Sunday, April 25, 2010

Comment on the Belmont Club:
"Cold Turkey"

The government claims it is determined to preserve industrial structures seen as essential to the economy and the American way of life. To do so they will drain tax money from productive sectors, divert an increasing portion to feed supporters and build bureaucracy to prop up a shell of the failing structures. The models for this are Amtrack/Conrail and the Merchant Marine. In both cases we have ghosts of what were major industrial structures symbolic of America's industrial Golden Age. Twenty years of government administration will turn the automobile, health care and financial services industries into zombies also. If the model of government support of declining industrial structures threatened by innovation had determined policy in the 19th century we would now see ourselves dependent on subsidized and regulated Clipper ships, the Pony Express and our environmental waste problem would focus on cleaning up after all the oxen hauling goods along rutted trails.

The Post Office is unable to sustain Saturday delivery, despite the legal monopoly it holds over the delivery of First Class mail. Fortunately the need to evade the strictures of government inefficiency have stimulated the growth of alternatives to evade the government controlled system. Unfortunately the freight rail industry proved less able to adapt than the air freight industry did and the Rail Express Agency (REA) failed as the rail portion of America's infrastructure fell under government control. Private bulk delivery services, like FedEx and UPS serve the parcel delivery sector and have stimulated innovation and growth in the air services and associated industries. The need for substitutes for the government document delivery service through the Post Office has also stimulated much of the growth in the telecommunications and computer technology sectors.

This is not an efficient way to stimulate innovation, it is merely how the productive sectors react to government constraint The markets reacted to Prohibition by creating new transportation and management and distribution models that may be used by legitimate businesses but that does not men that the growth of organized crime was a good thing. The government constraints may stimulate innovation in some sectors to compensate but that does not mean that better and more rational growth would not have happened in the absence of the government imposed distortion on the market. It would not surprise me if the push to Europeanize America lead to an effort to harmonize our government structures with the general model in which telephone and related services are seen as an extension of the Post Office and placed under the control of a government department.

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