November 4, 2008 - There must be something in the Treasury, Federal Reserve, Senate and Congressional water bottles that's causing brain damage. While the initial idea of saving the banking industry to avoid a crisis of confidence was sound because capitalism depends on trust in the banking world, there's a new fever going around that's much more dangerous. It's the notion that the Treasury or the Fed should start investing directly into all kinds of companies, take equity positions, become a shareholder in private enterprise.

Think this one through. If the government decides to own part of a business, it will most likely want a seat on the board of directors, maybe even a controlling interest. Why is that a concern? Have you looked at how the government runs its own business? It takes in taxes and always spends more than it brings in. It spends money like it's someone else's (oh, wait, it is....it's ours), keeping outdated payments to programs on the books for political purposes, building bridges to nowhere, and funding projects like investigations into the dating habits of the Argentinean fruitfly.

Getting government involved in business doesn't work. Look at the international airlines that are partly owned by their governments. They fly but rarely on time, and service is horrid. Or look at government involvement in the medical business, otherwise known as socialized medicine. Canadians have to wait years for many surgeries. So do the Brits. And why do you think most of the new drug discoveries and new medical breakthroughs occur in the U.S.? Because free enterprise allows the inventors (and investors) to reap the reward for their work and risks, unencumbered by government until the final approval process.

But what about all the jobs that will be lost if GM or Ford or Chrysler go out of business? They're just like the jobs that are lost when a restaurant fails or a farmer who has to sell the farm. There are just more of them. Sure that would hurt the economy, a lot. But the government's job isn't to tax everyone so it can spend the money on people to hold jobs. Creating jobs is what private enterprise is for. A capitalist economy separates those capable of creating value such as a car that is well-built and lasts the way the Japanese do (with Koreans not far behind), and those that can't. Sure, new models from GM, Ford, and Chrysler are better than ever, even competitive with the Japanese but they may be too late. Management at the U.S. companies may have played golf once too often and let their market shares slip too far.

What will happen to all those workers if the government doesn't save them? Most likely they'll go to work for the Japanese companies that are building plants in the U.S. to keep their costs low. Or they'll go to the German car makers building plants in the U.S. The market for cars won't go away, just the bad car makers, if the government doesn't step in and foul things up. The same thing has already started to happen in the banking world: the bad banks are going out of business or being bought by the healthy banks. That's the way a free economy works.

To think that the government is the total answer to every problem isn't right. Free market economics requires that certain businesses fail. That's part of the deal. High risk, high reward. If the government is the safety net for many businesses, then it will want to run them. And running a business is not like running the government. There are no taxes to be raised. There are no pools of money that can be transferred from one program to another. There are only revenues and expenses, generated by what the business offers. If it isn't offering the right stuff, then there are no revenues, and it goes out of business. It's that simple.

There's talk of "giving" (in quotes because there will be many strings attached...as there should be...this is no gift) money to car companies on top of the banks, thrifts and insurance companies that have already received funds. Why stop there? It seems the logical step (and certainly the most democratic) is to set up a government agency that will take applications from any business, then, after many months, maybe years, of deliberations, will get back to the applicant as to whether or not he/she qualifies. By that time most will be out of business, but that doesn't faze the government employees. They still have their jobs.

Here's another issue: when administrations change, they will place new rules into the game, can even change the rules from the last administration. New board members, replacing previous ones, would be added to any company that already had government representation. That would create even more changes for the companies involved, changes which have nothing to do with the basic business of the business.

If you think having government invest in private business is a good idea, let me give you one more example of why it doesn't work. Talk to anyone in Louisiana who was homeless after Katrina and was told by the government that house trailers were on the way. Those people are still waiting.

- Ted Allrich