Private Ownership of the Means of Production confers a Social Benefit

Perhaps the most difficult battle faced by the advocates of free markets it to convince people that Private Ownership of the Means of Production is not some special privilege conferring and advantage to "greedy capitalists" at the expense of everyone else, but that it serves a social function that is beneficial to all.

Private ownership makes the accumulated wealth of the entrepreneur a slave to the consumer - that is - to everyone else. We commonly understand private ownership to mean "for our own use," eg. the use of a toothbrush or a private residence, but in the case of private ownership, what is owned is almost exclusively for the use of others, placed at their service.

The capitalist keeps his wealth only to the extend he continues to use what he has accumulated in the interests of the masses, as they judge them, by churning out whichever goods and services they demand. To the extent he succeeds, his wealth will grow. This is the economy’s way of saying that he makes sure and wise decisions with the capital we have amassed as a society - not wasting them on projects that the public have no interest in paying for. To the extent he fails to do so, those factories, machines and companies that his investments represent will be sold on at knock-down rates to whoever thinks they can do a better job of managing them in the public interest. This allows for the constant re-allocation of capital to those who can best manage it, and engenders the accumulation of more capital over time. As the capital stock increase there is more wealth generation and technological advancement can be expected, and this will necessarily be largely led by the preferences of consumers, not those who actually "own" the capital.

Can Government Make a Business Run "For The Good of Society" ?

The New York Post recently reported that a judge in Indiana has temporarily barred Starbucks from closing 77 Teavana stores that were failing because "the very profitable Starbucks could absorb the financial hit". Industry experts said the ruling will send a chill down the spines of distressed retailers, and with good reason! The prospect of not being able to shut down an outlet that is bleeding the rest of the business may have countless unintended consequences that will affect not just owners but consumers in general. Firms are likely to take this as a signal to be more cautious about opening up new stores, and become reluctant to invest, take risks, and employ people in the first place. Customers stand to lose.

Amidst the debate upon the justice of the justice in question, I heard a voice clamour, "The question is not of profit, but whether a business should be run for society or society should be run for business!" and to be quite frank the claim struck me at first as vacuous; professing much while saying very little. Yet we must admit that throughout history many governments have believed they were "serving society" (rather than the business community) by forcing companies to fix prices, continue operations at a loss, or even subsidising or bailing them out with public funds. Many have believed this is in the interest of "the greater good."

Could it be that government forcing Starbucks to maintain unprofitable stores - in some circumstances - would be good for society?

First we should examine the use of the word "society" itself. Rather than bring clarity, it obscures the issue, making it more difficult to apprehend the facts of the matter. Who exactly is society and how do we measure what is and isn't good for it? Society is made of a whole bunch of different individuals and groups with different interests, and what is good for one might not necessarily be good for another.

It's not that keeping a Teavana open despite the owner's desire to close it won't be good for anyone; clearly the proprietor of the shopping centres is willing to fight hard for what they stand to gain, and certainly regular patrons will be happy to be able to get their regular cup of chai before leaving a hard-days-shop. However, the point is the move privilege a few individuals who want to continue going to those outlets at the expense of everyone else in the area who has demonstrated that they would rather something else opens up in that space instead. Starbucks then will need to recuperate the loss somehow or other, perhaps by increasing prices slightly at all other locations. If the locality can only sustain the demand for three tea houses and the unprofitable Teavana happens to be the forth then they are also bleeding demand away from the other three, and so on. We can continue counting negative consequences to other parties.

If Starbucks are deprived of however many millions it costs to operate 77 unprofitable stores that is less money they have to invest in stores that are wanted by enough people to keep them afloat. It's less cash for shareholders who will take it out to the shops to spend it or reinvest it in other businesses, it's less for Starbucks customers who have to pay slightly more for a cup of coffee and therefore don't have to spend on something else, it's less for Starbucks employees who might have to forego a raise because there is less to go around..

Clearly the effect of this policy is not something that can be broken down into whether it ‘benefits society’ or not. All we can say is that it benefits some groups and harms others.

It seems ironic to me that most of those who will cheer on the judges ruling, forcing Starbucks to run 77 tea outlets - against their own interests - for the interests of others are probably the most likely to complain when a Teavana opens up that it will "drive out" locally owned tea houses (which are probably actually collapsing under the strain of the regulations they have to comply with, not being able to afford Starbucks team of expensive lawyers and accountants.) If anything you'd think this crowd would be cheering on the closures! As they carry with them a certain prejudice that whatever vexes big business is necessarily good for the rest of us, we can only conclude that supporting the ruling is less about what is good for society and more about what is bad for Starbucks.

Surplus Value

It's still a very prevalent view that employers are somehow exploiting the people who work for them when they draw a profit from their business, despite the fact that a person's employer is clearly doing more for their finances than all of the people who are not employing them. I might add, perhaps somewhat facetiously, including those keyboard-warriors who claiming that entering someone into employment is exploiting them.

It is true that workers do get paid less than the total value of what they produce, but that is because what they produce is made with other resources which have to be bought, and in a factory or work place which has a price and requires overheads to operate. The capitalist is responsible for paying for marketing and advertising to link the product to potential buyers - and at the end of the day, if the product doesn't sell, everyone else has already been paid but the capitalist walks away with the loss.

The capitalist lays out a vision of what he thinks will meet people's needs better than they are being met at present. This requires a particular expertise which is in itself a labour contribution over and above that of the other employees which is unique to the entrepreneur. If his vision is clear, indeed he will make a profit. If it is faulty he will make a loss. This is not a necessary risk, absent the profit motive a rich person is more likely to buy a bigger house or go on a cruise. But the capitalist takes a risk now, and foregoes consumption, in hope that he will reap the benefit later. That is part of what he is being paid for.

Another part of what he is being paid for is the time between making the investment and getting paid for that investment. We would all rather have resources in the here-and-now than some time in the future, because the future is uncertain, that is why lenders can charge interest on money that they borrow. They are choosing to forgo a smaller amount of consumption now for a larger one in future. The workers get paid now, the capitalist gets paid later only after the product has sold, and only IF it is sold, after everyone else has been paid. Austrian Economist, Eugen von Böhm-Bawerk explained that far from exploiting labour, the capitalist removes the burden of waiting for income from the workers. If they wanted to produce the goods themselves they would also have to wait until they could find a buyer before gaining a stable wage, and first save or borrow in order to accumulate the resources to buy a factory or workshop without the help of the capitalist.

Finally, it's worth mentioning that the capitalist is increasing the value of the workers labour! If a man decides to try out the same manoeuvres which might get them somewhere in a factory out in a field it will not produce much of value to anyone else. Clearly workers can earn more working for their employer than for themselves otherwise they would simply declare themselves self-employed and get on with making a higher income. Perhaps some of them can earn more working for themselves but do not want to take on the responsibilities entailed which are currently met by the firm which employs them. This too is evidence that capitalists are providing value.

Marxists hold that capitalists simply skim their profits off the top while providing no value of their own. That they are "extracting surplus value" from their workers. But if that was true, non-profit organisations would just swoop in and undercut profit-making firms by eliminating the "dead weight" costs of paying a capitalist. They do not because they cannot. Capitalists are clearly providing some competence or vision which benefits their workers. Each benefits from the mutual exchange, as evidence by the fact that if the worker could get a better deal s/he would take it, and if the employer could find a better worker s/he would hire them instead.

Ultimately, wages are not an arbitrary figure but a reflection of how much value an employee is able to provide to a customer. If a person wants to do away with an employer they can do so by learning skills, either on the job or on the side, which will allow them to work for themselves. Likewise, profits are not arbitrary but a reflection of how much value a company is providing on the marketplace. Provided - of course - that they are drawing their profits from serving the market place rather than lobbying or appealing to the state, but that is another article.

"In order to show that it is a half-truth, we must have recourse to long and dry dissertations."

- Frederic Bastiat

If you're not growing you're dying.

It takes a long time to make changes in public institutions. You have to get enough of the public interested to make it an issue, you might need to get into the media which itself is a hell of a job and even if you do rouse some attention the best most people can hope for is to vote, and they need to vote for one of the package deals on offer. Even if your reform is quite modest and sensible and its benefit is uncontroversial, it may be adopted by a party who have several other ideas on your mind that you disagree with. There is another path, and that is to get a small concentrated number of people who already have a lot of influence to get on board with your ideal and push it through as a bill but even then the matter is not settled; it needs to go through levels of bureaucrats, managers and administrators before the change enters into the system at large and even then many employees will resist the change because they resent being told what to do by central planners.

If we take the example of our education system there has been no small amount of evidence on how to improve it since the 60s when a wave of intellectual idealists from the flower power generation began discussing how "getting things right" when it came to government could change the world. Some of this data has been around for over fifty years, some of it is still coming out. Have these reforms not been adopted for a lack of political will? Yes to a degree but also because of the insurmountable obstacles to mustering the political will. The largest is the simple fact that most people are more comfortable doing what they have always done than doing something new. Doing things differently is anxiety-provoking and it is very irritating to be told or forced to do it by an authority figure, even one who has the evidence on their side, when you think, "Well I have been on the front lines doing it this way my whole life, this is how I was taught to do it in four years of university I think you'll find I know how its done thank you very much you government busy body."

One of the reasons why markets are so important, and why products adapt to user preferences far quicker is because only one person needs to be bothered enough to accept a new innovation in order to force all the other providers in their sector to step up and do a better job. They can do that by matching the innovation, by implementing one that is equally valuable, by providing an inferior service but at a lower price, or in numerous other ways - but the fact is they have to step up and serve customers or on average over time they will be out of business. This means people don't even need to all be receiving the same service or a one-size-fits-all but it does mean that services that are way behind the times will fall out of favour. Public institutions are not under the same pressure to adapt to the times because people cannot divest from them easily since they are funded through the tax system rather than voluntary contributions that can be withdrawn if the service is poor, and also because they have a relative monopoly on the provision of services in their sector which means that people can't compare their performance to those of competitors who are trying different approaches which may have their own advantages or drawbacks.

People need to have a choice when it comes to services if the quality of services is to increase and not stagnate or fall behind the times. This is not because "ruthless tooth n' nail capitalist competition drives innovation" but simply without the petri-dish of trial and error which is a multitude of entrepreneurs with different information and ideas trying to sell them to a skeptical public there is really no way of discovering the best way of doing things. No one has all the answers, but many people have some of the answers, and by constantly turning over the soil society learns to combine the best ideas and discard the worst ones over time. The soil of government turns very very slowly and that's why innovation in the private sector continues (despite various government restrictions on who can innovate) while public institutions stagnate and become more expensive each year while providing poorer standards to the people.

Why is the Capitalist Workplace so Authoritarian?

You are told that capital tyrannizes over labor. I do not deny that each one endeavors to draw the greatest possible advantage from his situation; but, in this sense, he realizes only that which is possible. Now, it is never more possible for capitalists to tyrannize over labor, than when they are scarce; for then it is they who make the law -- it is they who regulate the rate of sale. Never is this tyranny more impossible to them, than when they are abundant; for, in that case, it is labor which has the command.

- Frederic Bastiat, from Capital and Interest

A persistent criticism of capitalism as an ideology is that it is authoritarian by nature, and can only lead to tyrannical bosses ruling over dependent staff who are forced - by fear of poverty and starvation - to remain under their command. Certainly, if we take our example from the workplaces of today, most of them are hierarchical, and many of them pretty authoritarian. In extreme cases staff even need to ask permission to go to the bathroom. So there appears to be some demonstration to the thesis.

In reality there is nothing inherent in the system of free enterprise that necessitates hierarchy, and many businesses have been successfully run with decentralised structures. Ricardo Semler is an example of an entrepreneur who had such massive success running his business on a non-hierarchical model that he turned to teaching other capitalists all over the world to do the same. Nonetheless, crappy bosses who like to throw their weight around the shop or office are ten a penny, and since no one likes working under a dictatorship we really have to question why more egalitarian models not more common.

A market will tend to use the skills and propensities of the labour force within that market, because it is costly and time consuming to inculcate staff with new habits. For example, if a workplace can afford to hire experienced staff rather than train newbies they will often do so (especially where there is a high minimum wage.) Companies will sooner offer a raise to hold on to an employee with a good work ethic than take a risk on someone new. The fact is, human qualities are less malleable than other factors of production, and so it's usually going to be preferable to try and court the kind of employees you want around rather than try to foster whoever walks in the door into a new sort of character you like; especially considering people have their own proclivities and desires for their own personal character development, unlike machines. This is why most of the companies that run in cooperative or non-hierarchical structures begin with this idea as a primary value, and will tend to attract a certain kind of person who shares in the company vision and is competent to contribute to making it a reality. (Tim Kelley, an expert who currently helps companies adapt to what he calls "The New Paradigm in Business" states that as they do usually some number of employees flee, unable to adapt to the rights they are afforded, and responsibilities they must shoulder, under the changed system.)

Now am I saying that people are naturally slavish and therefore will tend towards hierarchy on a free market?

Not at all!

The average person who enters the workplace has been through 11-13 years of a mandatory education system which is highly authoritarian and hierarchical, and at the time in their life where their character is most impressionable and inclined to adapt to their circumstances. Their personalities have already been adapted to what was necessary for them thrive (or at least survive) under that system. Interestingly, the empirical evidence on how people best learn seems to suggest that a cooperative learning environment is far more productive than the isolated one that is the dish of the day at school. A crappy boss is not that unfamiliar in aspect from a crappy teacher, and it's hard to imagine that a population exposed to a long period of cooperative and mutually edifying education along the lines of the empirical evidence would be so tolerant of poor treatment from authority. If schools were to teach reasoning, social skills, emotional handing, conflict resolution, and other soft skills, far more people would have the skills to run organisations. start business enterprises, or create egalitarian ones.

The Marxist ideal of workers owning the means of production is perfectly compatible with free market capitalism, and there is no reason why there should not be more worker run cooperatives, communally owned business, and organisations with polycentric structures - other than the fact that currently, workers have no idea how to own the means of production or run a business. Partly because this requires different skills from what is required to complete their jobs from day to day, and partly because they are pre-conditions by years of hierarchical and authoritarian state education. If Marx was right and bosses provide no value - only skimming profit off the top - then workplaces without bosses will surely be more efficient and out-compete workplaces that shell out unnecessarily on paying them... but we will never know until we reform our education system.

The Excesses of Capitalism

The government - we are told - is necessary to protect us from the excesses of capitalism, and whatever gripes the average person might have about their elected officials, almost all of them can agree upon this.

But there's a problem with thinking the government can ever enter the economy as a fair referee rather than merely playing into the hands of whatever factions are most rich, powerful, and influential; because as soon as a corporations can make more money by angling for government favours than they can by serving customers that is exactly what they are going to do. Not necessarily because they are evil - but because it becomes the rational thing to do.

On an open market where only voluntary exchanges are permitted a business can only turn a profit by  providing something that the general buying public wants. No matter how greedy the corporate fat-cats may be, if they fail to 'cough up the goods' (and services) that people want they will go to the wall. [all puns intended] In this way the market forces otherwise self-interested people to apply their self-interest to social ends.

Critics may still complain about "tooth and nail" competition, but at least on a free market firms are competing to serve you better and win your disposable income. As soon as the government intervenes in the economy one thing is for sure: companies will compete for control over legislative bodies and the strings of the public purse. This is where the real "tooth and nail" begins.

According to The Sunlight Foundation for each of the 5.8 billion dollars spent by America's 200 most politically active corporations between 2007 and 2012 on federal lobbying and campaign contributions by they got $741 in return in kickbacks and benefits.

To pay for these kickbacks tax-payers were left $4.3 trillion dollars poorer - but that's not all.  $5.8 billion was spent in political gaming instead of invested in jobs and product development. These incentives drive companies to misallocate resources by making products that the general public doesn't want profitable, and products that they do unprofitable. In other words, the government has become the client of these corporations rather than their customers.

Firms might lobby or contribute to political campaigns to earn the exclusive right to provide government with their products. This will give them a huge advantage over competitors even if they are producing inferior or more expensive services. They can lobby for subsidies on their own goods or tariffs on cheaper or superior competitors.They can get the government to pass laws about who can and cannot operate in their sector.

Mandatory licenses, fees, reviews, huge stacks of forms, inspections, make it expensive for small start up businesses to enter the market and compete on an equal playing field. Companies spend millions of dollars on accountants, lawyers, actuaries and bureaucrats - not to mention tens of thousands of hours - to make sure they comply with the entangling webs of red tape, and make no mistake this harms the public. The costs are reflected in the price of products, and those are millions of dollars and tens of thousands of hours that are not being spent on more productive work that would benefit others. The rounds of "regulation" inflate corporate profits more and more, by cutting small firms out the market and directing sales to bigger firms who can afford specialists or whole departments to play the game.

By changing the incentive structure of the economy to favour profit through political influence over serving customers the government corrupts the market rather than moderating its excesses.

Free Market Equality

The free market - we are told - creates large disparities in income and inequality. But let’s look at the facts.

A few hundred years ago, the wealthy used to go around in carriages with 4 horses, everyone else walked. Nowadays the wealthy man may have a Lamborghini, or a Rolls Royce, but even so - most poor families still have a car. That is equality.

You can afford, if it takes your fancy, to have steak dinner every night. A few hundred years ago you would have had to have been a king to afford that. That’s equality.

The richest person in the world can’t get that much better a broadband connection than you can. He can’t get comfier shoes, or a bed, or a couch. That is equality.

Everyone – increasingly now even people in third world counties – has a phone. That is equality.
A rich person has a flush toilet. You have a flush toilet. A rich person has water coming out of his taps. You have water that comes out of your taps. A rich person has electricity. You have electricity. You can afford soap. You can eat fruit that is flown in from all over the world, in every season. The richest lord in the world a couple of hundred years ago couldn’t even dream of the luxury that people who are considered impoverished in 1st world countries live in.

99% of Americans living below the poverty line have electricity, water, flush-toilets and a refrigerator. 95% have a television. 88% a telephone, and 70% air conditioning - just like rich. That is equality.

Now, I hate the term market competition – because the market is not about competition. Competition simply arises naturally, wherever there is choice between more than one option - whether that is a product, a partner, spending time in the evening, which friend to go to lunch with, or which parking space to choose. That said, market competition – as that is the term which is commonly used for the phenomenon of different service providers trying to sell their products to the same customers who have limited time and resources in which to consume those products – creates an upward pressure on the quality of products, and a downward pressure on their price, because consumers want the best product at the best price in most cases.

That is why at first hardly anyone could afford a computer, and because those greedy rich bastards who were so exuberant and wasteful with their handfuls of money decided to pay for them anyway – instead of giving it to the poor – the companies that made them were able to fund research to make the kind of computer that you are reading this article on now affordable to you.

Libertarians don't have any solid plans

Recently, after quizzing me on how x, y and z would be achieved without Government intervention, a socialist told me that "All of the libertarians politics is based on "if and but" no real solid plan."

I said I can see why it might look like that but it's not really accurate. On reflection maybe he's right.

People often ask how various services would be provided if not for government, and often the best answer I can provide sounds something along the lines of, "perhaps it would be done like this, or like that, but it just depends on what people want; these are just my suggestions, experts would probably come up with better ideas, those would get tried out, improved upon, and the best ideas would win out over time."

That's admittedly, not a very solid plan. But we are really  skeptical about people with "solid plans."

Because if you have a solid plan you basically think you are a genius and can run the whole society so long as your plan gets implemented. That you have better ideas than the entire combined intelligence of society working to test potential solutions on the small scale and through trial and error, rather than complete a priori calculation, allow the best ideas to be optimised and prevail. 

We actually believe that the community as a whole has far better methods for reaching good ideas than anyone with a "solid plan" can ever achieve. We see the progress of society as working like a sieve for good ideas, bad ideas get weeded out and good ideas get more widely adopted and rolled out and improved upon.

Solid plans, on the other hand, are very inflexible.

If you ask a Socialist, "what do you think the policy should be on x," they almost always have one, and they almost never have the same exact policy as one another. They have fervent debates over which policies should be implemented (for the whole society) under socialism, not stopping to consider how autocratic this all is.

We don't like to impose our "solid plans" on other people - we like to let them choose which plans they think suit them best and learn from their own mistakes. We would rather a thousand plans were tried all at once. Some of those plans might turn out to be bad: a waste of time, money, and resources, but at least only a small number of people will be affected by then. (If the stakes are high enough people can choose to get insurance against a plan going wrong.) On the other hand you might have a solid plan that sounds great on paper but when you try it out it turns out to be terrible. On a free market when that happens the bad plan goes out of business, but if the government has implemented that plan over the entire nation the results can be disastrous.

When many flowers bloom, good ideas become adopted more widely, and as they do they can be tweaked and upgraded because there is not yet a massive infrastructure churning out that plan for everyone in the country. The infrastructure around an idea builds as it becomes more popular meaning that if a product is good but could be better new versions can come out before everyone is issued with the first version.

To illustrate the importance of this point, lets suppose some politician with good intentions decides to invest billions of public money subsidising a new solar panel roofing product which he believes in, and tens of thousands jump to the opportunity to get them cheaper. Three years later another company invents a new solar product that is 20% cheaper more efficient. Those public funds have just been wasted on an inferior product due to someone's solid plan. It would have been better if a smaller number of people bought the inferior solar paneling, and a larger number waited until the new model emerged. These things are too unpredictable for central planners to account for and so the market is the best arbitrator of how soon and by how many people new ideas are adopted.

Libertarianism is essentially about the humility to know that you don't know. No one does. No individual knows better than the combined genius of the entire society testing out products and services created by the best designers each particular field. Making those experts in charge of running their field is no solution either. They might have good information about potential advances in their particular area of expertise, but they don't have the knowledge of everyone's needs, wants and preferences which are constantly changing in real time, neither can they have knowledge of future advances, or knowledge of how every element of their ideas may work out in the real world once tried, or which elements could be tweaked and re-optimised. They can't possibly have all the economic, social, political, historical, etc, etc., etc. knowledge from all possible other fields to make sure that their dictates run smoothly, or that they are the best dictates that could be dictated.

So if libertarians don't have any solid plans, thank goodness for that. At least no one is trying to plan your life for you. Our solutions are simple, if you get the incentive structure right for solutions to flourish then the best solutions will win out over time and the rest will fall into place. It's not a perfect system owing to human error, but it's a self-correcting system where the consequence of bad decisions are limited and lead to better decisions in future. That's the most important thing.

A. S. 10/12/16

If you liked this article you will also benefit from reading Economics is Elegant! (not boring).

Government "investing in small businesses" is a crock.

A recent press announcement reported that Scottish Enterprise, the main economic development agency funded by the Scottish Government, has  £15.2 million investment in Aquamarine, a wave energy company that went bankrupt last year, following a £16.3 million investment in Pelamis, another wave energy company, which was biggest write-off in the agency’s 25 year history.

One thing you can guarantee is that if the government has to fund it, it's not worth funding.

To most people the idea of Government giving grants to small businesses is relatively benign. I mean, why not give the little guy a leg up to compete with the big boys?

Well because this attitude belies a basic lack of understanding of market forces and the role of the investor on a free market.

The purpose of an investor is to try to predict - from all of the potential projects and producers they can possibly choose from - which ideas are most likely to be successful. Consumers have to make choices over what to buy with their limited resources out of literally every product that is available to them, so what they buy is a pretty good indication of what they value. Managing to guess correctly what people are going to want in the future is no easy feat, and doing it well really is providing an invaluable service by limiting waste through overproduction of things people don't want, and the allocation of resources to promote advancements which people decide, of their free volition, improve their lives.

If an investor chooses wisely then they will receive a more generous a return on their investment, if they choose poorly they forfeit their outlay. This means that people who make good decisions with financial resources become more wealthy and have more resources to invest in projects, while those who make bad decisions will soon find themselves out of pocket with less capital to squander on wasteful investments. In this way the market has a natural mechanism for allocating resources to good custodians of those resources: people who excel at spotting a good idea.

It's a beautiful system because the only way investors can grow their wealth is by making it available to the community. If they decide to spend it instead it goes to someone else, if they hide it under a mattress their wealth will stagnate, and if they save it in a bank someone else will lend it out on their behalf.

Government simply does not have "skin in the game" and therefore is likely to allocate money along political lines rather than those which serve the preferences of average individuals.

There remains a prevalent belief that the enlightened self-interest of investors who stand to gain from investing will be insufficient to inspire the rich to part with their money, and so there is a necessary role for Government to step in as an investor. This, in fact, was one of the central doctrines of John Maynard Keynes who believed that markets, left to their own devices, were likely to suffer from a chronic lack of investment as-such because they were inherently unstable, and so there was really no rational basis for making investments in long term projects. I would contend that if entrepreneurs who do have "skin in the game" are unwilling to risk their hard-earned pennies on a potential failure then the government certainly has no place playing poker with the hard-earned pounds of the tax payer. More could be said, but a further discussion of Keynes (and his errors) will have to wait as it goes without the remit of this article.

Fundamentally, the idea that small business will always be at the mercy of large conglomerates is largely a leftie myth. Yes, in several ways big business has the advantage - they can buy inputs in bulk for cheaper giving them economies of scale, they can avail themselves of large advertising campaigns, they can (regrettably) lobby the government for special privileges, contracts and unearned advantages, and may have other privileges, but they are at a disadvantage in at least one important respect. The larger a company is the more difficult it is for any one individual or group of individuals to keep a handle on all the relevant information necessary for making good decisions in the interests of the entire body. Large organisations tend to chunk down into smaller bodies of up to 150 people, and then these bodies have to be coordinated from the top down. Because of this, some areas of the body are likely to be running more inefficiently than others, and changing the protocols of production over a mass scale may be slow, and slower still the larger scale the production is. Picture the relative difficult in changing the course of an oil tanker as opposed to a number of smaller, more agile crafts. Small agile businesses - which may not be able to compete with Goliath competitors as a whole - can still chip away at sections of their markets by being more in touch with consumer preferences on the ground. They can cater to niche preferences with personalised services and superior, custom-made products, while Goliaths produce standardised products for mass consumption. A good selection of Davids and Goliaths will give consumers the best choice. A large company may be in many markets, while a David only needs to monitor a few, and can monitor them with precise clarity owing to the small scale of their operations. A number of Davids can chip away at a Goliath from all angles and even bring him down if he gets too complacent.

Sometimes people worry that large corporations will just buy out successful small businesses to prevent this from ever happening, but even those worries are misplaced. If David has a great product, and Goliath has a large infrastructure and access to larger markets, absorbing David's product into his company can only help a far greater number of people get access to whatever advancement might otherwise remain a niche product.

All this is not to say that there is nothing government can do to even the playing-field for start-ups. There are many ways the Government can help small businesses compete with large established conglomerates, and in doing so help increase the number and quality of option available to consumers, but these do not involve handing out tax payer money to pet projects. Making it easy for small businesses to hire people without too much (or any) form filling and bureaucracy will save them time and money consulting experts, simplifying the tax code will stop them having to employ expensive accountants, and stripping back the regulatory structure so that rules are intuitive and easy to comply with will save a heap on lawyers. Big businesses can afford to have these employees on staff, small businesses often cannot.

When anyone can start selling and hiring the moment they have an idea for an innovative new business we will soon see a renaissance of people "pulling themselves up by the bootstraps."