There's Something Happening Here

While enjoying a Saturday night social gathering this past weekend, a great conversation regarding our favorite concerts and performers struck a chord with me regarding today’s tidal wave of business events. It is well described by the lyrics of a 1967 pop music hit from Buffalo Springfield, “For What Its Worth,” written by Stephen Stills.

“I think it's time we stop, hey, what's that soundEverybody look what's going down.”

General Motors, the most iconic United States business enterprise of the 20th Century, was finally swamped by the numbers and declared bankruptcy on June 1st. Events this large don’t just develop in a matter of months but generally have their roots in decisions made long ago by people who have left the stage.

The business that substantially helped create a way up to the middle class for thousands of industrial workers was eventually dragged down by the costs of having thousands of people on and off the payroll who clung to the notion that it was GM’s responsibility to keep them in the middle class, regardless of market conditions.

“There's something happening hereWhat it is ain't exactly clear.”

I believe in capitalism as fervently as I believe that sunshine and flowers make the world a prettier place. But it seems that defending capitalism these days is a tough job. Yes, I believe that the system must have stronger oversight because simple uncontrolled greed will always create problems that can destabilize the economy. However, the Obama administration’s level of Federal financial activism, unprecedented in modern times, is changing the game in the banking and automotive sectors. But the same fundamental and immutable laws of commerce that dropped a rock on General Motors will eventually visit the government’s “socio-capitalist” hybrid that is being created right before our startled eyes.

“Paranoia strikes deepInto your life it will creep”

As a child I clearly remember the cold war battle of words between the United States and The Soviet Union. We were the world’s largest economy thriving on international business and reaping the rewards of having hard worked our way up to the highest levels of prosperity. We deserved the throne as kings and queens of capitalism. Those collectivists, communist Russians, were painted as a country that didn’t know how the world really operated, and they were paying the price with a drab lower class style of national life. Their premier, Nikita Khrushchev, famously said to capitalist states, “Whether you like it or not, history is on our side. We will bury you!" Their government directly owned many of the biggest businesses and capitalism was suspect or even banned.

Sometimes today I have to rub my eyes in disbelief as I read about the major stakes our government is taking in some of the biggest businesses under the cover of saving them. Is this a form of George Orwell’s predicted “Big Brother” scenario or a page from “The Communist Manifesto” written by Karl Marx? How things have changed in fifty years!

“There's battle lines being drawnNobody's right if everybody's wrong”

We also know from reading even a small amount of history that governments tend to overcompensate with a rather heavy hand. Here, in Los Angeles County California, we are down to just 14 of America’s Fortune 500 companies now. This morning I read about dialysis clinic operator, DaVita Inc., announcing a move from L.A. to Colorado because of an anti business atmosphere. Sometimes I wish that every newly elected official had to spend the first sixty days of their term in economics and business courses. They’d quickly understand that government can only remain solvent by helping to create conditions that support a healthy business community. This law is just as concrete as those legislated against heinous crimes.

“A thousand people in the streetSinging songs and carrying signsMostly say, hooray for our side”

This really doesn’t need to be a battle between the private and public sectors because sound business principles will prevail in the long term. You know them; something of value must be created, marketed and sold. Governments ride on the coattails of those who create. Despite many contrary attempts, the principle that governments can’t tax their way to prosperity has been proven.

Entrepreneurs engaged in enterprises of all sizes simply want to thrive and grow. Yes, the most ambitious among them can secretly yearn for a totally unfettered monopoly in their category, but even they realize there is a role for government regulations. They just want those rules to be clear, and have a steady hand that rests with a light touch on the tiller.

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