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Rob and Lauren Hudson: Letter of Common Ground about compelling support for free enterprise


Letters for families based on the book “It Can Be Done” @studentsleadusa

We write today to present three compelling points favoring capitalism, all of which can serve as truthful, productive common ground. People who would prefer a different economic system often cite some negatives about these points. However, their compelling positives should encourage us to preserve free enterprise as the foundation for our economy.

Free Market’s Invisible Hand – Free market solutions can be so subtle they’ve been called an “invisible hand.” The invisible hand consists of free markets where people make their own decisions about work, business, and purchases. Those decisions end up directing businesses to deliver what we want or need.

The invisible hand averts product shortages and delivers new products in an economy by democracy. President Ronald Reagan said it well, “It´s impossible for government to substitute for millions of individuals working night and day to make their dreams come true.” Socialists overlook the power of our daily economic “votes” about what to buy and sell.

Creative Destruction – Capitalism, like anyone’s full and vibrant life, can be messy. Assume tens of thousands of people have jobs selling or working on an old product. Now assume a new product comes out and replaces the old product in the marketplace.

The old business will cut workers, and the new business will grow and hire workers, which we call “creative destruction.” The new product, which could be more creative or less expensive, will destroy the old product and the old jobs, all the while creating new ones in the process.

Socialists have great difficulty sorting through capitalism’s ongoing, churning “creative destruction.” Socialists criticize business owners of the old product or service for reacting to creative destruction by cutting jobs, which the business had to do to try to survive. Socialists then enjoy the new products and new technologies, none of which could have been developed without creative destruction.

Profit Motives – Socialists consider “profit” to be selfish or greedy. Profit, however, has been a key factor in America’s progress. Businesses provide jobs and deliver products, helping society, but businesses really exist to make a profit for owners who place their money at risk by investing in the business.

Profit must serve as a primary business purpose because without profit, a business would go out of business. People who run businesses have solemn legal duties to their business owners. A business must strive to assure a healthy profit.

If a business does not have a healthy profit, and it has too many employees or other inefficiencies, it must cut employees to become more efficient. If it does not, and its competitors do, it will not remain in business for long.

Without a profit motive, we would not have marketplaces with businesses competing for our dollars, trying to please us. Without a profit motive, we would not have choices about our places of employment or the things we purchase, much less the opportunity to go into business.

Profit motive, perhaps more than any other factor, channels businesses in productive, efficient directions. Businesses must continuously look to cut costs to meet pricing and profit goals. Businesses must continually look to the future in terms of what customers might want and need.

Frost Brown Todd LLC Member Rob Hudson is a Past Chair of the Northern Kentucky Chamber and a business lawyer. 2018 Independent Author of the Year Lauren Hudson is a Singletary Scholar at the University of Kentucky. Their next letter will explore common ground about youth and free enterprise.

If businesses cannot demonstrate their ability to turn a profit, investors won’t invest in the business. Banks won’t loan the business money to grow or survive. Profit, pressure, and competition, all of which are mostly absent in socialism, produce terrific products and services which change lives.

To the modern-day socialist, the government should provide goods and services or control commerce because government does not have a profit motive. The socialist hopes that by eliminating profit, the good or service will be cheaper. Unfortunately, just the opposite happens. Without capitalism’s continuous market pressures for cost reductions, new methods, and new technologies, dry up.

We built America’s economy on our profit motive, which can seem greedy. But is it so wrong to get paid for your creativity, invention, investment, or work?

Without a general practice allowing for-profits, healthy marketplaces do not exist. Reasonable, logical people will typically stand together on this common ground.

Frost Brown Todd LLC Member Rob Hudson is a Past Chair of the Northern Kentucky Chamber and a business lawyer. 2018 Independent Author of the Year Lauren Hudson is a Singletary Scholar at the University of Kentucky. Their next letter will explore common ground about youth and free enterprise.


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