Two Modes of Prosperity in Mixed Economies
Author: Anvil Smith
The paths to success in the mixed economy can be distilled to two categories. While most people don’t follow one mode exclusively, their actions reflect one of two perspectives.
Mode #1. Become an expert in the controlled-economy game
One of the ways to make financial progress is to recognize the controlled economy format and embrace it. Be diligent to know the rules and regulations of the controlled economy in which you operate. Make sure to stay within the rules, but remember that the rules will often be contradictory, and change constantly. Hire an attorney, as well as a tax pro, to help you navigate the regulatory mazes. This will allow you to find loopholes, receive government subsidies, and qualify for tax credits.
Because so much of controlled economy revolves around rules (such as taxes and industry regulations), you must always be aware of the financial opportunities and risks from litigation. Expect to be sued and/or audited at least once.
If you can achieve a financial advantage through legal recourse, do it. The general public may attach a stigma to some of these behaviors, but those who are playing the game can’t worry about the perception of the masses. For example, the general public might see bankruptcy or other legally permissible methods of financial maneuvering as an “easy out” for people of questionable character who make bad financial decisions. But in controlled economy environment, you almost never win by following the social rules of “good behavior.” You win by knowing the legal rules and using them to your advantage.
Mode #2. Become a capitalist and focus on productivity
The ambitious capitalist figures the best way to overcome any financial challenge is to out-produce it - just make more money, build a bigger company, create more value. As long as you keep producing at a high level, all the other issues will take care of themselves.
Because the goal is increasing productivity, a capitalist seeks to operate in areas that afford the greatest economic freedom. The more regulated your activity, either to earn money or put it to use, the less control you have over profit, and the more “control” issues you must deal with. This is why capitalists often gravitate to new technologies or new products because the government hasn’t yet figured out how to regulate or tax them.
In a free-market format, liquidity, flexibility and financial control are priorities. Be wary of financial transactions that seem heavily reliant on government subsidies for their profitability (like the solar and alternative energy industry in the 1980s), or where tax laws are prone to change (qualified retirement plans, 529s college savings plans and the like). You not only want to be in charge, you want to be able to change, to pursue the next free-market alternative.
Both modes work - and affect each other
As you read the above options, you might be inclined to make some value judgments about the means to achieving financial prosperity. (Pick up two newspapers and flip to the editorial pages. One blames politicians and government control for the current economic mess, the other faults the greedy capitalists.) But setting aside what you may see as moral issues, understand
both approaches are absolutely legal - and successful - even in countries where the economy is most free or most controlled.
In America, we know many stories of entrepreneurs who build their wealth through business, but some very wealthy Americans have made a career out of working the system to their benefit as well. Maybe they used government programs to buy distressed properties, started a business with grant money, or invested in tax-favored financial programs. Whether they worked in the competitive market or the worked the system, the common denominator for financial success is work - focused, consistent effort.
Besides the common denominator of work, both parts of the mixed economy have similar goals: trying to prevail without destroying the other side.
People who understand the power of regulation and control also know that if there’s no productivity there’s nothing to control - if nobody’s making money, there’s nothing to tax, if no one’s working, there’s nothing to regulate. Regulators need successful capitalists.
Likewise, most free-market producers will acknowledge that some government-enforced controls (like prosecution of theft and enforcement of contracts) make free-market competition easier because everyone plays by the same rules. And an astute producer can often find new free-market opportunities as a result of some government regulations - even in an America where “we are all Socialists now.”