24A048 Market Scavengers by Jim Davies, 12/10/2024

In nature, when an organism dies other critters eat the bodies. Seems gruesome, but that's the way it works - and a good thing too, or else corpses would litter everywhere. Vultures are well known as scavengers of the remains of larger animals, and the press they get is very unfair, for they don't kill. They just eat what has died, or what others have killed. Next best to being a vegetarian bird.

In the free market, some traces of which can be seen even today, one kind of participant is the human scavenger; he or they take care of companies that fail. They dispose of its remains, so that it doesn't hang around and clutter, using up valuable resources but failing to deliver enough value for un-coerced customers to buy.

They may be called "asset strippers" and are, like vultures, often unfairly despised.

Such businessmen have access to capital (their own, or borrowed from banks or other investors) and a sharp eye for firms that are not producing a good return for their shareholders. That can happen with older companies that have done well in the past, but which have not kept up with changing patterns of demand; for example there might be a chain of retail stores that did well before the Internet Era, but which is now running short of customers. It has several valuable parcels of real estate, but the return on that asset is poor.

Enter, the asset stripper. He buys enough shares in the firm to control it, then puts it out of the (failing) business and offers the assets (real estate) for sale for other purposes; in-city houses, office or apartment blocks, factories; whatever buyers prefer. Then the stripper withdraws and enjoys his profits, while the assets' new owner puts them to that more efficient use and enjoys his.

A reason some despise this is that the previous, failing business employed a lot of people, who lose their livelihoods. The stripper may provide a generous severance package but still, they didn't wish to move at all - even though, if there were a free labor market, there would be zero unemployment. He breaks a strong sentimental attachment, and so provides an opening for socialist politicians to enter the scene, cry some crocodile tears and spread lies about wicked heartless capitalists. They may even try to get the practice prohibited, and encourage teachers to train the young and gullible to prolong the irrational hatred.

If that were to happen, inefficient and unprofitable firms would litter the land, so producing widespread poverty; for proof, see the Soviet Union. Waste disposal is vital; resources are limited and if prosperity is to be widely enjoyed they must be used to best effect.

Now compare a failing business with a government department or function. There, no profit motive exists in the first place - but resources are used up anyway, and there is a stated mission, an alleged reason for it to exist. There should also be a strong incentive to use those resources to fulfil that supposedly good and worthwhile mission at the least possible cost; to be efficient. Bureaucracy works against that, everywhere; and no government office has competitors to provide an incentive to minimize costs, so after a while all of them are in the same condition as the failing business.

But there is no asset stripper, no scavenger, able to buy it up, close it down and make its assets available to a properly efficient enterprise. So they all continue to rot. That is why government costs so much and achieves so little - and must always do so, by its very nature.

When government monopolizes every function in society that means all of them inevitably rot; again, see the USSR. When in the coming zero government society it does not even exist, no such function or enterprise will rot, or not for long. The free market with its scavenging asset strippers will ensure that. Result: no resources (land, buildings, machines, people...) are wasted, all are used for maximum profit, hence a widespread level of prosperity never yet seen.

About A B O U T:

It's been a decade since the page describing this Blog (for new readers) was written, and on reflection it didn't convey much anyway. So last week I corrected that.

At the bottom-right of each Edition there is the icon "About the Zero Government Blog" but the better to catch the eye, it now appears with a distinctive yellow font on a green background.

Click it now, and you'll be transported to the new "ABOUT" page. Improved, yes?