A Free Market Call to Arms

by Brian D. Aitken | August 12, 2009

Want to save the economy?

It’s not easy, but it starts with entrepreneurs and executives like me and you. The biggest problem is, as much as we think the government helps small businesses and start-ups, the government actually harm entrepreneurs’ long-term objectives. Ever wonder why, with all the money provided through loans and grants, most startups fail within their first 5 years?

Lots of these failed startups can be attributed to inexperienced entrepreneurs entering into an already competitive marketplace. Some of these entrepreneurs lack management skills, others didn’t take the time to formulate a thorough business plan, analyze the market and competition, or bring enough capital to the table. Many entrepreneurs actually bring too much “capital” to the table; but they do so in the form of loans which they ultimately cannot pay back (this is where I reiterate the importance of a thorough business plan). Outside lack of planning the single biggest threat to a small businesses success is the government.

I know, I know. Grants, government-backed loans, the Small Business Administration--all of these things are meant to help entrepreneurs; not bankrupt them. But what about government subsidies and bailouts to failing companies? These policies hurt entrepreneurs more than the government programs in place to help them.

Government subsidies are killing America. Subsidies, by definition, support a failing business with tax payer money. This immediately removes any incentive of the failing business to rethink their strategy or develop new revenue streams. Think about it: if the government paid you to fail, would you change your business strategy? Of course not.

An April 2009 Rasmussen Report showed that 37% of the thousand people interviewed were in favor of government subsidies to keep failed newspapers afloat. Personally, I love newspapers and magazines. I believe they are a craft and an art form; but a failed business is a failed business and these professionals won’t be the first starving-artists out there. Competing companies will eventually startup or expand where these professionals can find employment. This requires an amount of patience and competence not ordinarily seen in the recent past but which is necessary to the long term economic health of our nation.

I recently read an article which stated that newspapers were failing to successfully transition to the internet. The author attributed this to charging a fraction of what they were accustomed to paying for print advertising. This is simply foolish and not a sustainable long-term strategy.

For newspapers and magazines looking to transition, or who have already transitioned, to the digital world of online-news: Stop raping your profit margins! Charging pennies on the dollar for digital marketing compared to print marketing is a long term strategic failure. Your product is costly; there are hundreds of overhead expenses that must be met. If you don’t want to wind up like your bankrupt-print-counterparts you must start demanding a price necessary to profit!

If you don’t do this you will fail; and I won’t bail you out.

What America needs is a strong, diverse, open economy—not corporate logos masquerading as national liabilities. This whole notion of being “too big to die” is simply nonsense. Businesses fail and when they do they’ve failed for a reason. By throwing billions of dollars of tax payer money to these huge corporations we not only impose a huge economic sanction against the American people but we also remove the entrepreneurial incentive necessary to create a competitive company with a desire to succeed where these government-backed corporations have failed.

My industry has been in the spotlight throughout all of 2009 with talks of newspaper bailouts and Dan Rathers recent request for a “Presidential Commission” to explore the condition of Americas’ news media. I have a great deal of respect for Mr. Rathers and would like to point out that, in his August 9th Washington Post column, he specifically stated that he was not calling for a government bailout or government control of the industry. Unfortunately, as soon as we request the government to explore the status of an industry we simultaneously welcome them to offer solution—which usually involves government regulation and intervention.

Mr. Rathers concern appears to be the shortening supply of “real news” coverage as opposed to a lot of the yelling matches that pass for news on television. However, the best solution to save “real news” is a free-market solution; one which increases internet advertising costs while lowering costs for other mediums with less demand. This is not happening. As demand drops for print and television advertising and demand increases for internet advertising we are seeing a drop in prices across the board. Once the market adjusts for this, and the internet is seeing the profit it needs to sustain itself, then these companies will be able to invest in more journalists covering “real news”. The problem is that so many internet based news companies lack long-term focus and are not planning for this impending responsibility; in short, they are undercutting their own interests.

There is a belief that new media companies cannot emerge in this market simply due to the massive conglomerates like Disney, Viacom and News Corporation who own most of the media outlets around the world. It is true that Government subsidies and tax incentives helped to create these corporate Goliaths, however I personally challenge the notion that it’s impossible to be successful in this industry without government or conglomerate blessing. We should all embrace the free market and encourage other entrepreneurs to take back the entertainment and news industry.

It’s time to reclaim our economy. The government has shown that it does not operate in the best interests of small businesses, entrepreneurs, or the average tax-payer. But, what can America do? To start, America needs a shift in policy and a drastic change in the American psyche.

We, as American citizens, need to end subsidies and corporate bailouts. We need to demand decreased government regulations and interventions and open the free-market to entrepreneurs.

It’s time to hold businesses accountable for their liabilities and it’s time to hold policy-makers accountable for their actions. Remember, our representatives are supposed to be on the hill to represent our interests. When they fail to do that it is time to remove them from office.

All of us need to adjust our perceptions of America. We aren’t owed anything by anyone, including our government. It will take time for Americans to lose their sense of entitlement and realize what is necessary to create real wealth and prosperity; but it must happen, and entrepreneurs will lead the way.

Brian Aitken is CEO of Alister & Paine, INC.

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