Tuesday, April 27, 2010


My friend Ioannes posted an article at his website this morning entitled "Too Big to Fail". It's a reprint of an article posted by Dr. Jerry Pournelle at Chaos Manner. I replied at Ioannes' website with a rather lengthy bit of rambling that I'm reposting here. Since I went to all the trouble of writing it I figure I might as well use it.

I'm sorry for getting all geeky here but I've been thinking about this subject quite a bit. I believe that the only way out of the economic mess the world finds itself in today is to restore the "Mom and Pop" economy that has served us so well over the last 400 years or so. Mega businesses serve the ends of their owners, society be damned. These "too big to fails" really are and that cannot be allowed to stand. Not that they can't fail or that they shouldn't but because of their size their failure will take the rest of the economy down with them. They have become too efficient and too powerful.

A healthy economy requires competition and only small business can supply it. We need some regulation, but not the kind being considered in Congress today. It will be influenced by the "too big to fails" and will be designed to concentrate even more power in their hands. We need "just enough" regulation to break the stranglehold these mega companies have on the economy. A little "trust busting", if you will.

Since we can't rely on our compromised government we must take matters into our own hands. We have to start shopping and spending money locally, supporting the small businesses in our communities, even if the cost is slightly higher. That money stays in the community, creating wealth for all, not just for some far removed corporate giant. The local business owner has a stake in the community. He'll make decisions with the community in mind because a healthy community helps him. To a small business owner, his company means more than just profit at the expense of all else. His company is part of him and a reflection of his character. He cares what people think of him and his business so he'll generally do what's right.

The times are changing; they're returning back to a simpler way of life. Our future is in our communities, not in the world economy. To preserve our freedom and our way of life we must begin to think and act locally.

Thomas Jefferson would be so proud.

What we need is just "enough" regulation.

Pournelle is right. Let's take Walmart as an example. The efficiency that Walmart brings to the table is a good thing for the economy as a whole. It forces other less efficient businesses to become more efficient to survive, benefiting everyone. However, if Walmart is so efficient that at some point it dominates the marketplace, destroying all it's competition then the free market ceases to exist and Walmart can call the tune.

I relate this to human free will. While we have free will we do not have the freedom to do evil. To say that we do is to distort the whole concept of good and bad, right and wrong. We would deny the existence of evil and begin to believe, along with our friend Machiavelli, and the Marxists in our government, that the ends justify the means.

Most proponents of the free market do just that. Profit is the goal and any means of achieving it is deemed fair. "It's not personal, just business." Winning has become the highest sacrament in their religion of competition, relegating sportsmanship to the dustbin.

In this respect competition has to be treated as a right (I know, it's easy to bandy that word around) with fair play its corresponding responsibility. When rights are divorced from responsibility they become burdens on someone. They no longer work to benefit the individual and the whole but instead become of benefit to the individual alone. And strangely, or maybe not, the one benefiting from the right then will try to deny that same right to others. This is because it has ceased to be a right, which is a spiritual gift with no limit on it's availability and has become a privilege, which like any other commodity can be controlled by the people in power.

This is why the market needs just "enough" regulation. Efficiency is good; hyper efficiency will destroy it.

You're the engineer so correct me where I'm wrong because I'm doing this from memory. The Second Law of Thermodynamics states that all processes start with as much power as they will have and then begin to deteriorate. Without the addition of some source of power they will eventually cease to exist. Further, if my memory serves me, there is an addendum to this law that states that all systems will find the most efficient way to exhaust their power.

This applies to the free market. When one company become so efficient that it destroys all competition then it will lead to a rapid end of the free market. On the other hand, if additional energy is added to the system through the creation of new business that sparks healthy competition; it becomes less efficient but that very inefficiency works to prolong the life of the system as a whole.

What big companies and most proponents of free market capitalism just don't understand (or just don't care about) is that their application of efficiency and winner take all capitalism is destroying the very free market they claim to believe in.

The small business represents the energy needed to sustain the system. Without it, the mega companies will not survive because the market will not survive.

So the amount of regulation the market needs is just enough to insure that no one company can dominate; that new competition has room to start and expand. Without water the garden will die. Without real competition of the sort that welcomes others to take risk, the free market will die, too.

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