Learning The Free Market Lessons About Bailouts

Tom DeWeese
2/25/2009

My first reaction, when I saw the article, was of utter horror. It was entitled, “Obama Imposes Pay Cap on Executives.” Obama intends to dictate salary caps to American executives of private companies. We should all be very frightened of a government that seeks such power. It’s pure communism. The only result of such a situation can be that corporate executives and CEOs become mere employees with no incentives to build the business and increase profits. When that happens, there is no business.

In a free market, the CEO is free to take advantage of earned profits and pay himself accordingly – assuming the board of directors go along – presumably they too are profiting. All is well. But in a free market there is also the very real risk that the company can fail. Most, in fact, do fail. It’s a rare company that succeeds and actually makes a substantial profit.

In a free market, businesses do not exist to serve the common good – they exist to produce goods and services in order to create a profit. Society is served because there are products to buy and jobs created. But when a business loses site of that fact, acting more like a government agency living off taxpayer money, they are a business no more.

The story continues …..