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Atlas Is Shrugging

Posted On: 6/1/2011

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Atlas Shrugged, Ayn Rand, amusement business, vending business, coin-op machine business, small business, Vending Times, Marcus Webb, juke box, pinball machine, arcade game, Emerson Electronics, amusement machine manufacturing, Valley Dynamo pool tables, free enterprise, Chinese manufacturing competition

In mid-April, Ayn Rand's hymn to free enterprise was sitting at No. 4 on Amazon's bestseller list. At the same time, the long-delayed independent film version of Atlas Shrugged appeared on fewer than 300 screens nationwide, but was pegged as "the top-grossing limited release" of its opening weekend on boxofficemojo.com.

I mention all this not just because I like the book (although I do), but because its surprising popularity 53 years after first publication says something fascinating about the business climate in America today.

Atlas Shrugged is a fable about what would happen if a quasi-socialistic, over-regulation-happy U.S. government adopted policies that were so punitive, strangling and confiscatory that the most productive citizens decided, in effect, to go on strike.

What if every Gates, Jobs, Ford, Rockefeller, Carnegie, Goodyear, Duryea, Deere, etc., all said "the hell with it" and disappeared at the same time? When Rand wrote her novel, it was a theoretical question. Not anymore.

About a year ago, the chief executive of Emerson Electronics announced he was shutting down the firm's Midwest plant and moving lock, stock and barrel to Asia. The loss of American jobs was regrettable, said David Farr, but he felt Emerson Electronics had no choice.

"Atlas is shrugging," Farr declared at the press conference where he announced the move. "Washington is doing everything [possible to] destroy U.S. manufacturers. Cap and trade, medical reform, labor rules, whatever they want to do, raise taxes.

They're doing everything possible to destroy jobs ... We employ 125,000 people worldwide [but] I'm not going to hire anyone in the U.S. I'm moving."

Over the past decade, the same logic has been driving tens of thousands of large and small U.S. firms to outsource millions of jobs. Since the year 2000, some 2.9 million domestic jobs were lost while U.S. firms increased their overseas employment by 2.4 million, according to recent data from the U.S. Commerce Department.

Few if any of the CEOs responsible emulated Farr and announced, "Atlas is shrugging." But then, they didn't have to. Their actions spoke eloquently for them.

What has all this got to do with the amusement industry? More than you might think.

American operators are certainly feeling the pinch of taxation and regulation. Per-machine fees and taxes keep rising nationwide while sweepstakes, drinking, smoking and certain kinds of redemption are increasingly regulated out of business. Videogames depicting violence may be next; keep an eye on the U.S. Supreme Court this summer.

As a result of all this, partly, U.S. game manufacturers are increasingly finding they don't have as robust a domestic market as they used to have, or need. So factories focus more and more of their sales efforts overseas. By some estimates, the typical American game maker now sells 40% or more of its production outside the U.S.

This means more and bigger booths at the IAAPA Attractions Expo (which draws a heavy global attendee base), as well as an expanded presence at foreign shows, from London to Dubai. It means fewer and smaller U.S. trade shows.

A small but growing volume of amusement machine manufacturing is done overseas, too, as U.S. game makers look for cheaper parts and labor. Outsourcing doesn't always succeed (as Brunswick found when it briefly transferred Valley-Dynamo production to Mexico). But many U.S. factories that don't build in China are always looking over their shoulder at potential or real Chinese competition.

Some U.S. operators have been guilty of less-than-noble Atlas Shrugged behavior, as well. One satirical chapter of Rand's book portrays a trade association meeting where members persuade the government to license only the existing businesses while shutting out any potential newcomers, thus ensuring a quasi-monopoly for the entrenched establishment -- and letting the protected few set whatever prices they want, regardless of quality.

I have sat in U.S. coin-op machine trade association meetings where members suggested the exact same thing, for the exact same reasons. In one case, the association's legal counsel stood up and patiently explained this would violate the U.S. Constitution. In another instance, the association members donated enough money to their state legislators that they more or less got what they wanted ... for a while, anyway.

The industry's best operators, distributors and manufacturers probably identify with the heroine of Atlas Shrugged. She is a hardworking executive who believes in quality, competition, innovation and free markets as the best guarantor of fair business conditions, sound profits, and the best possible products and services.

Is free enterprise perfect? Absolutely not. Like Winston Churchill's description of democracy, capitalism is "the worst system that has been tried ... except for all the others."