Two Basic Free Market Principles Die in Recent History
The first was the notion that when you put money into the hands of the wealthy, it will be spent or invested productively. The investing class is sitting on a grown cache with some estimates as high as five trillion, and doing nothing with it. A local conservative activist told me a year or so ago that they are “on strike” against Obama. The more conventional explanation is that they are waiting for consumers to have more money to spend – a tall order when you’re sitting on the money yourselves.
The argument is of course that they need more money to feel “comfortable” about investing. It reminds me of an old political cartoon where the King and his advisers are sitting at a table looking over the multi-angle photographs of Humpty Dumpty, and the King proclaims, “Gentlemen, this simply means I need more horses and more men!”
More locally, the North Coast Journal has an excellent article out about the progress, or lack thereof, of local broadband stability. Within the first few paragraphs I found this gem:
There’s plenty of space on the new line for more companies to sign on. Mary-Lou Smulders, vice president of strategies at IP Networks, said pairs of fiber optic lines remain available for long-term lease. “We could lease those for a very inexpensive [price], and that would be revenue for us,” Smulders said. “But we have chosen not to do that. We respect the fact that our anchor tenants paid not a cheap price.” Any new tenants will be charged the same amount, she explained.
I don’t know if your experience was the same, but in my college it seemed that the microeconomics courses were always taught by conservatives while macroeconomics was taught by liberals – probably having something to do with figures like F.A. Hayek proclaiming that macroeconomics don’t even exist. But the mantra in microeconomics was that absent artificial intervention from government, prices were dictated by supply and demand. I think Ms. Smulders has pretty much put that one to rest. The liberal economists often claimed that once economic entities became very large, they altered the rules at the expense of free markets – something also vehemently denied by F.A. Hayek who opposed even anti-trust legislation with the argument that even very large corporations can’t alter the “fluidity” of market forces by nature of their size.
Absent from Hayek’s analysis was the exercise of power. Economic feudalism. Ms. Smulders almost makes it sound like a moral obligation to deny the smaller entities access at a price that is affordable – when she admits that it would benefit her own company! Why? Because the big guys demand loyalty.