"What's funny is that proponents of the [Vikings] stadium defeat themselves with their own arguments. 'Well, if we don't 'subsidize' the stadium, the Vikings' business will be unsustainable, and they'll leave.' Yes; that is exactly the point. If the only way for a business to be viable-- hogging up finite resources during its existence-- is to prop itself up with stolen money, then that clearly isn't the optimal use of those resources.
Then, of course, they argue, 'but the economy is otherwise stagnant; if we don't have the stadium, we'll have nothing.' To which I respond, 'yes, because you're misallocating capital with shit like stadia!' Total compliance with the regulatory state is almost two trillion dollars per year. And just the Federal government alone is extracting almost three trillion dollars per year in taxes. When you're causing five trillion dollars of malinvestment annually, yes, the economy is going to be stagnant."
Then, of course, they argue, 'but the economy is otherwise stagnant; if we don't have the stadium, we'll have nothing.' To which I respond, 'yes, because you're misallocating capital with shit like stadia!' Total compliance with the regulatory state is almost two trillion dollars per year. And just the Federal government alone is extracting almost three trillion dollars per year in taxes. When you're causing five trillion dollars of malinvestment annually, yes, the economy is going to be stagnant."
This malinvestment topic took on a very personal twist recently, into an issue in which I have specific insight. The company that I work for is losing money hand-over-fist making products that people no longer want or can afford. The company's leaders decided to do the obvious and necessary thing-- stop producing the worthless products so they can shift resources into making products people do want.
There is no way the company can survive doing what it's doing today-- not a shot in hell. Things are going down the crapper very quickly with the status quo. The executives have engaged in hundreds of millions of dollars in stock buybacks over the past couple of years in a flailing attempt to keep the stock price and earnings-per-share numbers afloat, but even that smoke-and-mirrors approach is losing its efficacy.
Today I read a news story explaining that the politicians in a city that hosts one of the soon-to-be-closed facilities are going to issue a bond, putting the tax cattle there on the hook to eventually pay back the bond, and make the interest payments in the interim of course. The politicians are then planning to hand over this loaned money to a private business-- the company I work for-- in an attempt to keep the facility open. So you would essentially have public money being funneled directly into my paycheck, or the paychecks of people like me!
There are so many things wrong with this that I don't even know where to begin.
- First, what are the odds that a handful of sociopathic, control freak city council members, most of whom probably have no background in business to begin with (otherwise why the hell would they be employed in a city council?) know a good investment from a bad one, better than the actual business which has already decided that the investment is a bad one? And what about when they're making this decision with someone else's money? Let's just say if I were a betting man, I wouldn't be putting my money on these odds.
- Second, think about this from a moral and ethical standpoint: issuing a bond, then stealing money from people to pay the interest? And what about everyone's supposedly huge moral objections to "crony capitalism?" Yet here we are, with this city engaging in pure, all-out Fascism, and with some people saying that this is a great thing for that city! So I guess crony capitalism is morally ok for some automobile and consumer goods companies, and for some banks, but not for other consumer goods companies or other banks? Why? What is the principle at play that informs us when such an approach is morally ok, and when not?
- Third, even if my company takes the money and foolishly tries to keep the facility running-- "saving" the four hundred or so jobs at this facility-- I can guarantee you that this will cause massive losses down the road because people aren't buying these products, leading to future layoffs elsewhere in the company. It's like putting bubble gum on a leaking dam; you're just going to cause a leak to spring elsewhere! And ironically, these future job cuts will probably come from the very same facility that the city just "saved", but that's still making the useless products; what is the city going to do then-- issue another bond? The concept invokes images of China's zombie factories and vast, totally empty cities!
The only possible way I could see this playing out ok-- not favorably, but not in the most stupid way possible at least-- is if my company could refit that facility to create different products. But even that's a big "if"; if that were the best use of the company's very finite resources, they would have made that decision in the first place.
The best thing to do, from an economic and moral standpoint, is to just let the damned plant close, freeing up the precious resources for other uses. Resources shifting from less productive to more productive uses is as natural a part of reality as atoms, or gravity, or the changing seasons.
I have family members and friends that are huge fans of Chobani yogurt. Remember: the world probably wouldn't have Chobani yogurt and its twelve hundred jobs had sociopathic city council members tried to keep the then-closing Kraft plant open in New York. The same thing can happen in the city that this blog post discusses.