Introduction
America, the country of free enterprise and entrepreneurship, may not be as free as it once was. With an increase in market regulation, less of an emphasis on supply-side economics, and government intervention in business vitality, America has indirectly adopted ideals from crony capitalism. However, this issue has come to rise in America since its early beginnings. George Gilder’s “Wealth and Poverty,” and Adam Smith’s “The Wealth of Nations,” describe the intricate relationship between entrepreneurship, and government intervention in the economy. In this discussion, I will compare and contrast ideas between Smith and Gilder, as well as discuss the state of capitalism in America today.
Gilder V.S. Smith
In Gilder’s “Wealth and Poverty,” he puts heavy emphasis on entrepreneurs’ ability to drive the growth of the economy. He argues that government regulation of markets and inaccessible market information are some of the key factors that inhibit an entrepreneur’s ability to be successful. Gilder suggests that “since governments in capitalist countries could seemingly control the supply of money, politicians came to suppose they could thereby influence the supply of everything else.” This quote exemplifies Gilder’s argument that the government tries to control aspects of the economy that they should not – directly hurting those who are trying to start a new venture. This is also a key proponent of Basitat’s argument in “The Law,” when discussing the government’s plunder in trying to regulate every industry in the economy. Gilder goes on to discuss that it is in an entrepreneur’s nature to put their customer’s needs and desires before their own. This is called “reciprocity,” and he argues that reciprocity is the key to a healthy economy. When businesses are focused on “giving” to the consumer rather than lobbying in government for regulations that minimize competition, then the businesses must work harder to sell their goods. This is ultimately better for the consumer because it drives down prices to stay competitive, and the growth of competition fosters creation of more jobs. On the other hand, in his book, “The Wealth of Nations,” Smith is concerned with the motivation of businesses in early America. He was convinced that businesses were operating out of self-interest and greed, seeking government aid and other forms of self-serving support, rather than appealing to their consumers. Although most businesses were not quite as large back then as they are today, Smith’s concerns rung true to the time, and are even more applicable today. Without true competition, and with government intervention in the market, the market becomes biased. This is not a free market at all, but rather a fabricated free market regulated by the government. When businesses no longer need to fight against potential competition, they have no incentive to appeal to the people they are selling to, but rather, the people who are protecting them against the competition. This is what Smith was afraid of, and although America is far from a socialist policy, there is still a concerning amount of government intervention in the economy, particularly in the protection of big businesses.
Supply-Side Economics
Another proponent argued by Gilder involves the economic theory that supply is the drive for demand. When the economic focus is shifted to highlight the demand for objects currently in existence, there is no room to innovate. This is evident in chapter 4 of “Wealth and Poverty,” when Gilder states, “because there is no demand for new and unknown goods, no demand for the unforeseeable fruits of innovation and genius, preoccupation with demand fosters stagnation.” In supply-side economic theory, the focus is shifted to the supply of goods. With an excess supply, consumers have more purchasing power. This makes it more competitive in the individual industries that make up the economy in its entirety. With more businesses competing, more jobs are made, and more opportunity is created for individuals to innovate and become successful entrepreneurs.
The Motivation of Businesses in America Today
Unfortunately, capitalism in America today has proved to support Smith’s view of businesses over Gilder’s optimistic view of their true motivation. Multiple industries today have lobbyists supporting their protection in the government. These industries include but are not limited to oil and gas, pharmaceuticals, electronics manufacturing, hospitals, securities, investments, etc. The most glaring industry out of those I’ve just listed is pharmaceuticals. There is practically no competition in the pharmaceutical industry, with so many barriers to entry and thousands of regulations imposed by the government. Their motivation is almost entirely self-centered. Consider the price of insulin: if the goal of pharmaceutical companies was to help consumers from a place of true generosity, then insulin would be much more affordable. This would also be the case if there was any sort of competition in pharmaceuticals – in which businesses would need to compete with each other through pricing and quality of the medications they sell. However, the most interesting thing about how businesses operate in the United States is the way they market themselves to consumers despite their continued support from the government. Businesses have adopted the habit of appealing to society through politics. The youth in the United States has become increasingly perceptive of what businesses promote through their production and advertising, not just their products. In addition to this, younger generations have also become less forgiving and will condemn businesses for excluding minorities and other groups from their advertising. This is extremely dangerous for businesses because they have turned from appealing to a target market to playing politics in order to convince certain demographics that the business cares about their agendas. This is most obvious in recent news, with many different corporations hiring transgender advocate, Dylan Mulvaney, as their spokesperson. This makes sense if the business’s target market involves those in the LGBTQAI+ community. However, for a business such as Bud Light or Tampax to hire a transgender woman as a spokesperson, it turns their target market away. Think about the majority of people who drink Bud Light: Blue collar workers, college-aged to middle-aged men, and older people in general. By hiring someone who doesn’t fit that demographic, Bud Light completely loses the support and attention of its long-term customers. The same could be said for Tampax. By hiring a transgender woman who has never had the need to use a tampon, the women who are buying the product do not feel represented. In addition, this feeds into a larger issue regarding male dominance in an industry created to offer solutions to women. Regardless of this, the main issue with this is that businesses have begun to sacrifice sales in order to be seen as “politically correct.”