Review: "Capitalism’s Biggest Threat..."

I found an interesting article today from the Mises Institute, called Capitalism’s Biggest Threat Isn’t Inequality—It’s Artificial Entrepreneurs, written by Alexis Sémanne. The title was intriguing to me! I had just been considering some of the writings of Ron Paul, about Austrian and Keynesian economics.

I naturally tend towards the Austrian method, as I have read much of The Road to Serfdom, and the ideas generally resonated with me. I know that not everything is so cut and dry, but it's the ideas and the positive effects that they can have.

In any case, I came across this article. I'm not going to argue about whether or not capitalism is good or bad, or the the real or perceived effects. But I want to focus on the entrepreneur.

First off, what does entrepreneur mean? I like to look up the etymologies for words, not just the dictionary meaning. We can find an entry for entrepreneur on etymonline.com:

1828, "manager or promoter of a theatrical production," reborrowing of French entrepreneur "one who undertakes or manages," agent noun from Old French entreprendre "undertake" (see enterprise). The word first crossed the Channel late 15c. (Middle English entreprenour) but did not stay. Meaning "business manager" is from 1852.

So our usage, relating to business, is from 1852. The idea of entrepreneuring seems to be more of the idea of an undertaking. Interestingly, the first linking entry on etymonline.com is enterprise:

early 15c., "an undertaking," formerly also enterprize, from Old French enterprise "an undertaking," noun use of fem. past participle of entreprendre "undertake, take in hand" (12c.), from entre- "between" (see entre-) + prendre "to take," contraction of prehendere "to catch hold of, seize" (from prae- "before," see pre-, + -hendere, from PIE root *ghend- "to seize, take"). Abstract sense of "adventurous disposition, readiness to undertake challenges, spirit of daring" is from late 15c.

So it seems that these two words, entrepreneur and enterprise, are quite similar and related, possibly even descendents of the same word.

So an entrepreneur is someone who undertakes a task. They put it "in their hand." I can almost imagine someone riding a horse, putting the reins in their hand, and utilizing the beast to get to where they want to go.

Artificial Entrepreneur

So what is an "artificial entrepreneur?" From the Mises Institute article:

...there are also artificially successful entrepreneurs who, by contrast, win—not through merit or creativity—but because they receive government favors—subsidies, protective regulations, tax breaks, or public contracts. Their success is politically-engineered, not market-earned.

I think that this is a powerful statement. But the author goes on:

This distinction is vital. When too many winners are artificial, people begin to lose faith in capitalism itself, moving toward what worsens the system in the first place.

So the artificial entrepreneur, according to this article, and the definitions I introduced above, is one that undertakes a task by use of subsidies or government favors, not by merit or creativity.

Remember, these are ideas that may or may not be aptly applied to a given situation. So take a moment to consider the idea of this artificial success, subsidized and not necessarily creative or exemplary of merit. Just mentioning this causes my mind to reflect on ways that a project manager might ensure a project is successful. The project manager must be in good communication with the client(s) and stakeholders, to ensure that the direction and utility of the project is good. The project should have milestones that can be tested by critics and users, to ensure that the project hasn't departed from actually becoming something that is needed.

How crazy would it be for a project to be continually subsidized, but never tested in the free-market of ideas, ensuring that it actually solves a problem? Or, for this funding to come in, paying for new features, when not one single user or paying customer has had any inkling that such a feature would be useful?

Real Entrepreneurs

What makes an entrepeneur real, according to Sémanne? He states:

...naturally successful entrepreneurs ... innovate, take risks, and satisfy consumer needs in a competitive marketplace. They create value, and their profits are a reward for serving others.

That sounds about right, doesn't it? A real entrepreneur innovates. Takes risk. Satisfies consumer needs. Creates value. These are all things that I would like to do. It is a terrible feeling when your hard work doesn't actually help make things better for anyone. Conversly, it's a great feeling, knowing that you've grown a relationship, and helped someone have a better life.

A True Market

If you had wondered what the libertarian view of a true market is, Sémanne gives a short description:

In a true market economy, success is fluid. Consumers are the ultimate judges. They “vote” with their money, rewarding the best and punishing the worst. But when governments start picking winners, this dynamic collapses.

So a true market can't be "centrally planned." The author gives the example of Solyndra, you remember that name?

Take the case of Solyndra—a US solar energy firm that received over $500 million in government loans before collapsing.

One word to that, whoops.

But here is an interesting technique that I've been hearing about recently (although I'm sure it's not a new idea or practice by any means):

Or Elon Musk—whose companies combine innovation with massive state subsidies and public contracts.

Where would you like your tax dollars to go? Maybe helping the government fund something is what you'd like to do. But, maybe not?

Not every entrepreneur is going to get government funding. And that's not a bad thing. It seems like it's better to know your product or service is good, because clients are calling you. Not because it was subsidized for however long of a time.

Postcluding Ideas

Well, take it for what you will. But I think the bottom line is, it's important for the human soul to work hard in order to offer something of value to another person, in return for something of equal value. And whatever stifles this process should probably be examined for legitimacy.

This is important because there are many many skilled and/or motivated people out there! There are people that want to help fix the legitimate needs that you have! If we discover that the market doesn't want our services, then we've learned an important lesson. But if we discover that the market does want our services, then we've learned yet another good lesson. But if there is favoritism by a central authority, then we've stopped the creativity of what could have been. A central authority may just well be the deciding factor on the fate of humanity, and we should hope that this central figure is so smart that they don't end up choosing wrong.

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