We
are bankrupted and ruined when risk goes the other way. Our productive assets and our workers
are picked up by new players and the economy goes on without us. We, the business failures, pay the full
price of our personal failure.
"The economy" does not pay for our failures or bail us out. It wounds us or kills us off, to
discipline us or to make way for new players. Business is not, nor should it be, a guarantee of "security". Business is real life risk taking with
real rewards and real consequences.
We
can limit our personal market risk by limiting the scale of our operations, so
that we can "afford" to suffer the losses, costs and damages we open ourselves
up to. Or we can, as they say,
"bet heavy and sleep in the street".
The magnitude of the potential rewards and losses is commensurate with
the magnitude of our risk taking.
But the invisible hand of the marketplace is only potent if the person
who makes the decisions personally and directly enjoys or suffers the
consequences. It is these
consequences that "discipline" the behavior of players in the marketplace, so
that while individual players rise up and fall down, the market and the economy
as a whole continue functioning.
This potent personal discipline is the essence of real free market
capitalism as described by Adam Smith.
Right
now it is government legislation that allows behemoth limited liability corporations
to exist and that insulates their owners and managers against the kind of free
market discipline that Adam Smith required. Eliminate the government
protections that limit owner and manager liability, and behemoth too big to
exist companies will very soon consume their owners and managers in personal bankruptcy
and personal ruin, just the kind of "creative destruction" that is
supposed to happen in a "free" market, where human beings are free
from both government 'interference' and government "protection".
It
is governments, not free markets, who allow limited liability corporations to
exist and, incubated by government protection against the market's constraining
and corrosive forces, to mutate to gargantuan proportions. Limited liability legislation is
government interference in the free market, and the unintended consequence is
this freedom crushing hydra headed corporate monster. If this creature has now grown too big to be disciplined and
destroyed by market forces, then for the sake of liberty we should pull the
legislative plug on limited liability and set this un-limited liability beast
free to consume itself in its own excesses.
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