Have A Nice Warm Bowl of Mixed Economy Soup
The Undercurrent’s latest article reviews perhaps the most fundamental force in Capitalism, who’s role and significance is also unfortunately the most demonized, underrated and ignored by our population, the profit motive.
Many people believe that without government regulation, pharmaceutical (insert any market) companies will dupe consumers and cut corners in order to make a quick dollar. They believe that the regulatory restrictions imposed by the Food and Drug Administration (FDA) (insert any government agency) are necessary to reign in companies whose greed would otherwise lead them to engage in a range of unscrupulous practices.
This view fails to recognize that the free market already has a means of rewarding integrity—the profitability of a good reputation.
[parenthetical emphasis added to make statement universal to any market or bureaucracy]
Laws which are written by those ignorant of this fact, designed to enforce morality on individuals, result in tremendous economic destruction and waste. Government essentially taxes citizens in order to fund the multitude of regulatory agencies that sink their fangs into the necks of businessmen, in order to keep them from taking (what they consider) unethical or immoral action. This tremendous undertaking, one which aspires to micro-manage millions of people in their endeavors ignores the fact that the motive of profit will eliminate wretched or incompetent individuals, and in a manner which is morally, economically, and justly superior. Individuals who make poor, short-sided or unethical decisions detriment the value of their barter, and more importantly, their reputation. Detract value from your product, or tarnish your reputation; and you won’t last very long in a free market.
Not only does it cost tremendous amounts of money to fund the variety of big-brother task forces, the larger, and more inconspicuous costs are the wider affects on the markets and our economy as a whole.
Last week’s grounding of American Airlines flights are a perfect example. The FAA induced groundings were due to a breach of the regulations pertaining to wiring standards, which obviously are important with regards to safety. The fact that most fail to see is that American Airlines already has a tremendous incentive for their wiring to not only be adequate, but to be as close to perfect as they can afford. In an industry already plagued by the remnants of 9/11, fuel costs, and our lazy economy, a catastrophic event and it’s associated overhead could easily send an airline limping down the road to their demise.
Why would anyone think that a successful airline could afford to be ignorant of the need for safety or the potential repercussions of failing to achieve it?
Instead, our government thinks that airlines need “incentive” to maintain safety, and those incentives come in the form of regulations, fines and if needed, seizure of their ability to operate. In other words, you don’t have a right to run your business as you see fit, because we’ve abandoned property rights in this country. Besides, we know how to run your business better than you do, so you’ll do it our way or cease to exist.
So, this past week (just like thousands of times before) the FAA initiated force (absent of any constitutional right to do so, or even to exist) against American to “influence” them to adhere to the agencies standards. The result was a grounding of over 3,000 flights, displacing almost half a million passengers.
In addition to the operational costs for the mere existence of the FAA, the financial impact of this “measure of caution” on the market (those who’s purpose is to make money, not destroy it) are astronomical. This snippet only summarizes the losses of a few (of the thousands) effected:
Mike Boyd, an airline consultant in Evergreen, Colo., predicts that direct costs to American will top $100 million, including lost ticket revenue, hotel rooms and food vouchers for stranded passengers, overtime pay for employees, and the additional cost of getting crew members to the right places.
And that doesn’t count the intangible cost to the brand. An estimated 3,300 American cancellations left travelers frustrated, while news reports about the Federal Aviation Administration’s questions about American aircraft safety continued for days.
Mr. Boyd figures the airline stands to lose another $150 million in future bookings by travelers so angry that they either refuse to fly or choose other carriers.
Officials at the National Business Travel Association, a trade group for companies in the corporate travel industry, estimates companies spent between $25 million and $40 million in extra airline tickets, hotel rooms and other travel expenses, based on feedback from association members.
Travelocity Business, a firm that arranges more than $800 million in corporate travel, estimates that a canceled flight costs the typical mid-level manager $1,000 in lost productivity. In addition, the Southlake-based company’s clients wound up paying, on average, $600 per traveler for rebooked flights, hotel rooms and extra meals on the road during the past week.
Unhappy customers pushed call volume to the agency up 29 percent, according to Lesley Harris, Travelocity’s president, and travel delays were running, on average, 1.8 days.
Cancellations and delayed flights have become a familiar problem for business travelers these days, between bad weather and congested airports.
But last week’s disruption went far beyond what happens when a storm affects flights. Bad weather is usually confined to one area and one day, Ms. Harris pointed out, while “this has paralyzed many more locations across the country.”
As cancellations continue, reaccommodating passengers gets more difficult because seats on other flights have already been taken by folks who got bumped earlier.
Some frustrated travelers began saying they’d settle for any flight within a five-hour drive of their planned destination, Ms. Harris said.
Dallas-based 7-Eleven Inc. was one of the local companies affected by the flight problems. American’s cancellations came just as one of its regional 7-Eleven University sessions began in Denver.
Several suppliers weren’t able to get their entire teams to the event, where new products are unveiled, said 7-Eleven spokeswoman Margaret Chabris, who managed to get a last-minute seat on United Airlines after her American flight was canceled Tuesday night.
And although cancellations didn’t prevent the 800 7-Eleven operators and corporate managers from attending, they certainly presented a distraction.
“There were a lot of people on the phone to their offices and to the airlines trying to figure out how to get home,” Ms. Chabris said.
Meanwhile, Mike Garcia, who sells western-style clothing and accessories, estimated that the two-day delay getting back to Oakland, Calif., cost him $12,000 in missed business.
Mr. Garcia was in Dallas with the rest of Sulphur Springs-based M&F Western Products Inc.’s sales force for a company meeting. Most of the sales people got stuck at Dallas/Fort Worth International Airport as they tried to return home.
While some of Mr. Garcia’s appointments might be rescheduled next week, “that just means my next-week appointments are going to get squeezed or pushed forward,” he said.
“I can’t get that time back,” he said. “It’s just lost.”
There you have it, taxpayer funded tampering in the affairs of a major player in a wobbly industry, resulting in loss of time, money and reputation. American’s brand, a result of billions of dollars in productivity and successful business practices, will suffer because “we the people” elect an overzealous group of capitalist-hating politicians, who then enable an illegitimate bureaucracy dedicated to resolving “problems” which, by virtue of the profit motive, would naturally take care of themselves - all for the “public good”.
To stomp irony into this situation, a stampede of business hating collectivists will no doubt seize this opportunity to slam Capitalism and business, lamenting the need for more regulation as a remedy to correct the deficiencies of the “free market”.
A mixed-economy, our dangerous concoction of a population ignorant of economics and individual rights, and with altruistic underpinnings, shows no better use-case than this scenario.
