Xin Chào from Nha Trang,
Where did we get the idea that businesses and sectors badly affected by external forces need to be propped up (rescued) by the taxpayer?
the invisible hand
The capitalist system has many shortcomings – and aren’t we seeing those in their grim profusion right now? – but one of the great advantages of the system is that it shakes out sectors and industries, by the mechanism of Adam Smith’s famous ‘invisible hand’. Losers go by the wayside and what’s left is an efficient operation of the system. No other player needs to intervene to establish efficiency.
That means that entrepreneurs – of any size, of any ambition – knowingly take the risk that their enterprise will fail. In the event of failure, the capitalist system allows them to silently exit the market, to disappear off the face of the earth. Survival of the fittest is not quite so callous when you know about the possibilities at the outset.
During the pandemic-induced recession, innumerable businesses are suffering. Take the example of the hospitality industry which sets itself up to cater to the tourist trade. It – like any other industry – is not a single entity but an agglomeration of many thousands, making individual decisions, presumably in their own interests. They are doing exactly as the system encourages; taking a risk with their investment in the hope of a future payout. When a major external shock comes, their business could feasibly be in trouble. They can’t expect taxpayers to sustain them through to the other side? They can’t argue a special case because they are offering a service.
Case in point: Nha Trang is Viết Nam’s Gold Coast. It has dozens of high-rise hotels breasting the sand, separated from the beach by a road and a linear park. Countless businesses here rely almost entirely on the tourist trade. There are normally tens of thousands of visitors here all year round and normally tens of thousands of hotel units, along with all of the other dependent enterprises. This is the crucial point: the businesses dependent on the tourists are not organic; not a force of nature; not something governments need to worry about (except when they behave badly).
the risk they took
Now, with international travel barred by government decree, there is a fraction of the usual tourist movement. Many hotels are closed and many of those many never re-open. The same picture obtains in almost every country. So, what? That’s the risk they took. When demand drops in a pandemic, what right does any private business have to put out their hand?
This applies to any industry, surely. The only reason governments should prop up a business is to maintain the service (for the good of society) or sustain a workforce (for the good of society). The business is surely dispensable. That’s the way the system works. By participating in the market, they took a calculated risk and the end result, whilst not their own doing, was a perfectly predictable outcome. Taxpayers should not be required to bail them out.
privatising the benefit, socialising the risk
So, how did we get to the point that such bailouts are expected? It’s a fundamental ignorance of the way governments function, and their raison d’être. Governments are not there to fund failed businesses. The only subsidies which should exist are for industries just trying to get on their feet (infant industries) or for essential services. Everything else represents a risk that entrepreneurs were willing to take. Anything else and we are privatising the benefit while socialising the risk. That’s an aberration of the capitalist system.
We need governments to concentrate on redistribution, on societal reform where needed and on prudent governance rather than offering subsidies to failing private businesses. And we need education of civics to ensure that ignorant majorities or greedy bastards don’t have the ability to pull the wool over our eyes. Otherwise, we are headed the same way as that failed state, the US of A. Let’s not.
Hẹn gặp lại from Nha Trang,
Greg
Other photos from thereabouts
