In a recent op-ed piece, J.P. Morgan Chase (NYSE:JPM) chairman and CEO Jamie Dimon asserted that there should be no limits to the size companies are allowed to grow, while at the same time any company should be allowed to fail.
While I heartily agree with Dimon’s statement, the problem is this should be done in a true free market climate where there’s no government interference and little influence from the monetary policies of the Federal Reserve.
As long as big bankers and financial institutions can receive help outside the free market, there is going to be corporate monstrosities built, not from competitive excellence, but from the help of the government and those issuing money in ways that harm capitalism rather then support it from not interfering in it.
When considering the idea of allowing businesses to grow to any size they wish, that’s great if it was within a real free market, but when you only have a partial free market, which is what exists in the U.S., you can’t operate in that way under Dimon’s assumptions, as all you’re doing is helping to sustain and support companies that are bloated and fat, and not lean and mean from strong competition. So when they’re not only allowed to grow big, but enabled to by the government, you have a business on life support propped up because they no longer have to compete with other companies to survive, but go to the government to extract taxpayers’ dollars for their benefit.
The conclusion to me is if a company gets huge based on great business practices within the context of the free market, it really doesn’t matter how big they get because they know what to do when operating in easy or difficult economic conditions, and competitors have forced them to operate under best business practices.
For those businesses that are like children that contact mom and dad every time they make poor decisions and are financially bailed out by them, until the parents stop reinforcing their lifestyles, they’re going to continue on doing the same until circumstances and the real world force them to adapt and live differently. It’s no different with big banks and financial institutions in connection to the government.
If things don’t change in that regard, we’ll see these bloated monsters that should never exist because their growth didn’t come from the types of business practices wish would grant them a long life and profitable life.
So too big to fail is the consequences of the government interfering over and over again in ways that encourage the same practices which brought the financial institutions to the brink of disaster in the first place. They shouldn’t have been allowed to continue on, and they wouldn’t have in a real free market which would have had the consumers and their customers discipline their excesses by leaving to do business with a better run company. That’s how business monstrosities are kept at bay, rather then some type of artificial limits imposed by the government on the size of a business.
The government helped create these bloated monsters, now they want to try to tame the monster they’ve been feeding for decades. The problem is the monster doesn’t want to be limited in its feeding habits, and now that they’re the size they are, know they can dictate the terms of how much they’re fed, rather than feeding on a more lean diet based upon their own skills and decisions.
Any company that builds itself from giving the customer what they want at the best prices with little of no government interference is positioned to successfully navigate whatever economic waters they’re forced to operate in. Wal-Mart (NYSE:WMT) is one of the greatest examples in history of a company that has effectively done that. That’s the reason the banking industry lobbied to keep them out of banking, as they know Wal-Mart would have decimated them in their poor practices which have brought us to where we are today.
