Subsidies as a Threat to Entrepreneurship
Subsidizing incompetence
The primary job of the entrepreneur is to solve problems, and in order to remain afloat, they must craft the most ingenious and speedy solutions out of all the others who claim to be problem-solvers as well. Chief among those problems, the entrepreneur often does not hold all the necessary capital or materials to fulfill the needs of the market, but just like any other complication they might face, the entrepreneur must deconstruct the obstacle themselves, because if not, they cease to be a true entrepreneur.
Subsidies, or money given by the government to entrepreneurs in order to ‘aid’ them in competition, actually have the opposite effect. In Collins’ example, the government subsidized a man who could not find a good enough solution to deliver mail efficiently and cost-effectively, and he really didn’t need to. Entrepreneurs who are truly riding the unpredictable wave of the market must always look for ways to create value, which in turn pushes for innovation and increased productivity. On the other hand, there’s not a sense of urgency pushing an ‘entrepreneur’ to innovate in a subsidized field because there will always be a cash inflow, therefore, competition doesn’t exist as there’s nothing to lose.
In a sense, subsidies sponsor the least qualified and competent problem solvers in a market filled with brilliant and capable competitors that are able to stand on their own. The consumer chooses who the fittest is, not the government.
Why did Congress continue to say yes?
Especially after the rise of Vanderbilt, I thought that Congress would realize they were not financing a true entrepreneur, but I became more shocked and curious as they continued to give him increasing subsidies.
I infer one of the main reasons why they conserved their support for Collins is because of the constant juxtaposition between the government and the market. In my opinion, a successful government is often perceived as strong, unified, and stable. The president and congresspeople must make decisions that affect thousands of lives on a daily basis, and should therefore avert any type of risk. But the nature of the market is different. Competition is ruthless and entrepreneurs must be risk-takers in order to survive. I think that subsidies are ways for the government to make the market something that is not for the sake of stability and consistent economic growth, and as a result, it allows entrepreneurs to play it safe and set a minuscule boundary for their creativity.
In addition, I think that government involvement in the market might be a way to attain more influence. Politicians who advocate for government minimization externally but internally yearn for more power could support subsidies. However, as previously proven, that power is limited because they are creating businesses that are not self-sufficient and could never reach their full economic potential.
Putting a cap on creativity
When the government started voting more evenly on whether to continue to give Collins subsidies, he started to think more about how to increase his profits and became more engaged in speed campaigns. I began to think that maybe subsidies themselves aren’t the problem, but the way they are distributed could actually improve and encourage market competition.
Perhaps, if governments created a deal where companies would receive a subsidy only if they reached a pre-established profit goal, they would start to think more seriously about ways to satisfy the market better first and make the consumer the priority again, not the subsidy. However, I realized that this creates an incentive for companies to reach the limits imposed by the government, not the possible limits that exist. Maybe if Rockefeller would have been put in this plan, his business would have only grown as far as Congress predicted, and not as far as owning 65% of the global oil market.
Maybe if the government only had provided Collins with that initial subsidy, it would have made it easier for him to find a way to stand alone afterward. But even one subsidy is one too many, considering how there are other companies who were and are able to do so with no such help. I learned that government help doesn’t really exist when it comes to business, as it destroys more than it aids every time it intervenes.
I think that the entrepreneur who prioritizes the needs of the customer before the monetary favors of the government always wins. The government and Collins entered the mail business to surpass Britain, but Vanderbilt made it reliable and accessible to immigrants. The Central Pacific and Union Pacific entered the railroad business to gain subsidies so the other wouldn’t, but James J. Hill was in the business of connecting the American coasts. I think subsidies deviate from the purpose of businesses and the reason they are created, ultimately leading to inefficiencies and failures.