About
25 years ago while on vacation, my wife and I spent a hot and humid summer day
in New York City (NYC). Our goal was to
explore as many Manhattan nooks and crannies as possible. Eventually, as most tourists do, we strolled
into the Chinatown neighborhood when something happened that oftentimes happens
on hot and humid NYC summer days; it suddenly started raining.
Hot
and sweaty one moment earlier, we were now quickly cooling off thanks to a
downpour of rain splattering on our heads and soaking our clothes. We were ill-prepared for this rain; however, our
quandary was brief as countless solutions immediately presented themselves. In less than two minutes and two seconds, there
were brigades of street vendors offering umbrellas for sale.
All
of us needing an umbrella were willing to pay a premium price but it wasn’t
necessary because competition among these street vendors was intense. Waving their umbrellas for sale, they sang
their low prices in non-orchestrated unison in what seemed like a big band performance.
It
didn’t take long to decide which vendor would get my business. I pointed to one and told him I’d buy one umbrella,
pulled out my wallet, and completed my purchase. My wife and I were now spared of further
spoils from this summertime downpour, thanks to these small business capitalist
NYC umbrella street vendors.
What
an example of small business capitalism at its finest. It gave me a better understanding and
appreciation of Adam Smith’s “Invisible Hand” and the economic law of supply
and demand than my college economic professor’s lecture 15 years earlier.
Fast
forward to the present, I wonder what would have been the outcome that day if a
government program was my only solution.
Such
a program would have been the result of a study determining how best to respond
to emergency umbrella needs. Consultants
would have been hired to conduct this study.
Purchasing the umbrellas would have followed a complicated and lengthy bidding
process but only after stringent and politically-influenced product specifications
were lobbied for and determined.
Additionally,
eligibility workers would have been hired to determine who among those needing
an umbrella qualified for taxpayer-subsidized ones at a lower price, or perhaps
qualified for a “free” one.
This
summertime shower would have been long gone before umbrellas arrived on the
scene to save our day.
This
decades-later Monday-morning quarterback reflection made me realize how capitalism
fueled by the economic law of supply and demand does the most efficient job of delivering
cost-effective and best solutions for taxpaying consumers. Granted my story is a simple example
demonstrating this so you may want to use your own more-complex scenario to see
if you come to a different conclusion.
We’re
living in an era that may be recorded in our future history books as the 21st
century “Make American Great Again” continental divide. On one side are angry
Americans and political leaders who are now underdogs. Happy Americans and other political leaders
now top dog and in charge are on the other side. They want to do things different than how things
were done the past eight years.
Each
side is at intense odds with the other about what’s the best way to make America
great again. A competitive tug-of-war is
taking place between two broad-based approaches. One approach advocates government program
solutions to fix our great nation’s socio-economic maladies while the other advocates
private marketplace solutions.
Government
solutions fail miserably; they’re terribly taxpayer expensive, reactionary,
challenging to end when they’re no longer needed and subject to the perils of
political influence. Pick your favorite
government program and test it for yourself.
Like
affordable housing, for example. I
recently wrote an op-ed article appearing in the Sacramento Bee asking the
question of what’s the solution to California’s unaffordable housing
crisis. I gave examples of how government
affordable housing programs are not efficient or cost effective.
One
example was of the State of California Department of Housing and Community
Development’s helping hand in a new $15.8 million affordable housing apartment
complex that’s now home to 30 lower-income facilities at an average cost per
family of, ahem, $526,667.
In
response to this article, I received an e-mail from a state housing official privately
sharing another example even more mind-boggling. He told me about a government affordable
housing rehabilitation project in San Francisco, offering views of the Golden
Gate Bridge, costing about one million dollars per unit.
Why
do we need a Small Business Administration government agency? Do you think Mark Zuckerberg of Facebook fame
created this multi-billion-dollar company with seeds planted from attending an SBA
workshop or funded by an SBA-guaranteed loan?
Why
do we need any government-guaranteed loans?
What’s
the cost of these programs to taxpayers and who are the beneficiaries?
Taxpayers
or a few lucky souls like institutional lenders and borrowers having the
wherewithal to borrow that may just take a little extra effort without a
government-guaranteed loan?
Private
marketplace solutions are clearly the best.
They’re the most cost-effective way of getting the job done. Have you ever stood on your front porch
holding your newly-arrived package from Amazon shaking your head in disbelief
how quickly it arrived because you just ordered it the other day?
Adam
Smith correctly figured this out over two hundred years ago and it’s time for
us to rediscover and embrace it once again.
Capitalism is nothing about which to be embarrassed. We should be its biggest fan just like we are
for our favorite professional sports team.
Granted,
there are some public goods where private marketplace solutions may not do the
best job of meeting our needs. Providing
a militia to defend our borders and interests around the world comes to
mind.
But
such a public goods laundry list is smaller than we’ve been led to believe, meaning
most of our public good needs are more efficiently and cost-effectively met
with private marketplace solutions.
Just
like that hot summer day in NYC Manhattan about 25 years ago when a sudden
summertime shower appeared out of nowhere, and my wife and my needs for cover
were immediately and cost-effectively met by small-business capitalist umbrella
street vendors.
We’ll
make America great again by embracing capitalism.
Pax Domini sit semper vobiscum