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Politicized Capitalism


Politicized Capitalism.

Students of the free market will recognize the concept of “Politicized Capitalism” or “political entrepreneurs” , the idea that “entrepreneurs” receive their venture capital from the taxpayer.  Political entrepreneurs and their ventures almost always result in inefficient firms that cannot compete or stay alive without subsidies.  Hence, while operating in the free market environment, they are a plague that brings the system down.  These were true “robber barons”, if such a concept truly exists (which it does not). 

They are in stark contrast to the more efficient entity, “market entrepreneurs” or “market capitalism”, which works within the constraints of the free market to create, produce, invest, and change our world for the better.  Think Bill Gates, Vanderbuilt, Schwaab, Andrew Mellon, James Hill, Carnegie, Rockefeller, and others that gave us the great railroads, US Steel, Standard Oil, productive steamships, automobiles, and tech world that allows me to write this email.   

Government didn’t do this, the free market did.  No bureaucrat or politician conceptualized the idea that railroads should be built more efficiently, with better equipment, land surveyance, and reduced costs.  In fact, that is the primary difference between political entrepreneurs and market entrepreneurs:  reduction in cost.  Those engaged in subsidies have no incentive to reduce costs (AMTRAK, the US Post Office anyone?), while those who have to survive by performance must make every effort to reduce costs…and thus why the leave Blue States and/or the US altogether, to avoid punishing costs. 

Burton Folsom, author of “The Myth of the Robber Barons” provides us detailed historical examples that contrast the two.  For example, what you think you know about the history of railroads in our country is all a lie.  We were taught by government agents disguised as teachers that the Union Pacific and Central Pacific railroads was a significant achievement, the ‘Transcontinental Railroad.’  The only “achievement” here was that it was ever completed to begin with.  Subsidized entirely by the taxpayer, the two railroad developers engaged in corrupt practices, cut corners, used cheap materials, and continued to just “build track” until they were finally ordered to complete the project by the same government that was funding them.  Since they were paid by the amount of track and rail they laid, the incentive was to lay track for the sake of laying track.  Over hills and over dales and never the shortest distance between two points, the track was planned to go on indefinitely thanks to the incentives in place.  After completion (and what you were never taught), is that the two railroads were not operative.  Most of the track and rails needed to be re-accomplished due to shoddy workmanship and the danger the poorly built rail system was to trains and passengers. 

In contrast, James J. Hill used the free market to create The Great Northern Transcontinental railroad, a railroad you probably never heard of, which is another illustration of how awful our school system is.  This is the man that transformed railroads and our nation, not the Union/Central Pacific fiasco.  What Hill did for rail is not studied in our Publik Skuls or taught by socialists, but his effort created the most efficient and cost-effective railroad in America in his day.  He competed against the nonsense of the Union and Central Pacific and defeated them in efficiencies, cost, and service.  Along the way, he helped develop the Pacific Northwest, created scores of complementary businesses and associative markets; he even increased our nation’s trade with Japan.  He helped create  wealth and entire cities, increased our nation’s GDP and all while the political entrepreneurs abetted by congress, created nothing but graft, shoddy work, and a railroad system that eventually went under.

Capitalism’s bad name comes from government intervention, such as political capitalism.  Market capitalism and those entrepreneurs who engage in it, ought to be celebrated and encouraged (via government withdrawal) and are the real reason why our nation became the success that it was. 

Instead, we get more of the same failed Socialist system that has been creating misery ever since they gained power.

Fil “Filvis” Rechnitzer

  1. mike drapr
    July 25, 2009 at 3:10 pm

    Enron, Washington Mutual, A.I.G., Lehman Brothers, GM, Wachovia, et al. – the best and the brightest of free market capitalists. The corporate/capitalist meltdown of 2008 was caused by free market greed by your captains of industry. ’nuff said.

    Of course your “history” forgot to mention that the Northern Pacific Railroad was propelled to success by Federal government charter and huge government land grants.

  2. July 27, 2009 at 6:23 am

    Absolutely incorrect on all counts.

    What an inane thing to say. Far from it. Even government officials have agreed that it was government intervention that caused the current crisis. You might want to research just how many government agencies regulate housing and financial markets, but to say that an unregulated free market caused this is fantasy. And since you’re not following the news, here’s the latest: the House Committee and Oversight and Reform just reported (admitted more like it) that government did indeed cause the current crisis. http://www.humanevents.com/article.php?id=32615. Since the Congress is run by Marxists, this came from a committee led by socialists. Your attacks against free market financiers ring hollow and are the standard typical nonsense that the 5 people who still read the NY Times can expect to get… always left and always wrong (Note: Krugman, the NY Times discredited “economist” RECOMMENDED a housing bubble to get out of the Clinton-era tech bubble).

    Not sure I understand what is wrong with greed or profit margins. If you have an issue with individuals making a profit, then you are by definition a socialist/Marxist. Why not move to the wonderful “utopias” of collective ownership such as you’ll find in N. Korea and Cuba? Even Communist China doesn’t buy that anymore.

    On James Hill, once again, inaccurate, a moot point, and doesn’t contribute to the conversation. You’ll note that the commenter provide no references, but I did. James Hill BOUGHT the PREVIOUSLY subsidized St Paul and Pacific railroads from Dutch bondholders..critics thought he was crazy and dubbed the sale “Hill’s Folly.” (Folsom; pg 27).

    As far as land grants, that’s what THEY ALL DID. The government owned the land to begin with…what a completely disingenuous comment. But wherever he got the land from is not the issue. It was his risk, his investment, and his approach to ensure the line prospered and was successful that was key. More importantly, his start up money and other initiatives were at his risk, not the taxpayer. In fact, the taxpayer did not pay one dime for “Hill’s Folly” since the government already had the land.

    More on Hill:

    “…As Hill built his railroad across the Northwest, he followed a consistent strategy. First, he always built slowly and developed the export of the area before he moved farther west. In the Great Plains this export was wheat, and Hill promoted dry-farming to increase wheat yields. He advocated diversifying crops and imported 7,000 cattle from England and elsewhere, handing them over free of charge to settlers near his line. Hill was a pump-primer. He knew that if farmers prospered, their freight would give him steady returns every year. They key was to get people to come to the Northwest. To attract immigrants, Hill offered to bring them out to the Northwest for a mere $10.00 each if they would farm near his railroad…To make sure they prospered, he even set up his own experimental farms to test new seed, livestock, and the use of fertilizers.” (Folsom; pg 27).

    Folsom, Burton W., Jr. “The Myth of the Robber Barons: A New Look at the Rise of Big Business in America.” Young America’s Foundation. 1987. VA.

    This is just a small paragraph that nowhere near covers the accomplishments Hill brought with his railroad. Again, whole cities and international trade were the result of his efforts…while the UP/CP went bankrupt.

    While Hill was doing all that, the political entrepreneurs at UP/CP were “just laying track”… developing nothing but waste and graft, and in the end, Hill’s railroad was a commercial success, while allll the other “AMTRAKs” of their day went out of business.

    As far as your “history” goes, your comment is source-less and ridiculous. Hill’s railroad was not a success because of a federal land grant… I guess in your world view, a federal land grant equates to instantaneous success…no hard work was accomplished whatsoever and success was just “deeded” to Hill, because of the land and the land only

    Utter nonsense.

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