Will Big Government Disincent Entrepreneurs?

Ayn Rand is probably turning over in her grave at this moment in capitalism.

Her famous novel, “Atlas Shrugged,” foretells a time when Big Government gets out of control, stifling individual freedom and entrepreneurism.  As economist Stephen Moore writes in the Wall Street Journal, the events of 2008 and 2009 sound strikingly similar to the events in her novel: 

“The current economic strategy is right out of “Atlas Shrugged”: The more incompetent you are in business, the more handouts the politicians will bestow on you. That’s the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies — while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to “calm the markets,” another trillion of national wealth is subsequently lost. Yet, as “Atlas” grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate ‘windfalls.'” 

I am troubled by the current environment – that it will cause entrepreneurism to wither away.  In a time when business failure is rewarded at taxpayer expense, and business owners are looked on as “marks” to be tapped to pay for ever-increasing taxes due to all the spending, the incentive to be creative and take risks could quickly dry up. 

I think Big Government is changing commerce – and not in a good way.  We are sliding toward a socialist state, with government intervention in business at every turn, spending at records levels, and the prospect of the tax burden on the most successful small businesses increasing.  Doesn’t anybody in Washington know what it means to live on a budget anymore? 

Professor Jeff Cornwall notes that it’s the long term effects we have to worry about … and how it may lead to dysfunctional people and businesses.  He is visiting Prague and builds a corollary between communism and its aftermath and the situation in the U.S.:

  “Although I am now worried about our move toward socialism in the US, I have become more worried about the aftermath.      Economic decisions have a major impact on a culture.  Although the communist economic system is officially gone, its effects remain everywhere.  People here [in Prague] have become innately dependent upon the state.  It is become so much a part of the culture that it is difficult if not impossible for most citizens to break free of that dependence.  They are like a 47 year old man who never left home and still lives in his parents basement.  He hates his lot in life, but is stuck in a dysfunctional, dependent relationship from which he cannot escape.    It reminds me of a flood.  Although the flood itself is devastating, the aftermath can be even worse.  The stinking sludge that remains after the waters subside can take months to clean up.  And the rebuilding can take years.  But, nothing is ever the same when all is said and done.” 

So far we are in early days.  We haven’t seen the long-term debilitating effects and whether it will stifle entrepreneurship.  However, the prospects are troubling. 

I worry about how many would-be entrepreneurs will never attempt their dreams, because they deem it’s “not worth it.”