who honestly in this economy thinks that is sound business practice?
No, you misunderstand. A smaller business CANNOT compete with a larger business because of economies of scale and bulk pricing. Let me give you an example (extremely oversimplified but you should get a general idea).
A large business has a pool of $100 million to which to purchase goods.
A small business has a pool of $10k to which to purchase goods.
A manufacturer tells both businesses that they can give them a discount on pricing if they buy at least $50k on their goods. Let’s say that discount is 25%.
The small business simply cannot afford to buy the number of products needed to cost $50k so they do not get the discount. The larger business can. And does.
So, a widget costs the small business $20. The exact same widget costs the large business $15. The large business can charge $20 for the widget making a $5 profit on each widget sold. The large business has to charge $25 for the widget.
Now, you, as a customer, see business A selling the widget for $20 and you see business B selling the widget for $25. Which business do you patronize?
Obviously, due to economic conditions, you’d go with the larger business. But hey, that’s how the economy is right now. It’s not the fault of the market that there is less purchasing power on part of the consumer at the moment. The federal government has been spending to such a vast degree that the dollar has devalued over time. Hence, why the customers would go for the cheaper price. No matter what their politics, they would buy the cheaper variant of essential goods because their dollar is worth less. It’s why bigger stores can outdo smaller stores.
For instance, a grocery store I used to work at lost it’s customers. This was due to a variety of reasons:
-Since the store had lost money due to a bad real estate deal, they could not afford to keep every item stocked.
-Stores with bigger inventories and cheaper prices had sprung up throughout the area.
-Customers are fed up with the high prices and reduced stock, so they go to other stores.
-Mom and Pop shop loses revenue due to smaller customer base. Cycle starts again until the company goes under.
Which in my store’s case it did. But the free market is a dog eat dog world and that’s just how life is. The only real thing our store had going for it was a superior meat department. Now if they’d taken that department and stock and downsized the store to just a butcher shop, they might have been able to ride things out due to the established customer base.
Not really. Even if you had the money, you would go to the larger store with the cheaper prices…unless you’re asserting that people with money ‘waste’ it by going with the higher priced store.
In which case, let me make this face: O_o
I’m just saying, quality of product can also be a selling point, and gaining and retaining customers largely boils down to a balance between cheap goods and high quality goods. Plus, you have to treat your customers good, because in a service industry job, good customer service is a life and death matter.
But, all other things being equal (quality of goods and services), the larger company still has the advantage of a) A higher customer base and b) lower cost per unit.
This creates, in a laissez-faire economic system, monopolies and, left unchecked, will eventually create a single company. The question is asked: Why aren’t there any truly “free markets” out there practicing purely laissez-faire capitalism?
It doesn’t work. No pure system does.
Why?
Because of the human element. That is always the sticking point in any “pure” system and why none will ever work. Mixed economies are the way to go with partial “wealth redistribution”.
Despite it’s fallability, the free market is certainly a better option than having a higher power plan the economy. Look at how central planning worked out for North Korea. Or, to be more accurate, how it didn’t.
If there is any kind of regulation on the system, it should be as little as possible, because without the “free” in free market, there is no incentive to grow or to be successful, because once you start redistributing the profit from successful ventures to the non successful you have effectively dis-incentivized success. I mean, who would want to make more money only to have to give half of it away to someone who isn’t doing what you are as well? It hardly seems fair.
Why isn’t there an incentive to grow and be successful? Why would redistributing a portion of the profit from successful ventures “dis-incentive” success?
Who would want to make more money only to have to “give half of it away”? ME. I wish I could making so much money that I’m required to give half of it away…TO THE PEOPLE THAT MADE ME RICH. So that they can, in turn, purchase more of my products and MAKE ME EVEN RICHER.
What’s wrong with wanting to be richer? Do you want to dis-incentivize success by harming the very people that make you rich? Because, that’s what’s happening.
Cutting off your own nose to spite your face is not a good business strategy.
Well neither is encouraging unemployment through redistribution from the rich to the poor. That’s more like cutting off the economy’s nose to spite the face of people who produce goods. And considering the rising unemployment rate, no matter how much you siphon off from the producers, the consumers on the receiving end of the aid will probably wind up having to spend most of that money on living expenses rather than consumer goods. So unless you free ride their living expenses plus hand out purchasing power, I doubt that the collectors of the cash are going to be spending it on products. And if you did follow that model, isn’t that effectively de-incentivizing work?
I was wondering when that talking point would come up. How does “redistribution from the rich to the poor” “encourage unemployment”? Please explain the mechanism for that.
Well, if you got your money for nothing and your chicks for free, would you want to give that up for a job?
So, you think that “entitlements” are something you can even live off of?
EDIT: Oh, and if you believe that the government just gives money to people for no reason or for no effort, I have this nice bridge to sell you.
Redistribution of wealth?
As I first read that thread title, I was all:
“Well, that’s what they do in…”
I had to take a break from the thread for a while. Daniel, I commend you highly on your endurance of online debates. Kudos for that. Seems to remind me of that one XKCD comic. Either way, rather than tangling this web further by picking out all of your points yet again, let me shed some more light on my personal economic views. I recently came across a video that I think touches on a lot of what this debate circled around (in a much more effective way than I have been able to convey).
https://www.youtube.com/watch?v=KGPa5Ob-5Ps&feature=feedu
Finally someone who realizes that it’s the government, not capitalism, that is the real source of the problem.
Founded in 2004, Leakfree.org became one of the first online communities dedicated to Valve’s Source engine development. It is more famously known for the formation of Black Mesa: Source under the 'Leakfree Modification Team' handle in September 2004.