"If a private enterprise is a failure, it closes down - unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find exceptions."
- Milton Friedman
I was looking for a long article regarding democracy vs. Capitalism but instead I found this quote from Milton Friedman. I think Friedman poses a wonderful thought regarding capitalism in The United States. In our class, we have discussed subsidies for landowners and how those subsidies affect their lives, as well as the lives of people who purchase the goods cultivated on the farmers' land. Subsidies can assist families who come from generations of farming and really don't want to do anything different based on tradition. However, subsidies even help those who are new to agriculture and wish to cultivate goods on their land. Friedman poses an interesting way of thinking. If we as consumers go out and attempt to start a business and that business fails, most likely that business will be closed down. However, if our government invests money into a business and it fails, the government is more likely to increase capital going into that business to counter undercapitalization. A good example of this would be the ties between government officials and big-business in The U.S. Funding can come from private accounts but most of the time the funds come from a pool of different economic resources. I ask the question, is this fair for the small entrepeneur or venture capitalist?
1 comment:
Subsidies are a very complicated economic mechanism because it is so closely intertwined with politics. In the majority of cases subsidies cause dead weight losses (overall loss) but because of political interest (get the votes in agricultural or steal producing states) and sometimes strategic reasons (military industry, but also, supposedly, sugar...) they are a reality of our system. I think it is not only unfair to other businesses but also to other countries that cannot sell their products as a consequence. On top of that it is the citizens that must pay for the subsidies, the cost is largely spread and therefore low to the individual but is it worth it? The price of saving a few thousand jobs in an industry is higher than what it would cost to give these people a comfortable retirement for them and their children. I believe that if we want to preserve some industries solely for sentimental reasons, it is up to us to pay higher prices. We should have access to the most efficient market in my opinion (this would require too many caveats to be cited).
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