Restaurant Revitalization Fund: Government Remaking American Society

By: Georg Grassmueck

The Small Business Administration creation of the Restaurant Revitalization Fund (RFA) under the American Rescue Plan Act is another government program in response to the covid pandemic that has the potential for abuse and misuse, similar to the Paycheck Protection Program (PPP). However, what is even more troubling about the RFA is the increased politicization of the application process through the adding of eligibility criteria on race and gender in a bureaucratic overreach. The RFA is the next step in government re-creating American society in a new image, an image of division based on racial and gender group mentality.

The RFA provides funding to help restaurants and other eligible businesses keep their doors open. The program provides restaurants with funding equal to their pandemic-related revenue loss up to $10 million per business and recipients are not required to repay the funding as long as funds are used for eligible uses. The RFA is another example the “rescuer twice over” policy, in Hoppe’s words, of shutting down businesses over covid fear, saving the general public from the pandemic, while at the same time rescuing businesses from bankruptcy by giving away money at a cost to taxpayer. Even more concerning is the addition of new eligibility criteria based on racial and gender group. It is an attack on the core principle of equality when the restaurant revitalization fund states:

SBA will prioritize awarding funds to small businesses at least 51 percent owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals.

The focus of the RFA on prioritizing funding based on business characteristics that have nothing to do with the ability to serve customers is bizarre. How do businesses qualify for the RFA? An applicant must self-certify on the application that they meet eligibility requirements for a socially and economically disadvantaged businesses? According to the SBA website:

  • Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
  • Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

According to an article by Inc. the SBA received 266,000 applications requesting $65 billion. About 147,000 applications came directly from women, veterans, and socially and economically disadvantaged business owners, requesting $29 billion.

The core principle of equality is put ad absurdum when a government program creates a priority group for applicants with a clear preference for groups of society over other groups that have nothing to do with the ability to provide services to consumers.

Government officials in the Small Business Administration do not seem to understand competition in a market economy or the role of government should play in the market. Officials in the SBA should read what Mises wrote in Human Action on competition, which offers a clear answer on how the RFA eligibility criteria are counter to a free market. Mises attacks governments’ willingness to interfere in the market when he writes,

[C]atallactic competition is not open to everybody in the same way. The start is much more difficult for a poor boy than for the son of a wealthy man. But consumers are not concerned about the problem of whether or not the men who shall serve them start their careers under equal conditions. They only interest is to secure the best possible satisfaction of their needs. (p. 276)

Consumers only care for good food and good service when frequenting a restaurant or bar. Consumers generally do not care what the ownership structure of the business may or may not be, because as Mises writes about consumers:

They look at the matter from the point of view of social expediency and social welfare, not from the point of view of an alleged, imaginary, and unrealizable “natural” right of every individual to compete with equal opportunity.

In all fairness, the Restaurant Revitalization Program, grants “more fortunate” restaurants that have the misfortune to be owned by more than 50 percent “more fortunate” owners to apply for a grant after the first twenty-one days. So, for example, a restaurant owned by a recent female immigrant to this country that is backed by wealthy investors who strongly believe in her idea to fund her establishment is somehow less desirable than a restaurant owned by a majority of females. How do you even self-certify that you have been subjected to racial or ethnic prejudice or cultural bias or that you are a socially disadvantaged individual? Do government officials truly believe that by prioritizing certain businesses based on the ownership structure, consumers will be better served? By introducing of those eligibility criteria, government only serves political interests at the cost of less fortunate businesses with the “incorrect” ownership structure.

In Profit and Loss Mises attacks the idea of a government bureaucrat interfering in the production decision when he writes:

Entrance into the ranks of the entrepreneurs in a market society, not sabotaged by the interference of government or other agencies resorting to violence, is open to everybody.

But more importantly, Mises makes it clear that businesses providing goods and services demanded by consumers will not have issues with funding:

Those who know how to take advantage of any business opportunity cropping up will always find the capital required. For the market is always full of capitalists anxious to find the most promising employment for their funds and in search of the ingenious newcomers, in partnership with whom they could execute the most remunerative projects.

Bureaucrats at the SBA believe they are far better equipped to make decisions about what businesses should be funded than the market. However, Mises writes that:

The task of the entrepreneur is to select from the multitude of technologically feasible projects those which will satisfy the most urgent of the not yet satisfied needs of the public. Those projects for the execution of which the capital supply does not suffice must not be carried out.

The market is always crammed with visionaries who want to float such impracticable and unworkable schemes. It is these dreamers who always complain about the blindness of the capitalists who are too stupid to look after their own interests.

The SBA and government in general would be wise to follow Mises’s conclusion:

The consumer chooses what, as he thinks, satisfies him best. Nobody is called upon to determine what could make another man happier or less unhappy.

The only question remaining is: Why do government officials feel the need, the right, the obligation to interfere in the market? The answer may be found in Robert Higgs’s book Against Leviathan: Government Power and Free Society. Government bureaucrats have the tendency to take advantage of “emergencies,” in this case, the covid-19 pandemic, to consolidate and grab even more power. Power to reshape the American society to their liking and preconceived ideal world of justice. The Restaurant Revitalization Program may be the first step in the governments’ desire to force individuals and business into a “perfect” society.

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