Most people have trouble understanding the libertarian, free market principle that businesses should not only be allowed to succeed, but also to fail.

Failure may not be an option in the Marine Corps, but it is not only an option in the free market–it is a necessity.

Today (November 19, 2008), we got to view the obscenity of Detroit auto executives appearing before Congress to beg for (or demand) somewhere between twenty-five and fifty billion dollars in taxpayer loot. This, from businesses that paid bonuses in the millions of dollars to executives who have managed to drive their businesses into the ground.

Now, if these executives had first voluntarily given back their bonuses, and voluntarily forgone their salary for the year (or at least cut it down to something closely resembling the salary of their workers with whom they will not share a washroom), they would have at least garnered some sympathy.

And of course, as has been widely reported, they came to Washington to beg for YOUR money, in private jets, at a cost of about twenty thousand dollars each. Plainly, these creeps think they are just entitled to the money. Cut back on extravagance for the sake of the company? You gotta be kidding!

But even had they flown commercial, the answer to their begging is, properly: “hell, no!” Not out of disgust at their impertinence, but out of loyalty to a principle. Failure, in the marketplace, is arguably more important than success, in the overall scheme of things.

If the Big Three automakers are turned away, and go bankrupt, thousands and perhaps millions of people will lose their jobs–temporarily. They will have to take jobs in unrelated industries. They will likely have to take a significant pay cut.

But the automakers don’t just go out of existence, their assembly lines, suppliers, and sales networks just disappearing in the wind. What actually happens is, they get reorganized under bankruptcy, and a bankruptcy judge gets them reopened for business under much, much tighter fiscal discipline. Such a judge might close the executive washrooms. He might sell the company jets to raise badly-needed cash. He might suspend any bonuses until the firms show a profit.

Under that newfound discipline, the automakers might (again–no guarantees in a free society) make it back, start to re-hire workers, and build better cars at better prices.

Or, perhaps they would fail again, in which case America has to buy its cars from Toyota, Nissan, or many other foreign companies. But those companies actually build a lot of their cars in America, employing thousands of American workers. And perhaps, they would be able to buy the closed Detroit plants at bargain-basement prices, start up production again, and re-hire the former employees of the Big Three.

But again, folks: no guarantees. In a free society, the goad of possible failure forces companies to operate efficiently, with an eye on quality and customer service. The specter of failure teaches other business executives not to go down the path of those who failed.

And if anyone needs to feel the sting of failure, it is the useless executives who collect million dollar bonuses for destroying their businesses, then ride their corporate jets to Washington to demand taxpayer subsidies.

Failure is ALWAYS an option, in a free society.

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