Dan was right


Filed Under General on Oct 19 

Dan Henninger of the Wall Street Journal beat me to the punch with his excellent article last week on how capitalism saved the Chilean miners.

His overall, indisputable point was that the competitive nature of free-market capitalism—that drives private companies to innovate in their quest for market advantage and profit—fostered the atmosphere that made the creation of Center Rock Inc’s deep-earth drill bit possible. Center Rock, a small 74-person company, developed this innovative drilling technology using their own privately-generated profits.

With no profit motivation, there would be no drill bit invention, and no life-saving technology for the miners. Pretty simple.

When Government intrudes on the free market profit motive and attempts to control the production/implementation process through over-regulation or onerous taxation, innovation and cutting-edge creativity are stifled. That’s why the vast majority of technological breakthroughs in industry, high technology, medicine, and agriculture take place in economies that have the least-restrictive regulations and the least amount of Government control.

This is not to be construed as meaning that no Government regulation is preferable. Human nature is human nature, and the possible thought of ‘getting away with it if no one’s looking’ is ever-present. Common-sense oversight is needed. But over-regulation is ruinous and horribly counter-productive.

Look at the countries Henninger mentions in his article: The U.S., Japan, South Korea, and Germany. Is it a coincidence that these are the countries consistently at the forefront of technological innovation and production, year after year, decade after decade? Is it a coincidence that the countries whose market dynamics produced such companies as Apple, Pfizer, GE, Sony, Honda, Samsung, LG, Mercedes-Benz and Siemens also produced the technology that saved the Chilean miners?

No, it’s not a coincidence.

Is it a coincidence that countries without competitive free-market dynamics like Russia, Syria, Venezuela, Iran, et al. didn’t participate at all? Look at every “Engineered in…..” or “Designed in….” label in your home. How many of them say “…. in Syria?”

This same free-market capitalism dynamic—the quest for unrestricted profit—is at work in every industry, in every sector, driving innovation, and speeding up the timeframe in which market solutions are brought into reality. This is especially true in the energy sector, as untold millions—even billions—in profit dollars await the inventor(s) of the next truly viable ‘alternative’ energy form or production/delivery method. Maybe it will be an environmentally-agreeable, economical method to unlock the vast crude oil reserves frustratingly imprisoned in the U.S.’s mid-West oil shale deposits. Perhaps it will come in the form of a breakthrough in solar technology that removes the current-day financial barriers to efficient solar energy generation. Perhaps it will be in an unforeseen area altogether. But one thing is assured: If the free-market profit incentive is significantly impeded by over regulation/Government intrusion or burdensome Government mandates, then the likelihood of an imminent breakthrough is almost non-existent.

This is not to say that absolutely no worthwhile inventions or innovations occur at Government behest. Humans are an ingenious lot, and many life-enhancing consumer developments were the result of Government programs originally intended as something else altogether. The U.S.’s space effort in the late 20th-century produced all manner of new inventions and technology that found their way into everyday life. But the consumer benefits were by-products to the main goal, and whatever we gleaned in new consumer technology was the result of blind luck, not targeted results. That’s not an efficient model.

Right now, the innovation incentive of U.S. industry is in limbo. With the threat of new “consumer protectionist” Government regulations, an unclear, changing-by-the-day tax policy, Government involvement in so-called “Health Care Reform” that is likely to drive companies’ health expenditures up, not down, many firms are sitting on piles of cash, not hiring, not doing research for new technology and products, and not taking the chance on new innovations. Business climate uncertainty is the mortal enemy of dynamic corporate expansion. We may be waiting a long time for the next Center Rock.