One of the attributes of the American dream is that the little guy can become the big guy. Or rather, through the creative destruction of the free-enterprise system, a small entrepreneur may destabilize and replace a larger competitor through innovation, cost savings and better ideas.
American history is full of stories of small entrepreneurs with good ideas displacing preexisting giants in the marketplace. Over time, however, that has become less the case. Now Goliath hires an army of lobbyists who help shape the regulatory code and the tax code and draft legislation to provide competitive advantages for themselves or disadvantages for would-be competitors.
The little guy cannot become the big guy, because the big guy has lobbyists. It is no coincidence that Democrats are decrying the wealth gap and the inability of the little guy to become the big guy at a time the big guy is engaged in shaping federal policy and funding the Democrats. The Democrats’ solution is to make the little guy more comfortable but also punish him if he dares to get too successful. The Republican solution has largely been to prop up the big guys and bail them out when they falter, equally ensuring there can be no competition.
Whether it is the 2008 financial crisis or now, the government has created more moral hazard in the economy by bailing out and propping up a lot of financial institutions and other companies that should be wiped out in the creative destruction of the free market. A correction is coming, if only because the government has intervened so often to prop up so many that should be dead or left to die.
Likewise, major corporate Goliaths are now advocating government policies that stifle the David competitors. Amazon can embrace a $15 minimum wage and major online retailers can support an internet sales tax because they are billion-dollar companies. The would-be competitor does not have that money.
Along comes the GameStop saga. First, let me explain at a very basic level what short selling is.
Short selling is when someone or some entity borrows stock, not money, from a brokerage. The short seller thinks the stock is going to go down. So, Short Seller X borrows 10 shares of Company A from Brokerage for 30 days. X then sells the stock at $100 and pockets $1,000. Within 30 days, the stock has fallen to $50 a share. X then buys back the shares at $50 and returns the shares to Brokerage, and X has profited $500.
Hedge funds love to do it. Along comes a hedge fund that sees GameStop and thinks GameStop stock is going to go down. So, the hedge fund borrowed shares and sold the shares, and the public got wind of it.
A group of day-trading gamblers on Reddit operating under a subreddit called WallStreetBets decided to buy up GameStop, which would force the hedge fund to buy even more before the price got too high, in order to minimize its losses.
In doing so, both the financial press and many regulators treated the “redditors” as the bad guys. Robinhood, a popular trading app backed by major Wall Street financiers, stopped allowing people to buy GameStop and other stocks involved. CNBC hosts and guests excoriated the regular stock traders having the audacity to drive up a stock price and hurt a hedge fund. Goliath, yet again, had the elite rally to protect him from David.
If the system always protects Goliath, then at some point, David is going to try to not just slay Goliath but also burn the system down. The system turning on the regular guy pushes the regular guy to find their own Goliath, which may look like Trump 2024.
David does not need big government, a social safety net or a nanny state. He needs rocks, and he’s starting to throw them at whichever party tries to protect Goliath. Yes, people will lose money. Some people may be financially ruined. But risk-taking by regular Americans is essential to the American dream. David must be allowed to slay Goliath.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.
To find out more about Erick Erickson and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.
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