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Big Business

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Big Business = Absence of Free Enterprise

 by SARTRE

Fraud Schemes Cause more Regulation
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Monopolies Curb Competition with Regulation

Capitalism is not equivalent to the practice of Free Enterprise. The conditions that allow Big Business to dominate the economy, result from the lack of real competition. Regulation is the silent partner of the multinational. Government protection builds empires, one monopoly at a time. Cash is king when elimination of your rival is your goal. Mergers and acquisitions, tender offers, or a hostile take over - are all tools of the trade. But the most productive method to achieve dominance is to bankrupt your competitor.

Over a century ago, the underlying prime objective for the captains of industry, was to eliminate any challenger. Their ultimate prize was the ability to set prices and control their markets. Simple and straight forward, easy to understand.

The cry for government regulation - breakup the Trusts, was the solution that was supposed to tame the greed of those evil Capitalist’s. Well, how did we do? That approach made them even stronger. Today the challenge has changed in style, but the game is still the same. Profits are still good, but cartels are pigs . . .

Understand that the systemic economic paradox is based upon the natural differences in talent, motivation and methods that drive business organizations. There is no guarantee for success. When the abilities of a visionary tycoon can build an empire, we have a direct link for corporate responsibility. But when conglomerates are the design and products of committee cultures, we are rewarded with diffused unaccountably.

An unholy alliance between public equity schemes and enforcement governance, chokes out the upstarts. Once capital markets were based upon sound reasons - raising capital for productive ventures. Today exchanges often promote shams, where new IPO’s are more interested in “pump and dump” gains, than producing real products or valuable services. Real competition is seldom the objective for their corporate boards, just next quarters results, often massaged with creative accounting.

The way to look at this degeneration is to admit what it is - The “House of Morgan” has become the realm of mendacity. The machinery of illusion is found in the techniques of short selling, arbitrage and derivatives. The practices of futures, options, forward and swap contracts all have to do with manipulation. Even cross-collateralization, subordination and substitute surety bonds have an inhibiting effect on the task of raising capital for the potential competitor.

Big Business thrives on access to new money. Wall Street now exists to create imaginary fantasies that are just fleeting mirages. Technical analysis and momentum trading are based upon a disconnect from fundamental performance or business reality.

By being the gatekeeper, gratuity provider and protector for the anointed; the potential for serious and innovative competition is gravely reduced. Add to this equation the agent of extortion; namely, government and all their regulatory agencies.

Is this the formula for a Free Market? Hardly, but this is the substance that commerce now runs on, full throttle. Like a drug addict, those who consider themselves to be investors are really just gamblers in a casino where fees are the only warranty. The odds are all stacked for the few at the top, who are willing to pay off the croupier for entry into a Fibonacci betting system. Here the sign reads - only Ponzi’s need apply!

Commerce, for it to become good business requires it to be responsible to the customer. Monopolies by their nature are anti competitive. The model for success is to slash and burn to become an industry leader, and marginalize any remaining firms that remain in the same field. We are told that improved efficiency will bring better service at lower prices. Economies of scale promises inventive advancements - progress is our most important product . . .  Has that pledge been fulfilled?

The undeniable record of Big Business is one of domination over the economy for the enrichment of elites. Independent businessmen seek convergence with customers, while rotating boards and corporate executives want docile and compliant consumers. Free Enterprise exists only when the barriers of exclusion are lowered and the inspiration of the creative is encouraged. The model of the corporate economy has the current intent of regimentation for society, through the regulation of commercial markets. Only through opening the flow in the brilliancy of individual initiative, and the acceptance that profits for the bold risk taker is good - will we restore economic health to a sick society.

Essence

Big Business lynched capitalism
by George F. Smith

Business Week ran an article recently that provides a clear look at how government markets its influence to business. Southern: The New Power in Power focuses on Southern Company's new position as the "800-pound gorilla" of energy companies now that Enron is history.  [1]

"Southern Co.'s strategy in Washington", Laura Cohn writes, "hasn't been terribly different from that of other successful corporations: lavish millions on politicians and hire a battery of A-list lobbyists to make sure its voice is heard in the corridors of power." 

According to Business Week, Southern has seven political action committees which have spent over $1 million since 1999, and can boast of 'a pack of high-powered lobbyists' that includes the likes of Haley Barbour and C. Boyden Gray, two Republican big-wigs who break bread with the president.

Southern's investment pays dividends.  After Barbour rushed off a letter to Cheney in March, 2001, Bush did an about-face and claimed he did not favor tougher standards for carbon dioxide emissions.

While the Bush administration was denying that Barbour's note had any pull, environmentalists were charging Southern with manipulating the "political process."  Cohn's article concludes cheerfully, saying Southern is well-prepared to fight the battles in Washington with its "silver-tongued lobbyists" leading the charge.

As we've seen with Enron, buying political influence won't guarantee a company's success, but failing to buy enough of it, as Microsoft painfully learned, makes them tempting targets.

Is government refereeing conflicts -- or fixing fights?

Government has always interfered in the economy, but stepped up its meddling during the Civil War.  Its chief role was to accelerate business expansion, particularly the growth of railroads.   It bumbled along as a close friend of business until the Progressive Era of 1896 - 1916.  Then the relationship got intimate.

The conventional view of this period depicts the federal government coming to the rescue of a helpless public against the rapacious talons of Big Business.  The enemy, we're told, was the free market -- laissez faire capitalism -- which allowed predators like Morgan, Rockefeller, and Harriman to exploit the country for their insatiable greed.

The facts, however, tell a different story.  They show Big Business unhappy with an insufficiently regulated market because it fostered competition.

Believing they had a right to consumers' dollars without challenge, the top industrialists and bankers leaned on their buddies in the federal government.

At the turn of the twentieth century, almost everyone -- business critics and supporters alike -- thought bigness in business was both inevitable and good.  It was inevitable as one "dog" ate another through merger, and good because it was assumed that great size meant improved efficiency of operations.

Most observers also believed mergers would inexorably culminate in monopolies, enabling the big trusts to choke competition and dictate prices.  Thus, the country saw a swarm of merger activity from 1897 - 1901, as investors sought profits and businesses gobbled up competitors.  When mergers instead brought lower profits and greater competition, the merger movement collapsed.  [2]

The big trusts were slow to react and failed to anticipate new technology.  Despite the mergers, the number of manufacturing firms in the U.S. increased 29.4 percent from 1901 - 1910.  U.S. Steel saw its share of the nation's production of ingots and castings go from 62.9% in 1901 - 1905, to 52.5% in 1911 - 1915.  Standard Oil saw its market share drop from 1899 to 1911, the year of its dissolution.  [3]

Similar patterns evolved in other major industries -- automobile, agricultural machinery, telephone, copper, and meat packing.  The dominant firms could not eliminate competition or control prices -- with the existing tepid level of regulation.

"The Progressive Era was essentially put through by the Morgans and their allies in order to cartelize American business and industry," writes Murray Rothbard, "to take up more effectively where the cartel and merger movements had left off." [4]  Business was in the forefront agitating for federal intervention, working closely with reformers.  Regulation was designed by business, for business.  J. P. Morgan's people went "duck hunting" with Senator Nelson Aldrich at Jekyll Island, Georgia to grind out the details of the Federal Reserve System, now in its 88th year of funding government irresponsibility.  Business interests pushed for and obtained the Federal Trade Commission Act, which authorized a five-bureaucrat panel to declare "unfair" methods of competition illegal.

Business gave us the beginning of the leviathan state of today.   The government they wanted to shake hands with now has them paying A-list lobbyists to stave off their extinction.

References

1.  Southern: The New Power in Power, Laura Cohn, Business Week online, requires subscription)

2.  The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916, Gabriel Kolko, Quadrangle Books, Chicago, 1963, p. 24.

3.  Kolko, p. 37

4.  The Case Against the Fed, Murray N. Rothbard, Ludwig von Mises Institute, Auburn, Alabama, 1994, p. 86.

 
The truth is always the strongest argument
Sophocles

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