Utah State University

Labor Day

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Last summer I worked for a company named Agri-Concrete, owned by a man named John Ravsten.  John’s business is a small company specializing in building foundations, and retaining walls.  It was hard work, but I worked with great people and had experiences that I will be grateful for the rest of my life.  

John is currently trying to sell his business.  He can’t make money doing concrete anymore due to increasing cost.  John’s business was jokingly called ‘the unemployment office’ of the small town I lived in.  I know that bills were paid and families fed, that wouldn’t have been, because of Agri-Concrete.  On Labor Day I want to talk about why I think that Agri-Concrete is going out of business, and what affect it has on John Ravsten, a true laborer.

 There is a problem in America today.  Okay, there are many problems in America, but I want to discuss is cronyism.  Cronyism is defined as: the practice of favoring one’s close friends, especially in political appointments.  I defined it a bit wider: giving a group of people or businesses an artificial advantage.

Many people believe that our current economic system is one of capitalism and free markets.  This just isn’t true.  Capitalism benefits consumers, and will only help a business if that firm help consumers.  This is achieved when we have truly free markets that are without government intervention.  When government regulates and subsides business it changes the incentives and signaling that the free market provides, and creates protections for certain businesses.  This is crony capitalism. A LearnLiberty video featuring Dr. Jeff Miron of Harvard University, explains capitalism well and is worth the 3:28 it takes to watch it. (Link at the bottom)

Crony-capitalism arbitrarily increases costs for businesses, and small businesses can’t cover these costs.  Current business owners don’t want competition, and in order to discourage competitors they look to government to place barriers to entry. These barriers range from required business and professional licenses, to banning certain goods and requiring the use of others.  Another LearnLiberty video shows this well. (Link at the bottom)

John’s costs of doing business were made higher because of the government regulation and subsidies.  Every job that is poured is required to be inspected, to make sure it is up to building code.  An inspector from the governing agency would come to the job site and make sure that all the reinforcing bar (rebar- steel bar that strengthens concrete) was where it should be and tied right.  One of the last projects that I worked on was for a sewage pit at a pig farm. This pit used twice as much rebar as a home foundation of the same size.  Because it’s more important for pig excrement to be protected than human lives.

This increase in the raw materials used increased John’s costs. Add this to the other costs imposed by government (taxes, licensing, ect) and John can’t be competitive. I asked Daniel Ashcroft, the foreman of Agri-Concrete, how the other crews in the area were able to cut cost, and he said that some paid people under the table, and some had lower quality work.

I’m not trying to say that there aren’t other concerns that we need to take into consideration when looking at this case and others like it. What I am saying is that government intervention into the market does change things and has a real cost that affects real human lives. If we want to celebrate laborers and what they do for us, we need to talk about what these costs.

 

http://www.youtube.com/watch?feature=player_embedded&v=KGPa5Ob-5Ps

http://www.youtube.com/watch?feature=player_embedded&v=gSgUENZ9O94

 

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The opinions expressed in this blog are solely the opinions of the writer and in no way represent those of Strata itself.

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