There are perils to empowering the state to pick economic winners and losers
In August 1923, with the unexpected death of President Warren G. Harding, Vice President Calvin Coolidge became the 30th president of the United States. At that time, the gregarious Harding’s presidency was mired in scandal. For many, having the notoriously taciturn Coolidge — who was raised with traditional New England Puritan values — in the White House brought a sense of relief and stability. Seemingly uninterested in international affairs, the Coolidge administration was almost singularly focused on economic growth.
A member of the Old Guard Republicans, Coolidge believed the role of government was not to interfere in the affairs of business. He quickly replaced staff at the regulatory agencies of the day, like the Federal Trade Commission, removing people who wanted to “police” industry and putting in their place administrators who would support and bolster American businesses.
Perhaps ironically, as he was married to a woman who taught the deaf, Coolidge himself was a man of very few words. So much so that he was often referred to as “Silent Cal.” Once while at a party in Washington, D.C., the hostess approached him saying, “You must talk to me, Mr. President. I made a bet today that I could get more than two words out of you.” To which Coolidge replied: “You lose.” And so it came to pass that Coolidge became known for his brevity and wit.
It comes as no surprise then that some of his well-chosen words would become an indelible part of America’s business history. A master of the succinct, when addressing the American Society of Newspaper Editors in 1925, Coolidge said:
“It is probable that a press which maintains an intimate touch with the business currents of the nation is likely to be more reliable than it would be if it were a stranger to these influences. After all, the chief business of the American people is business. They are profoundly concerned with buying, selling, investing, and prospering in the world.”
Coolidge’s quote has appeared in nearly every economics textbook ever written since. Beyond that, hundreds of books have been published about what can and should happen at the intersection of government and business. Some folks — mainly socialists — believe that the “chief business of the American people” is government. These people have bastardized the quote saying, “the business of government is business.” This is not what Coolidge said, and it is certainly not what he meant.
Coolidge meant what he said. He said that the business of the “American people” is the buying, selling, investing, and creation of wealth. The key point is that through commerce, the American people were responsible for picking winners and losers; which businesses would thrive, and which businesses would fail. That power was the exclusive province of the people. Not the government.
Logic follows that if you take people who understand nothing of business and put them in government, fairly soon you will have no businesses, only government.
Enter Brandon Johnson. To be fair, it should be acknowledged that Johnson inherited a mess. The administration of Lori Lightfoot oversaw the hasty exit of more Fortune 500 companies from Chicago than any other mayor. Anywhere. Ever. The departures of Tyson, Boeing, McDonald’s, Citadel, and others means Chicago, and its people, are all poorer. That’s all on Lori. Sadly however, from everything we see so far of Johnson’s short tenure as mayor, things will only continue to get worse.
Johnson’s greatest misstep is failing to acknowledge the problem. This is, given his socialist leanings, understandable. Johnson believes in the concept of “stakeholders.” In Mayor Johnson’s worldview, companies exist not to produce a return on investment for their owners or shareholders, but rather to service the community at large.
The role of government, according to Johnson, is to make sure that all companies are appropriately servicing the community. Those businesses which “service the community”, according to the government’s wishes, are rewarded. Failure to abide by government edicts results in strict punishment and perhaps closure. As such, for Johnson and his ilk, a business leaving Chicago is a business abandoning its community and its responsibilities thereto. To these companies Johnson says, “good riddance.” Johnson’s ignorance is only eclipsed by his arrogance.
In the next four years we can expect to see from the Johnson administration much of what can be called “The Grift”. The Grift is all about the government, not the people, picking winners and losers. Its function is straightforward: Through extraordinary regulation (fees, taxation, work rules, etc.) the government creates a hostile business environment while simultaneously collecting exorbitant taxes from the populace. Then the government says: “We are hereto support new businesses. Just fill out this grant application and we will determine if you are worthy.” Lastly, with great fanfare the government proclaims: “We gave millions of dollars to help small businesses!” which will then be repeated for weeks in the corrupt media.
Naturally, Brandon Johnson’s aides in the mayor’s office get to determine who receives a grant, and who doesn’t. A Polish immigrant wants to open a pierogi stand on Milwaukee Avenue. No, we don’t need one of those. An Irish teenager wishes to start a construction company. We don’t think so. Some guy of Mexican heritage opens a security company. Sorry, not in the cards…. Well… wait. Just exactly how politically connected are you? If your brother is the alderman you probably qualify for special treatment. Black-owned nail salon? Yes! Korean owned nail salon? No.
The Grift is corruption on every level. However, even if it were possible to put the corruption aside, it would still be a horrible idea to allow the government to pick winners and losers. The unavoidable problem with The Grift is that it makes taxpayers to become investors in the business without having any equity stake. If the business succeeds its owner will collect all of the rewards, yet the taxpayers get nothing. If the business fails the taxpayers get nothing. This means the citizens share in the risk without any potential for reward.
Whereas Johnson possesses exactly zero business knowledge, we can expect Chicago’s business climate to continue to deteriorate. Of course, crime is a factor. Transportation is a factor. Taxation is a factor. State regulation is a factor. None of that is in dispute. But there remains an underlying fundamental flaw in Johnson’s socialist agenda. Wherever the government is picking winners and losers, this government is violating the first law of business. Soon there won’t be many businesses to govern.
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