By Wayne Allyn Root, 2008 Libertarian Vice Presidential nominee
I woke up yesterday morning and got a chance to see what capitalism really looks like. You see capitalism- for better or worse- is alive and well in Las Vegas, Nevada. The headlines in the Las Vegas paper were filled with pain, losses, doom, gloom, bankruptcy and…CAPITALISM. Station Casinos reported they might file for bankruptcy by April 15th. Bally's Hotel announced they were closing their Race & Sports book until next fall. The Riviera Casino Hotel and Hooters Casino Hotel both missed interest payments and could file for bankruptcy soon. Herbst Gaming is already in bankruptcy. None of the bad news in yesterday's headlines even included news about the three biggest gaming companies in the world. Harrahs, MGM Mirage and Las Vegas Sands (Venetian) are all multi-billion dollar conglomerates on the verge of bankruptcy (with stock prices off by more than 90%). And to top it off, one of the biggest developers in Las Vegas, James Rhodes, also made headlines yesterday by filing a petition for bankruptcy on behalf of a multitude of his businesses. It's all just another day at the office in the midst of the worst economic crisis since 1929. And I have a feeling- with Obama's tragic economic policies soon to take effect- we are heading for an economic crisis worse than 1929. This folks is what a full-fledged depression looks like.
But there is one good thing to come out of all these depressing (and shocking) headlines- they prove that in Las Vegas, we still practice capitalism. You see failure is a natural (and unfortunately, necessary) part of capitalism. Failure plays just as big a part in a capitalist system as success. Companies succeed and fail every day in a capitalist system. Companies are allowed (and are supposed) to go bankrupt without the government jumping in to save them. Bankruptcy serves a useful purpose. It doesn't mean that a company is going out of business. It might mean that the company is restructuring and shedding unprofitable contracts, or bloated union contracts under the protection of bankruptcy court. It might mean that the company is becoming leaner and meaner. It might mean that a competitor will buy the company out of bankruptcy.
That's precisely how capitalism has worked for centuries. That's precisely why capitalism works. In a free market capitalist system, businesses and businessmen are allowed to succeed and fail without government interference. Some people soar, while others flop. That's precisely how you figure out the winners and losers- you leave companies (and people) alone and allow them to succeed or fail. If they fail, someone new will come along to pick up the pieces and do it better. How would anyone learn from these failures and mistakes, if government doesn't allow anyone to fail in the first place?
There is risk inherent in business. You cannot take risk out of the equation, or it isn't capitalism anymore. To change that equation produces government-controlled Socialism. In the long run, government interference in business is a disaster. Yes, in the short term it might avert a sudden panic or market crash. But in the long run, allowing a company to fail is healthier for the system and the economy. Ask Cuba…or the old Soviet Union (who had to build a wall to keep people from escaping)…or the People's Republic of China of 30 years ago. Under communism China was once one of the poorest nations in the world. Today, under a capitalist system, it is one of the richest. Asking government to save businesses, to choose winners and losers, distorts the free market system and kills capitalism. In the long run it costs millions of jobs to artificially prop up failing companies. In the long run it damages GDP (Gross Domestic Product) just as Obama's own Congressional Budget Office now predicts that Obama's trillion dollar bailouts and stimulus plans will decrease GDP over the next decade.
Worse, government has no idea how to run a business. Most of the people working in government couldn't get or keep a job in the private sector. Now we suddenly want them to make life and death decisions about how to save or run major companies or industries? How preposterous. Failure is natural. It is part and parcel of the capitalist system. It is actually…HEALTHY. If government would just leave the banks, AIG, and the "Big 3" automakers alone, we'd all be far better off in the long run. When TWA and Eastern Airlines failed, we all survived. As a matter of fact, out of the ashes rose Southwest Airlines- and flying got better (and more profitable). When the U.S. television manufacturing industry failed, somehow we all survived. We found new companies to make better television sets at cheaper prices- Sony, Sanyo, Samsung, etc. We should all keep this in mind when we discuss the options for companies like GM, Ford and Chrysler. No one is too big to fail.
Is failure really bad? Or do good things come out of failure? Look no further for proof than the housing market in Las Vegas. Housing prices have collapsed, down 50% or more from just 2 years ago. I'm certainly not happy about it. The Las Vegas economy is downright painful. It has already put one of my businesses out of business. My home is down as much as 50% from its high value. My ownership in two casino stocks is down over 90%. But I haven't asked government for a bailout. I haven't asked government for a dollar, or a favor. I've been too busy restructuring my life. It's called initiative. It's called ambition. It's called creativity. It's called tenacity. It's called being RELENTLESS.
I want and expect nothing from government. I don't believe in handouts. I believe in free markets, self-reliance, and personal responsibility. I didn't complain to my government when my home went up 50%; what right would I have to complain when it goes down 50%? But this is called free market capitalism. We've had 25 straight years of economic boom and expansion (since the amazing economic recovery orchestrated by President Ronald Reagan). A bust is to be expected after a quarter century of boom. Government can't change that (but they can make it far deeper and far worse).
But this housing crash isn't bad for everyone. What's happening right now in Las Vegas is proof positive of why government should keep its hands off of free markets. Some people are cheering the drop in Las Vegas housing prices. Like those who have been priced out of the housing market for years- some for a decade or longer. New buyers, first-time buyers, and young couples are thrilled at the Las Vegas housing collapse. They are finally able to buy homes at prices that reflect reality. The result is a housing BOOM in Las Vegas. Residential real estate sales have doubled from this same period a year ago. Doubled! Remarkable. Las Vegas homes are flying off the shelf. Yes, most of them are foreclosures. Yes, $500,000 homes are selling for $200,000. So what? That's good for the buyers. This could be the greatest buying opportunity in history. In capitalism, one man or woman's terrible loss can sometimes be another's fantastic gain.
But if government interferes it screws up the natural cleansing process. If government stops homeowners from losing their homes, then new buyers will be locked out of the process. And landlords who want to rent homes to those who lost their homes will suffer. Worst of all, government will be unnaturally propping up home prices- thereby risking a new housing bubble. Only a free market can and should determine the price of a home.
Wall Street is no different. With casino stocks like MGM Mirage and Las Vegas Sands selling for $2 per share, down from a high of $150 per share (or higher), some investors are cheering. These stocks are affordable for the first time in years. Other investors have made a fortune selling them short all the way down. In each of these cases, there were winners and losers, and none of it was the government's business. To ask the government to get involved would distort the free market, and favor one group over another. It would kill capitalism. Stock investors have a right to profit or lose on the way up, and on the way down. The problem is that no one complains on the way up, but sore losers and whiners complain bitterly on the way down. They want to keep their massive profits, but demand government take action to take away their losses. I have news for them- that's not how capitalism works. Worse, government involvement in business is the very definition of “conflict of interest.” You can bet whoever President Obama or Congress chooses to “save” will be chosen by the size of their past and future campaign contributions.
Bankruptcy in the business world works the same way. Government has no right- according to the Constitution- to get involved in bailouts, managing corporations, limiting salaries of executives, or firing CEO's. The answer is to leave these companies alone and let the free market and private investors figure out a way to save them, fix them, improve them, or let them go the way of the Edsel. Am I worried about the futures of Las Vegas companies like Harrahs, MGM Mirage, Las Vegas Sands, Stations, Herbst, Hooters or the Riviera? Sure. I want them to succeed. I'm rooting for them (excuse the pun). But in the end, it isn't government's job to get involved. It sure isn't government's job to use taxpayer money to choose winners or losers (based on legal bribes called "campaign contributions"). These gaming companies will either find a way to survive, get restructured, or get bought by a competitor. That's called capitalism. I'm proud to say it's alive and well in my hometown of Las Vegas, Nevada. We don't ask for bailouts. We don't need no stinkin' bailouts. Here in Nevada we believe in capitalism, free markets, self-reliance, rugged individualism, personal responsibility, and the American way. We've done pretty well so far with this Frontier Spirit. I think we'll stay the course.
Wayne Allyn Root was the 2008 Libertarian Vice Presidential candidate. His new book will be released by John Wiley & Sons this Spring entitled, “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts.” The book is available for pre-sale at Amazon.com. For more of Wayne's views, commentaries, or to watch his many media interviews, please visit his web site at: www.ROOTforAmerica.com