Brookfield Basics

A column about history, culture, policy, and things in between.

Harley Davidson and the Deployment of Capital

The United States Congress is woefully ignorant on this topic.  That's not a shot at the Democrats, for I would levy the same criticism of the Republican suits that once lounged in the sunshine of a strong majority.  Just as Nancy Pelosi might glower imperially at the camera if faced with a question on this topic, so too would the moribund figure of Denny Hastert have balefully blundered his way through a response to the same query.  It's not so much that they would resent the question - they simply wouldn't understand it.       

Washington's ignorance of the laws of economics has been pandemic for decades, and has flourished on both sides of the political aisle.  The formation and deployment of capital is the Sine Qua Non of economic development, and it is time to give this matter consideration as the Badger State approaches an election season.  There are business leaders and entrepreneurs out there sitting on capital, one of the big reasons for the stalled "recovery".  They are waiting................waiting to see what happens to the environment for deployed capital.  And it is certainly what the managers of Harley Davidson are pondering.  It is going to take more than rhetoric to keep Harley here.  It is going to take an environment that both fosters and rewards the deployment of capital. 

As for the formation of capital, the last few years have actually witnessed the reverse, as the balance sheets of so many financial institutions all but imploded.  Balance sheets are the lagging indicator of a business; a barometer less sexy but far more fundamental than the income statement.  In the short term, income statements hold sway.  This is a sad reality that, along with Congress' eggregious administration of Fanny and Freddie May, Greenspan's decade long, Bachnalian binge of easy money, and unfettered human greed on the part of lenders AND borrowers, was the foundation of the housing bust and financial meltdown.  The income statements of financial institutions that were delivering such siren-song results, were allowed to achieve primacy over balance sheets that betold a more sobering tale.  Most banks that took Federal bailout money didn't use it to "spur the economy".  They used it to shore up balance sheets left torn and tattered by a frenzy of bad lending, debt collateralization, and weak management.    

As to its deployment - capital is a great white shark.  It is never resting, always moving; inexorably searching for its next meal.  The matter of capital deployment is a long-term issue, and decisions about it are measured in decades; a reality that Harley's managers are considering at this very moment.  Those who own or manage capital are constantly looking to better deploy it, a dynamic that cannot be obviated by legislation.  Human behavior and human nature have not changed over the millenia.  That is why I believe Ludwig von Mises was the greatest economist.  He titled his enormous treatise on economics Human Action, for the great Austrian understood that economics was at its core, the study of how individuals and organizations make decisions.   

As you reflect upon your choice for Governor and legislators between now and November, I would submit that the criteria of capital formation and deployment should loom large in your considerations.  By all means lets differ on what candidates might offer the best solutions.  But let's not debate the singular importance of this criteria.

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