Friday, November 21, 2008

Economic Darwinism

First of all I am not a libertarian, I am a pragmatical entrepreneur. I pride myself on being able to make something from nothing with a focus on sustainable business economics. Simply put, I believe a business should not have to rely wholly on outside financial support be it a government or otherwise. So this brings me to a discussion I has this week in regards to the various US government bailouts being proposed or implemented and why I think in certain cases such as the US auto sector, we should let the free market determine who wins and who fails. I've been using the term economic darwinism to describe my philosophy.

The concept of economic darwinism isn't a new one. It's routes trace back to a concept more commonly known as evolutionary economics.The concept goes like this; In the 19th century Charles Darwin proposed a theory for a general framework whereby small, random variations could be accumulated and selected over time into large-scale changes that resulted in the emergence of wholly novel forms of life. In economics the basic premise is that markets act as the major selection vehicles. As firms compete, unsuccessful rivals fail to capture an appropriate market share, go bankrupt and have to exit. (Survial of the fittest)

GM, Ford and other American auto makers are in trouble because they are failing to adapt to the market demands of the 21st century. They still cling to 50 year old business practices, design sensibilities as well as out dated sales models. Add to the mix an over capacity of vehicles and you have recipe for disaster. Again, I say let the market dictate who wins and who loses.

Yes, I know that thousands of jobs will be lost. So I say bail out those people. Give them the tools to reinvent themselves. Bailing out struggling unsustainable enterprises will create a cycle of boom and bust that ultimately will do more harm then good.

My suggestion to those who control the direction of the US economy must be to realize that economic sustainability is paramount to the continued health of the over all business ecosystem and more importantly those who power it, people.

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