Wednesday, November 12, 2008

Let Them Fail

In a capitalist society, there are great risks and great rewards. America's capitalist nature is a result of the outlook and mindset of the people who live here: it's in the genes. People from all over the world chose to come here, usually at great peril to themselves and their families for the possibility of great opportunity. They left their more risk averse friends and relatives back in the homeland, bringing with them little else besides optimism, faith in their ability to succeed, and a propensity to throw the hail mary pass in hopes for a big return. This is what we are made of. We are a nation of doers, always striving, and with great expectations.

This expectations thing is part of what separates our overall outlook from our European friends. Most of Western Europe falls under the umbrella of a Social Democracy: nanny states with high taxes, and cradle to grave care for all. Under this system, the benefits to all citizens are more equalized, but innovation is suppressed. Large amounts of the countries' GDPs are spent on government programs, and people do not expect much upward mobility. Denmark recently topped the list of having the happiest people in the world. It turns out that their expectations are lower, so they do not face disappointment as readily as in the USA, where one often has to fail in order to succeed.

Most successful people, particularly business owners, will tell you that they have failed more often than they have succeeded. What sets them apart is their ability to get back in the saddle, put everything on the line, and try yet again to attain success. They learn from their failures, and consequently their innovative skills are honed, so each time they fail, they learn what to avoid and how to best move forward. This very American concept needs to be applied to the Big Three Automakers.

The Big 3 are clamoring on the Hill for more government funds from the $700 bailout bill, in addition to the $25 billion loans they just received. The bailout was specifically designed to buy up troubled assets and infuse capital into financial institutions to grease the credit market and get cash flowing. There was no part of the bill designed to assist any other industry or group.
The fact is, the Big 3 are losing money at breakneck pace due to lack of innovation, and lack of ability to control overbloated union benefits. The taxpayers should not support a bailout of an industry which does not learn from its mistakes. This would be tantamount to a handout to unions and inept politicians from Michigan. Indeed, there are upwards of 3 million people associated with the auto business in some way, but if the Big 3 were to fail, either big foreign automakers or other more innovative companies would move in to provide jobs for the unemployed. Nature abhors a vacuum, and this is especially true in a capitalist country. To an entrepreneur, a vacuum is an opportunity.

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