Thursday, January 07, 2010

End of a Decade - End of an Era

Imagine if, in 1910, the federal government had decided that everyone needed "access to affordable horseless carriages." What kind of cars would have been produced, and how much would they cost? Would innovation have sped up, or slowed down? This is not necessarily a question about morality, but rather one of economics, incentive and pragmatism.

What about the personal computer in 1980? If Congress had nationalized the PC industry back then, when a bulky 48 Kilobyte computer cost $3,500, what capabilities would the average computer have today, and how much would it cost?

I can think of two government-controlled institutions (or two types of institutions) that most Americans are familiar with at a personal level: The U.S. Postal Service, and the Departments of Motor Vehicles in each of the 50 states. I don't think I'm going out on a limb when I say that neither one of these is a prime example of innovation or efficiency. To the extent that the U.S. Postal Service is efficient, let's not forget that they have to compete today with FedEx and UPS.

Technically speaking, Freddie Mac and Fannie Mae were not initially owned by the government, but their existence came from a similar egalitarian mindset: that everyone should be able to afford a home. Reality has a funny way of catching up to Utopian ideals, and now our economy is on the brink of ruin thanks in large part to the good intentions that spawned these "Government Sponsored Enterprises."

When the Senate and House of Representatives pass their secret 2,000-page health-care bill, it will be analogous to a GM/Ford, IBM/Apple/Dell/Intel business morphing into something more closely resembling the DMV, the post office, or Freddie Mac. Even though history is full of examples of wealthy and powerful nations falling into decline due to forces from within, I still can't quite believe what I'm seeing.


Cathy said...

Great examples of what would have happened to innovation if government had intervened.

Even as I'm writing this comment, I'm watching John Stossel on Fox Business news.

He's using Ayn Rand's Atlas Shrugged as the conversation starter.

Fascinating panel and audience participation.

One of the panelists is the CEO of the 9th largest bank in America. Deals mostly with small businesses. He says that given the current trend we will be a third world country in thirty years.

They tried to refuse TARP - but were forced to take it at a cost to them of 250 million dollars.

He allowed that there will be an uptick in the next few years, but it will be temporary.

As a panelist pointed out - what's happening today in terms of government intervention is eerily similar to Atlas Shrugged.

November can't come soon enough.

Keith Wilson said...

A truly insightful, well-thought out post. You have cut right to the heart of it, made it crystal clear, and scared the hell out of everyone.

Fantastic post, describing our massive screw-up.

Is there salvation in our future?
Not if Barney Frank, Nancy Pelosi, or Barry O have their way. They are termites chewing away at the pillars of our democracy.