Home > Politics > Free Market vs. Gov’t

Free Market vs. Gov’t

I have liberal friends that choose government over free market whenever the choice comes up because they believe that free market only results in mega-corps that crush small business and people. They think that the only way for small businesses to exist is to have the government protect them from corporations. They believe that free choice results in lower wages and general usury by corporations of the populace. They bring up child workers of the 1900s and monopolies like the Rockefeller’s.

They are wrong.

To explain the differences, I’ll use a company that I helped the owners setup – From Another Planet.

They make clothing that is very stylish and very much on the cutting edge of fashion for their market segment. It is a very small company with just a handful of employees and most of their business is done over the internet since they can’t afford to have a retail center.

For a corporate example, I’ll use Volcom, which makes the same type of clothing for the same market, but is a massive corporation.

For a government example, I’ll use the Army.

For the two free market clothing makers – when a shift occurs in their market segment, which can happen at any time for many reasons, they MUST be able to adapt.

  • FAP deals in small inventories and they have a couple designers, so they can crank out a new design in a week and have the new product line available in just a couple weeks. Their largest concern is being able to market broadly enough, and assuming that works, meeting that demand (which is a problem every business dreams about).
  • Volcom must have a meeting about the possibility of a shift, then they have several designers create concepts that they then put through their QA and once they have a new design approved they begin production, which is comparatively fast; however, the whole process still takes months. Their strength is their massive marketing machine.
  • The Army has a contract that they made previously and they must allow it to expire or break it in order to even pursue a new design.  Unless the current design is so bad that it is causing an unacceptable number of soldiers to die, they will stay with the current design, despite market forces.

As you can see in this example – corporations are not very good at meeting new demand, but they’re better than government and the small business excels at it.

So why are corporations so prevalent?

Once FAP grows to a certain point, it will have more regulations heaped upon it, more costs stacked on it by the government, and at that point either will be unable or unwilling to grow further unless it takes on debt and more risk. If a company does not grow, then it dies. Therefore, it will have to borrow money to expand its operation to a size that can support the expenses imposed by the government. It will also have to begin an aggressive marketing campaign to push out competitors who will not be able to grow large or fast enough to support themselves. So, to summarize, companies either become large corporations or they die, because the government ensures that there is no middle ground.

Categories: Politics
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