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It seems lately that everyone is arguing about where to spend the “stimulus” money for the auto industry.

Some think they should stop manufacturing cars and just design them. Some think they should take all the stimulus money and give it venture capitalists. Some think the car companies should fix their PR. And some even think they should recruit Steve Jobs to be the car czar!

Everyone is missing the point: we don’t need to guess!

Some of those ideas have potential, some are really stupid. But it doesn’t matter. We shouldn’t have to pick one. There is already a time tested, guaranteed, method which has worked for hundreds of years which will determine the best way to fix the problem. It’s called the free market.

Individual people can sometimes get it wrong. We bring our personal biases, our own background, etc. If one person (or a small group of people) decides how to spend the money, they COULD get it wrong (and often do).

But if instead of a few people deciding, thousands or millions of individual people decided by “voting with their dollars”, all competing against one another, then we could try those solutions and thousands more simultaneously. The free market would name a winner based on who got the most “votes” (dollars) and came out profitable. The lure of financial gain would motivate these entrepreneurs to compete in this race to find the best solution.

But by having the government decide for us, we’ve nipped that race in the bud and placed our fate in the hands of a few people deciding for us (more on the qualifications of those people at the end).

Imagine if the government had to pick a winner for renewable energy and decide what to invest in? Would it be solar, wind, bio-diesel, nuclear, etc, etc, etc? The truth is that nobody knows what will ultimately end up on top. And if you give a handful of “expert bureaucrats”, especially with all the special interests and lobbing going on in Washington, the right to choose for you, you’re in trouble. Thousands of entrepreneurs trying their own solutions in a true merit based competition to see whose works best is the way America became great.

Some final thoughts…

Want to know more about the team of “experts” who will be deciding how to spend your money to “stimulate” the auto industry? Alexander Muse writes about how not a single one of them has auto-industry experience, and of the 18, only 2 drive American cars. Nice!

I’m reminded of something Milton Friedman would say: You always spend your own money more carefully than you spend someone else’s.

Finally, there a number of world organizations that rank countries by their economic freedoms. Historically, the U.S. has consistently been in the top three. It’s what differentiated America from everywhere else in the world and made our economy great. But in the last 10-20 years or so the U.S. has moved more toward socialism and fallen as low as 8th or 9th in the world. Personally, I find it rather annoying that the average business income tax rate in the U.S. is now around 45%, which means the government owns about 45% of the production of our economy. We are about 45% socialist by that measure.

What is the alternative?

If this keeps up, do you think entrepreneurs will continue to incorporate in the U.S.? For myself, I’m thinking that after Buenos Aires I might try moving to Hong Kong and seeing what it’s like there. As a citizen of the world, I’m more interested in going where I can prosper the most instead of trying to change the U.S. (a futile effort) or waiting for it to come to it’s senses.

Guess what the business tax rate is in Hong Kong? A flat 16%.

Here’s to discovering new ways to break free!
Brian Armstrong

Source:Will entrepreneurs be fleeing the U.S.?