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THE MARKET SYSTEM

The primary purpose of this page is to pay homage to the free-enterprise system. The free-enterprise system also is known as the market system or capitalism. The microcomputer industry will be used to illustrate how the free-enterprise system works. Microcomputer companies such as Apple, Microsoft, and Google demonstrate that, at the dawn of the 21st century, the free-enterprise system is as alive, vibrant, vivacious, and thriving as ever.

At its most basic level, a free-enterprise system is one in which property is privately owned. The free-enterprise system involves the buying (consumers) and selling (producers) of goods, services, and factors of production (land, labor, and natural resources) based on the market forces of supply, demand, and price. The principal participants in the market system are businesses, households, and governments.

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The government usually gets involved in the free-enterprise system when there is a system failure. Take mail delivery, for instance. Private companies might decide that it is not profitable for them to deliver mail to some remote rural locations or to some poor areas where the residents could not afford to pay for the delivery. As a result, resident who live in rural and poor places would never receive any mail. In a scenario such as this one, the government would take responsibility for delivery of the mail so that all citizens could receive their mail.

Another instance of government intervention into the private-market system would be in the public parks arena. Members of society might decide that everybody should be entitled to go to the park and enjoy the open space without having to pay an entrance fee to do so. The government would purchase a parcel of land, develop it, and maintain it as a city or neighborhood park. The public park would be free for all members of society to visit and enjoy.

Another instance of government intervention into the private-market system would be in the arena of economic stability. Free-enterprise economies tend to be cyclical in nature. Free-enterprise economies tend to go through periods of expansion and contraction. In the process, there can be times of high unemployment, and there can be times of high inflation in a free-enterprise economy. The government usually would intervene into the free-enterpise system to assuage its most adverse cyclical effects. The government might introduce various fiscal and monetary measures to stabilize and even to stimulate the economy. During periods of sustained economic downturn or sluggish economic growth, politicians often are blamed for adopting ineffective policies and ineffective strategies to foster overall economic stability and growth. In reality, however, in a free-enterprise system, private enterprise, private businesses, or the captains of industry (namely, boards of directors and chief executive officers) are the true drivers of economic prosperity in society. Much like an umpire in a baseball game or a referee in basketball or football game, the government's primary role in the broader economy is to serve as a referee.

In a free-enterprise system, the government is not the source of economic prosperity in society. Private businesses and the decisions made by business owners and managers are the primary sources or the chief determinants of economic prosperity in society—or lack thereof. During the course of USA history, perhaps one of the most drastic instances of governmental intervention into the free-enterprise system of commerce came during the Great Depression period in the form of New Deal legislation passed by Congress during the 1930's. During the New Deal period of USA history, among other measures, the USA government became an employer of last resort under President Franklin D. Roosevelt's leadership, namely, by hiring unemployed workers to complete various public infrastructure kinds of projects. Fortunately, President Franklin D. Roosevelt's overall New Deal initiative was a resounding success in the sense that it prevented a collapse of the USA's free-market system, in general, and a collapse of its financial system, in particular. Perhaps the closest thing to a repeat of the Great Depression and extensive USA governmental intervention into the private marketplace came during the so-called Great Recession of 2008, which arrived some 80 years after the 1929 onset of the Great Depression. Again, fortunately, the various economic stimulus initiatives launched by Presidents George W. Bush and President Barack Obama, in conjunction with a cooperative USA Congress, were successful in averting a meltdown of the USA economy.

What was the common denominator between the successful recovery from the Great Depression and the successful recovery from the Great Recession? The common demonimator was a cooperative USA Congress. The nation can accomplish big things with a vision, an action plan, a cooperative USA Congress, and the will to implement the action plan.

Another instance of government intervention into the private marketplace would be when some corporations become so huge, strong, and powerful until they begin to behave like monopolists. Rather than market forces determining supply, demand, and price, a monopolist is the sole producer and seller of a product. A monopolist becomes uniquely empowered to manipulate supply (hence, demand and price) at will. [Rather than submitting to the will of the electorate to benefit the broader public good or interest, the extent to which politicians or government officials sometimes are co-opted (by bribes, campaign donations, lobbyist activities, specialized interest group activities, and so forth) to do the bidding of these powerful and more narrowly focused corporations (and the bidding of powerful and more narrowly focused labor organizations) is an altogether separate matter for discussion.]


MICROCOMPUTER EXAMPLE

Steve Jobs and Steve Wozniak popularized the microcomputer revolution by introducing the Apple personal computer to the world during the 1970's. During the 1980's and 1990's, Microsoft, as inspired by Bill Gates and Paul Allen, ushered in a new area of microcomputer inventiveness with their Windows operating system and several years later with their office productivity suite. The next burst of personal computer inventiveness was inspired by Larry Page and Sergey Brin, the founders of Google. Google emerged on the microcomputer scene at a time when the focus was shifting from microcomputer hardware and software per se and was shifting to the World Wide Web and online computing.

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An old cliche in the microcomputer industry is this: If you want the best in microcomputer hardware, then you go with Apple. If you want the best in microcomputer software, then you go with Microsoft. If you want to be microcomputer au courant, then you go with Google. At the dawn of the 21st century, this cliche has been turned on its head from the standpoint that Apple has made significant gains in the software arena (for instance, iWorks, iOs, iTunes, iCloud, and so forth) whereas Microsoft has made significant gains in the hardware arena (for instance, Microsoft Mouse, Xbox, Windows Phone, Surface tablet, Zune player, and so forth). Google's claim to fame is its globally renowned World Wide Web search engine, but Google has not been resting on its laurels. Google innovativeness and acquisitions since its 1998 inception include a repertoire or bevy of product offerings and services.

Moreover, in a clash with Microsoft and Apple, not only has Google developed the Chromium operating system to run its Chromebook netbook/laptop product line but also Google has developed the Android operating system to run its smartphone and tablet computer product lines. An effort is underway to introduce the Android operating system into the so-called WinTel (Windows/Intel) desktop arena. Meanwhile, microcomputer players such as Ubuntu and Mozilla slowly are mounting separate efforts to encroach on Google's smartphone, tablet, and laptop turf. It remains to be seen the extent to which Ubuntu and Mozilla are successful. Equally, it remains to be seen the extent to which the Android operating system can penetrate the WinTel world.

In each of these competitive cases mentioned in the above paragraph, it is highly recommended that you purchase a device with one of these respective (Android, Ubuntu, or Firefox) operating systems already installed and working (or go to a store and test the device before purchasing it). It is not advised for you to download and attempt to install one of these new operating systems on your existing device. If you download and attempt to install one of these new operating systems on your existing desktop, laptop, netbook, or smartphone device, then you might cause the device to become inoperable. In the process, you also might lose your data files, contact lists, and so forth.

For aspiring entrepreneurs, it should not be forgotten that Microsoft Corporation (MFST), Apple Corporation (AAPL), and Google Corporation (GOOG) were started with very modest budgets. Hewlett-Packard Corporation (HPQ) and Intel Corporation (INTC), too, began modestly as founded by Bill Hewlett and David Packard of HPQ, plus Robert Noyce and Gordon Moore of INTC, respectively. The point in mentioning these successful individuals, the powerhouse companies they built, and their somewhat modest beginnings is this: You do not need to be rich to make it big in a free-enterprise system. You only need to have a talent or a product, a dream, a touch of business acumen, a knack for selling things, and the desire or ambition to make that dream become a reality.

Since the inception of the microcomputer, there always has been competition to produce the best microcomputer hardware, the best microcomputer software, the best microcomputer peripheral, and so forth. Some allude to these ongoing microcomputer competitions as "wars". If free-enterprise competition is to be characterized as "war," then it is the type of peaceful war that I can relate to and support. These so-called microcomputer "wars" reduce to competitions to be crowned as the very best corporation in a particular class, niche, or field within the broader microcomputer industry. Some competitive examples include:

With the global popularity of Microsoft's Windows 95/98 operating systems during the 1990's, some makers of competing digital or software-based multimedia players (for instance, RealPlayer, Winamp, and QuickTime) accused Microsoft of engaging in anti-competitive business practices. They complained that Microsoft's practice of bundling the Windows Media Player (for free) within the Windows operating system gave Microsoft an unfair advantage with respect to media players. They complained that Microsoft's bundling practice caused microcomputer users to ignore their multimedia players and, consequently, caused users to select the Windows Media Player as a matter of convenience. They complained that Microsoft's business practices made it extremely difficult for them to compete in the digital multimedia player marketplace. When it came to offering consumers a choice of digital multimedia players, Microsoft's competitors asserted that they deserved an equal place on the field of competition for digital multimedia players.

I mentioned on the "Black Crime USA" page of this website how the Civil Rights Movement is a two-way journey. Competition in free markets also is a two-way journey. The business that produces the better product, or somehow manages to convince buyers that its product is a more desirable one to use (say, through marketing and advertising), generally speaking, is the one to leverage a greater market share and is the one to make the most money. In other words, it is not enough, say, for RealPlayer simply to win a legal judgement against Microsoft, which grants it a seat at the digital multimedia player table. Getting a seat at the table is only one-half of the journey. The second half of the journey involves RealPlayer demonstrating to consumers that it deserves to keep a seat at a table by showing how its digital multimedia player is just as capable a performer as Microsoft's Windows Media Player. RealPlayer would need to demonstrate to consumers that its digital multimedia player is an equally desirable and is an equally capable product when compared to the Windows Media Player, that is, if the RealPlayer product is to gain market share and if the RealPlayer product is to become a popular and successful product with consumers.

To be sure, Microsoft became embroiled in several high-profile and costly legal battles during the 1990's. The USA government as well as some of Microsoft's business rivals sued Microsoft. These legal battles ran the gamut from claims of unfair business practices for the way Microsoft marketed/bundled its operating system, web browser, and digital multimedia player to patent-infringement claims. Microsoft became distracted by its legal woes. While Microsoft was in court defending itself against various lawsuits and legal claims, its competitors were fast at work nibbling away at Microsoft's market dominance and its competitive edge. For example, during Microsoft's legal woes, Mozilla Firefox emerged to challenge Microsoft's web browser dominance, and Apple's iTunes Player emerged to challenge Microsoft's Windows Media Player dominance.

For its part in suing Microsoft, one of the roles that the USA government plays in the economic marketplace is to serve as an impartial referee. The USA government strives to ensure that fair play exists in the economic marketplace. The USA government strives to ensure that all market participants or business competitors play by the rules. The USA government strives to ensure that the so-called cream of the capitalist crop rises to the top strictly due to consumer demand, merit, ingenuity, talent, uniqueness, hard work, and so forth, and without recourse to acts of fraud, bribery, market manipulation, intimidation, coercion, deception, cheating, stealing, and so forth, in the economic marketplace.

The adoption of a free-enterprise system does not imply that the law of the jungle shall reign. In civilized society, free and private markets, too, are governed by the rule of law. Businesses that operate in free markets are bound by a certain code of conduct and are governed by rules of fair play.

To use a motorsports analogy, the free-enterprise system can be viewed as a stock car race. Sometimes a competitor in the race might have a flat tire. It momentarily is slowed as it must pull alongside the road to inspect the damage and repair the flat tire. Before long, the car rejoins the race and fiercely competes until the checkered flag is waved.

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And so it is with the free-enterprise system. There is the thrill of victory and the agony of defeat. Some successful entrepreneurs or business owners become wealthy, and other unsuccessful ones become financially bankrupt and end up having to close or sell the (assets of the) business.

In the microcomputer industry, the next big thing is always waiting just around the corner. The next microcomputer phoenix stands poised to rise from the ashes of an idea and burst onto the scene to become the center of consumer attention. A classic example of this come-from-nowhere scenario would be Nintendo (NTDOY) corporation and its popular Pokemon GO product of 2016. What will the 2020's bring to the microcomputer industry? Will Google still be dominating the microcomputer landscape during the 2020's? Will Microsoft and Apple continue to cast their all-imposing shadows over the microcomputer industry? Will the browser finally emerge as a fully fledged operating system in its own right? Will the semantic web find its way into the spotlight? Will Linux finally arrive to bask in the sunlight of widespread popularity? Will Oracle, Adobe, Hewlett-Packard, IBM, Sony, Amazon, Yahoo!, Facebook, or Twitter take the honor of owning the decade of the 2020's? Will a company from Europe, Asia, Australia, Canada, South America, or Africa earn the distinction of being the "new kid on the block," so to speak? Will quantum computing arrive to make child's play of Big Data? Stay tuned. For time is certain to provide answers to all of these questions.

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FREE ENTERPRISE LESSONS

Two lessons to be learned from the free-enterprise system are these:

  1. Never become complacent and rest on your laurels based on past successes. You must always strive to be on the cutting edge, or strive to keep up with, and lawfully move ahead of, your business rivals.
  2. No corporation (or country or people) holds a monopoly on excellence and wisdom. No corporation (or country or people) is invincible. Recall, for instance, the rise and fall of empires. The quest for higher standards of excellence should never be taken for granted by a corporation no matter how successful it is. There always will be other competitors who are seeking to create or invent a good or service that's more unique, more innovative, more clever, better, etc., than similar products in existence in the economic marketplace. There always will be other competitors who wish to rise to the top of the industry and to earn the lion's share of the industry's profits.
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There is little doubt about it: The free-market system has experienced unparalleled success not only in generating individual wealth but also unparalleled success in generating overall societal wealth. It is perfectly comprehensible and justifiable how operation of the market system generates winners and losers based on demand, supply, and prices. If you are abiding by the law and are engaged in the creation and production of a wildly popular product, then it is not your fault if the demand for that product is so high until it results in you becoming extremely wealthy in life.

In a market system, for highly successful businesses, the general consensus is that either your competitors should produce a competing product (for example, the Snapple™ line of beverages versus the Coca-Cola™ line of beverages) or somehow emulate your product (for example, the Coca-Cola™ beverage versus the Pepsi-Cola™ beverage) in a effort to siphon away or redirect some of your business profits into their bank accounts. Yet, from a moral and big-picture perspective, I find it somewhat troubling and unseemly that the market system can create a situation whereby a few dozen humans could control more of the world's wealth than billions of humans combined. This type of severely skewed income-distribution outcome represents a gigantic and unconscionable imbalance on the global have/have-not measurement scale. To me, something is wrong with that picture.

Think about it for a moment. Morally speaking, what good does it serve humanity for one human to have billions—or even hundreds of millions—of dollars sitting idly in the bank, whereby, on the other hand, millions of other humans are walking around on Earth each day suffering from malnourishment, poor health, and not possessing the basic necessities of life (that is, food, clothing, decent shelter, clean air, and clean drinking water)? Several billions dollars held by one human is more money than that one human could spend in a million lifetimes.

For developed economies, I particularly admire the profit-sharing business model of Lincoln Electric, which results in a more equitable distribution of corporate earnings as opposed to the more common practice of funneling the lion's share of distributed earnings to the top of the corporate hierarchy. To be sure, the point of regulated capitalism is to establish rules that make for a more equitable distribution of wealth and a more balanced protection of the environment while keeping the engine of capitalism itself in tact, which is an approach that I support.

For instance, if it were not for legislative intervention to curb the business practices of some capitalists, then child labor (in the West) might still be permissible with children working up to 12 hours a day for, say, $1 an hour. If it were not for legislative intervention to curb the business practices of some capitalists, then adults (in the West) might be required to work a mandatory 60-hour week for, say, $5 an hour. If it were not for legislative intervention to curb the business practices of some capitalists, then some industrialists (in the West) might despoil and pollute the environment with impunity. In the USA, if it were not for the Civil War (from 1861 to 1865, namely, the anti-slavery/pro-Union Northern states pitted against the pro-slavery/pro-Confederate Southern states with the Northern states emerging as victors), then slavery in the deep South might still be permissible. USA Slavery, of course, was about the slave-holding states maintaining the freedom and independence to import and exploit a cheap labor source for maximum profits. In the USA, if it were not for legislative and judicial intervention, then racial segregation might be permissible in all facets of American life.

As I mention on the "Annual Bruessard Award" website, for underdeveloped and developing economies, when it comes to philanthrophy and foreign aid, I support the approach of the Bill & Melinda Gates Foundation, which focuses on measuring the effectiveness of various charitable and development projects rather than wasting money on ill-conceived and hastily put together types of development and charitable projects—or to get the most bang for the buck, so to speak. The idea is to adopt and replicate what has been determined to be the most highly effective development projects. For, as I mention on the "Foreign Aid" page of this website, the point of foreign aid is to eliminate the need for foreign aid. Another point of foreign aid would be to stabilize somewhat fragile economies so that its citizens do not feel compelled to try to migrate to the West in search of safer and more prosperous livelihoods, which is another way of saying "prosperity for all" humans.





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