Redistribution is socialist! (But, give me my federal bailout…)

I’ve observed numerous messages from companies on social media this week asking customers to continue paying despite the companies’ inability to deliver the same or substantially similar goods and/or services. The rationale is that, if people don’t, the business will have to lay-off staff or possibly close. One friend related to me an email received from a private daycare franchise asking for continued tuition payments despite being closed.

The COVID-19 pandemic is providing a real-life example of why self-governance, the act and process of community-centered decision making, is so critical. We need a collaborative, cooperative response to this crisis or, as an American society, we will suffer irreversible damage. Unfortunately, a plurality of us have concluded that Government (the capitalization is intentional, I’ll explain in a moment) is the enemy. Government, this group argues, is the cause of our problems, not the solution.

Leadership, as a topic of study, falls into two major categories: entity-based and relational. Entity-based leadership focuses on subjects, studying individual and group traits, characteristics, and behaviors. Contrastingly, relational leadership considers the relationships, interactions, and spaces between subjects. It decenters individuals and organizations and looks instead at practices and processes. Taking relational leadership one step further, Leadership-As-Practice (LAP) considers the space between the spaces between, looking at the actions and behaviors that constitute the relationships between entities. Think of it this way, there is the study of the things that lead or are affected by leadership (e.g., leaders, followers, organizations, etc.), the study of how the things affected by leadership interact with one another, and the study of what the specific behaviors are that make up the interactions and why. This theoretical foundation is important in understanding the current challenge the United States is facing in responding to the calamitous economic consequences of the pandemic.

Those who prize the free-market system (i.e., capitalism), reject the notion that there should be checks on what Adam Smith called the “invisible hand,” the unseen force created by individuals all acting in their own self-interest. A critical element of fiscal conservatism is the idea that Government, as an entity (i.e., not a practice), has no place in regulating a free market. In a truly capitalist environment, the current situation with COVID-19 not only would, but should, result in numerous businesses closing, individuals being laid off, and a fundamental shift in the way organizations operate. The capitalist answer is for the fittest, most agile, and most innovative companies to survive while others, who cannot reinvent themselves or adapt quickly enough, die out. Capitalism is Darwinian.

Generally, the fittest companies are those with the most accessible cash on hand and the least loyalty to precedent. Liquidity is paramount to surviving a cash flow disruption and an ability to discard what has worked in the past, but no longer serves, runs a close second. In this scenario, the market adjusts (some might say “corrects”) itself, without regard to the social cost. Economic forces redistribute income, and to a certain extent wealth, within the system. There are very few companies that are simultaneously financially fit and operationally dextrous, so the business landscape after the fact is pretty barren.

Communities, large and small, may come together to take steps to mitigate the potential fallout from the situation described above. Most often, they do so by taking immediate action to redistribute resources (i.e., cash) to those businesses that founder and the individuals affected. The legislation Congress just passed is an attempt to do just that. It is an example of the power of self-governing (i.e., a practice not an entity).

Any form of bailout is an act of redistribution, considered a heresy by those who put their faith in the free market. Companies asking their customers to bail them out are also asking for money to be redistributed (to them). It is ironic that those most passionately arguing for a bailout are among those most opposed to any form of wealth or income redistribution or other social safety net.

The COVID-19 pandemic and the economic disaster accompanying it clearly makes the case for self-governance. It also lays bare the need for hybrid forms of self-governance. Neither unadulterated capitalism nor pure socialism is the answer. The solution does not live at the extremes.