For all the fun I have poking the French with a stick, frere Jacques (Chirac) and I do agree on a couple of things. People are greedy. Therefore, businesses -- really just amalgamations of people -- are greedy.
I also think that governments ought to try to ensure that economic policy encourages businesses to do the greatest good for the greatest number of people. (I know, I'm a big pinko.)
We part ways, however, on what governments should do in order to effect these goals. Since greed is a given, I tend to think that governments should tailor their policies toward channeling that greed into investment and innovation. Frere Jaques thinks you can just put a stop to the greed, bullying businesses into providing jobs and security by keeping underperforming operations.
Witness his recent tattle-tantrum regarding Hewlett-Packard's (NYSE:HPQ) job cuts. Long story short, Chirac asked the EU to do something about the HP pullout, but the EU just shrugged. Next, French Prime Minister Dominique de Villepin made a vague threat to somehow require Hewlett-Packard to "repay" any "public assistance" it may have gotten, although de Villepin neglected to quantify exactly what that might be. C'estla vie.
Easy answers, bad consequences
As I've mentioned before, this kind of government-mandated inflexibility only hurts economies and citizens in the long run. The greed doesn't go away. It's simply redirected, forcing companies to always play defense instead of offense. That means little job growth, little investment . in a nutshell, the "European" way, as described by German journalist Olaf Gersemann, author of Cowboy Capitalism. This is pretty intuitive stuff: If you're a tech company watching the goings-on in France right now, how enthusiastic would you be about opening a plant in the land of the Brie?
Profits are not the enemy. Profits are the reason businesses try new things. Like, oh, creating factories and jobs.
Look in the mirror
But before you start snickering too much about those silly socialist French, take a look in your own backyard. Across this country, our own fair-weather capitalists are starting to howl "Down with profits!" By which they really mean: "Down with your profits. As for us, gimme, gimme, gimme!" Freedom and enterprise are only good enough until they produce uncomfortable consequences for our own wallets, it seems.
It starts with our bureaucrats and elected officials. We've got self-serving Mississippi politicians trying to change the definition of "flood" to force insurance companies to pay for damages that, however regrettable, were clearly excluded from contracted policies. Of course, all this will do is ensure that residents will either pay through the nose for insurance or get none at all. What would you do if you ran AIG (NYSE:AIG), Allstate (NYSE:ALL), or Travelers (NYSE:STA)?
We've also got ever-increasing calls on Capitol Hill to investigate "windfall profits" being made by oil companies -- presumably anyone in the biz, from ExxonMobil (NYSE:XOM) to Valero (NYSE:VLO). Gas is expensive because everyone wants a lot of it, and there's less of it around. Keep the price of gas low? Never mind that artificially suppressing the cost would only encourage demand, ensuring that current shortages continue. You think oil companies are going to invest in more production capacity if they believe our government is simply going to yank their profits and redistribute the resources according the political whim of the day? Gimme, gimme, gimme. Chirac would be proud.
Even bad luck favors the prepared
I'll be blunt. I don't like $3-per-gallon gas (or $4 or $5) any more than anyone else. But the last time I checked, no one was forcing any of us to choose that 14 mile-per-gallon Canyonero over a Honda (NYSE:HMC) Civic, nor drive it 80 miles each day in order to escape the 'burbs and live in the 4,000-square-foot "executive estate" with the grassland view.
If we take anything positive away from the recent economic upheavals that hurricanes, massive layoffs, and bankruptcies have brought, let it be an important lesson: We need to be prepared, as individuals, for the financial consequences of all our decisions in good times and bad. That government we love to scorn when all seems sunny may not be able to fix everything when times are rough. Even if it could, we'd still need to be careful that the cures we propose aren't worse than the maladies.
For related Fool Takes:
- We need to see beyond lost jobs.
- The gas-price legislation that seemed like a long shot to one Fool has become more popular.
- Pricey gas? Blame it on Katrina, Rita, and maybe, our unchecked consumption?
- Your slick Attorney General got a plan to stick it to the insurance industry? Prepare for your rates to triple.
Seth Jayson thinks a savings account with four months' worth of living expenses is a good start to financial independence. At the time of publication, he had positions in no company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.
