The Libertarian Review March 1980 - Libertarianism.org

~\~~,{AP!10Of windfallsand bailoutsBRUCE BARTLETTIN A REMARKABLE EXampleof irony the u.s. Senatevoted within the space ofthree days during the weekofDecember 17, 1979 toimpose a $178-billion taxon the oil industry for the"sin" of having made profits,while also voting to giveChrysler Corporation $1.5­billion in Federal loan guaranteesfor the "virtue" ofhaving lost approximately$1-billion in 1979.The Senate was, in effect,telling the American peopleand the world that profitsare Dad and losses are good.It was telling businessmeneverywhere not to make investmentswhich might reapthem large profits or itwould tax them away. Itwould be better for them tomake bad investmentswhich caused them to losemoney, for then the governmentwould come totheir aid.'Such actions show an incrediblemisunderstandingof the nature of profit andloss in our economic system.When individuals makeprofits everyone prospers,for this means that they havefound a better way to satisfyour wants, to supply us withnecessary goods and services,and to make efficientuse of scarce resources. Inotherwords, the existence ofprofit is proof that morewealth has been createdthan consumed, and societyas,a whole is better offfor it.It is only the prospect ofprofit that gives people theincentive to find bettermethods of production andbetter products which canbe sold for lower prices. Andit is only the prospect ofmaking large profits whichencourages people to makerisky investments in newtechnologies, to look fornew supplies of scarce naturalresources in unexploredareas, and to make largecapital investments whichmay not payoff for manyyears.On the other hand, losseshurt everyone, because thismeans that capital has beenmisallocated, that scarce resourceshave not been put totheir best use, that someonehas misunderstood the public'sdesires by producinggoods it did not want atprices it would not pay.Losses indicate that errorshave been made.The market today is tellingus that profits are to bemade in producing oil andthat little or no profit is to bemade in producing the kindsof cars Chrysler produces.This means that peopleshould be encouraged tofind and produce more oil,while Chrysler shouldchange its operations toproduce and market differentkinds ofcars atprices thepublic will pay.Congress is moving in theopposite direction. It is actingto discourage the productionof oil, and it is actingto keep Chrysler in operationdespite its errors. TheTHE LIBERTARIAN REVIEW