The death of common sense

Milton Friedman recalled traveling to an Asian country in the 1960s and visiting a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: “You don’t understand. This is a jobs program.” To which Milton replied: “Oh, I thought you were trying to build a canal. If it’s jobs you want, then you should give these workers spoons, not shovels.”

Government is notorious for not being productive.  That’s not its job.  It is the job of the private sector, business people and capitalism.  When firms compete against each other, they find ways gain short term advantages though lower costs, higher quality, innovation and productivity.  This in turn frees up capital to be used for other purposes.  Capitalism is a fluxating dynamic growth engine.  Government is not.  When it comes to businesses, Government is a static wealth redistribution monopoly.

Milton Friedman knew how to create real wealth-producing jobs. Once, when he visited India in the early 1960s, John Kenneth Galbraith, the U.S. ambassador, welcomed him by only half-joking, “I can think of no place where your free-market ideas can do less harm than in India.” Talk about irony. India has adopted much of the Friedman free-market model and has moved nearly 200 million people out of destitution and despair.

Recently Rose Friedman (Milton’s wife and co-author) was asked what she thought about the attacks on her husband and capitalism. She was mostly dismayed at how far off-course our country has veered under President Obama. “Is this the death of Milton’s ideas?”. “Oh no,” she replied, “But it is the death of common sense.”

Limited Intervention

Treasury Secretary Timothy Geithner told the House Financial Sevices Committee during his testimony that the Administration’s reform plan includes four broad components:

1. Addressing Systematic Risk
2. Protecting Consumers and investors
3. Eliminating Gaps in Regulatory Structure
4. Fostering International Coordination

All good goals but when did our Government become one gigantic consumer protection agency?  What about strengthing our capital markets, streamlining red tape, encouraging small business growth & innovation?  When you are going to grow youself out of a recession and begin hiring again, you first need to grow.

Let my people go

Small business people and entrepreneurs are the most productive, creative, innovative, hard working imaginative, risk taking & under appreciated group in the world.  We are the growth engine that spurs employment and pushes everyone’s quality of life ever higher.

 

And yet:

• If you want to start a company in California it will cost you $800 on day one.  Before you even have any sales.
• You will be over regulated.  One third of most business expenses are unnecessary overhead dealing with red tape, bureaucratic delays and cover-your-ass procedures.
• You will find out that Commercial speech is not Free speech.
• Your ability to raise money will be hampered by out dated, inflexible and ill-conceived rules dealing with things that have nothing to do with a vibrant capital market like Anti-Money Laundering (AML) and Sarbanes-Oxley.

 

And yet, we are called to put our hearts & sweat into our businesses.  Whether to change the world, provide a new service, show off to our old boss, for the potential of money & glory, or just because. 

 

Let’s join together, sing our praises and make sure that the winds of change do not lead to stifling regulation or protectionism.