Jump to content
Objectivism Online Forum

Franchises and special interests?

Rate this topic


determinist
 Share

Recommended Posts

I was reading Capitalism: The Unknown Ideal and it was basically talking about government cronyism. It mentioned that the government's ability to grant favors to businesses attracts special interest groups. It named examples. It mentioned subsidies, franchises, licenses, and some others. Why franchises? Will anyone explain to me, as a beginner, why a franchise is spoken against? What do franchises have to do with special interests and why are franchises lumped with these other government things? I thought a franchise was just one form of free market business. I'm confused. I have seen it said elsewhere too, so I'm pretty sure I'm missing something here.

Thanks for any response.

Edit:

Maybe the following content from the book will help.

The necessary precondition of a coercive monopoly is closed entry -- the barring of all competing producers from a given field. This can be accomplished only by an act of government intervention, in the form of special regulations, subsidies, or franchises. Without government assistance, it is impossible for a would-be monopolist to set and maintain his prices and production policies independent of the rest of the economy. For if he attempted to set his prices and production at a level that would yield profits to new entrants significantly above those available in other fields, competitors would be sure to invade his industry.
Edited by determinist
Link to comment
Share on other sites

The assumption is that the operation of streetcars should be an open market. Fair enough. However, the government hires and buys literally thousands of goods and services, granting contracts, franchises, and monopolies to single-source providers. Federal courts are protected by over 8,000 plain-clothes armed officers hired from a Akal Security.

Other contracts such as telephone, broadcast, and internet go to multiple vendors, depending on the actual agency putting out the bids. (To speak of "government" is to commit the fallacy of the unnamed collective.)

Four firms guard US Army bases in the USA: Wackenhut (a branch of G4S of the UK), Vance, Akal, and Coastal International.

Should the agencies and departments produce their own uniforms, or buy them?

http://www.defenseindustrydaily.com/usa-contracts-for-new-army-combat-uniforms-in-acupat-camo-03024/

Edited by Hermes
Link to comment
Share on other sites

Should the agencies and departments produce their own uniforms, or buy them?

http://www.defenseindustrydaily.com/usa-contracts-for-new-army-combat-uniforms-in-acupat-camo-03024/

Buy them. The multiple vendors problem, at least for military uniforms, is that the uniforms produced are insufficiently uniform due to slight differences in manufacturing methods between suppliers.

Link to comment
Share on other sites

The assumption is that the operation of streetcars should be an open market. Fair enough. However, the government hires and buys literally thousands of goods and services, granting contracts, franchises, and monopolies to single-source providers. Federal courts are protected by over 8,000 plain-clothes armed officers hired from a Akal Security.

Other contracts such as telephone, broadcast, and internet go to multiple vendors, depending on the actual agency putting out the bids. (To speak of "government" is to commit the fallacy of the unnamed collective.)

Four firms guard US Army bases in the USA: Wackenhut (a branch of G4S of the UK), Vance, Akal, and Coastal International.

Should the agencies and departments produce their own uniforms, or buy them?

http://www.defenseindustrydaily.com/usa-contracts-for-new-army-combat-uniforms-in-acupat-camo-03024/

Are you saying that instead of purchasing from a single supplier, the government should purchase from multiple suppliers to curb monopoly?

Link to comment
Share on other sites

Are you saying that instead of purchasing from a single supplier, the government should purchase from multiple suppliers to curb monopoly?

I am saying that as long as there is a government, there will be businesses that supply to the government and lobbying will be part of that process. It is not a bad thing. It is not immoral or evil. It is human action.

Over the years, I have interviewed many business people for magazine articles that I write. A sales manager for IBM once told me that if the first he heard of a government agency placing an open bid for a printer was reading about it in a bid list, he would fire the salesman assigned to the account. The salesman's job is to help the client understand what they need. That goes for government as well. New jet fighter craft, or new roller pens, the principle is the same: innovation comes from the private sector.

It can happen that a government agency will ask for something on their own - sometimes they are imaginative and insightful - but then why not ask for time travel? And they have been asking for a cure for cancer for 50 years. Businesses tell the government what is possible, and what it will cost. Then the bids go out and are awarded. Some are single-sourced; others are not. Some are inventions; others are off-the-shelf.

But you will never get rid of the so-called "special interests" and neither do you want to, really.

Despite distancing Objectivist political theory from religionist conservatism, we get a lot of folksy down home talk against everything to do with government. We join in the complaints against lobbyists, and the close ties between business and government, and now against wages paid to government employees. Believe me, I understand. But the fact remains that as long as you have government - even one constitutionally limited to police forces, army, and courts of laws - you are going to have these institutional mechanisms. And you want them. Either the govenment buys from businesses, or the government operates businesses. Which do you prefer?

Edited by Hermes
Link to comment
Share on other sites

The assumption is that the operation of streetcars should be an open market. Fair enough. However, the government hires and buys literally thousands of goods and services, granting contracts, franchises, and monopolies to single-source providers. Federal courts are protected by over 8,000 plain-clothes armed officers hired from a Akal Security.

Terminology question:

Are you meaning to suggest that gov't having a single provider of some service or product creates a franchise or/and monopoly?

Edited by Greebo
Link to comment
Share on other sites

Greebo, clearly, several companies make pencils and a few others also make jet fighter craft. While a contract for a million pencils or a hundred jets is clearly a win, that does not in itself create a monopoly. Others are not prevented from entering the market for other buyers. A franchise is just a kind of monopoly - street car franchise; ferry boat franchise. We understand that.

Assuming some common understanding about the way businesses and individuals organize their affairs, nothing prevents you from stopping at McDonald's on the way home from the supermarket and once home, picking your own tomatoes off your vines. You - and even a large corporation - always multisource. In fact, the very existence of AMD versus Intel is based on the broad need for second sources of the same devices -- and Intel is more or less happy to sell a fraction of their licensing to a competitor because doing do strengthens their market position.

Government does not work that way. Whether it is by open bid - usually the case here and now - or by the "arsenal" model - one governmental entity creates something for use by other agencies and departments - the modality is exclusionary.

The basic assumption of government is a zero-sum game. The basic assumption of business is win-win: competitors cooperate for mutual profit.

As long as there is a government, there will be special favors, insider deals, a military industrial complex, a revolving door between industries and agencies. I am not arguing against government. I am just saying that this is the wsy things always will be of necessity. And it is not entirely bad.

I just added a post to my blog, "Unlimited Constitutional Government."

Edited by Hermes
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...