One of the inspirations for Jonah Goldberg’s 2008 book Liberal Fascism was to explore the ramifications of corporatism; as he wrote earlier this year (behind the paywall, alas) at National Review On Dead Tree, when the original idea for LF first struck, he thought the entire book would be about economics:
The inspiration came from the CEO of the globe-spanning conglomerate Nestle — a firm so enormous it wouldn’t surprise me if “Nestle” is actually Swiss French for “Ram Jack Corporation,” or maybe “Skynet.” I was in Switzerland on the sort of junket I naively thought I’d soon be going on a lot more of.
As I listened to the CEO talk about his company’s relationship with the European Union, the UN, various NGOs, and his competitors, it became very clear that he didn’t really care much about free markets. Oh, sure, he liked a little competition for efficiency’s sake among his vendors and suppliers, but basically, he saw Nestle as bigger than all of that — and apparently, so did the various world leaders he dealt with.
Hardly an earth-shattering insight, I know. But it got me thinking about how feckless big business is when it comes to fighting for free-market principles. It also illuminated how big business really doesn’t mind regulations, if the regulations help them secure market share and prevent other firms from competing.
That’s one of the reasons the health-insurance industry was perfectly fine with being thrown into the briar patch of Obamacare. Thanks to the individual mandate, the law protected the big insurance companies by turning them into de facto utilities.
The example I usually use for this sort of thing is the Americans with Disabilities Act. Big corporations didn’t object to it much because they understood that they could pass the costs on to consumers, while the burden of the regulations would prevent smaller, nimbler firms from competing.
When I make this point, people who don’t want to understand its implications look at me funny. “You mean big business likes . . . big government?”
Politically favored businesses of course benefit from direct subsidies (think agribusiness) and government loan guarantees (think Solyndra and Boeing), but Mitchell makes the important point that regulation itself creates a privileged class.
Regulation often acts directly or indirectly as a barrier to entry. The conservative and libertarian media have documented this anecdotally — Philip Morris supported and is benefiting from Obama’s tobacco regulation, for instance, because the rules allow it to lock in its dominant market share. Mitchell assembles scholarly work broadly showing regulation’s anti-competitive and pro-big-business effects.
These critiques of regulation come not only from Milton Friedman, but also from the Left. For instance, liberal activists Ralph Nader and Mark Green wrote in the Yale Law Journal that the “regulatory system undermines competition and entrenches monopoly at the public’s expense.” Mitchell in this section also cites Alan Krueger, who now heads Obama’s Council of Economic Advisers.
In the Obama era, as Democrats and the media try to paint deregulation as some sort of dangerous sop to big business, Mitchell’s notion of “regulatory privilege” is a crucial tool for dismantling the old narrative that regulation protects the public. Mitchell uses a colorful image to make his case: Bruce Yandle’s “bootleggers and Baptists.”
Illegal booze smugglers, Yandle wrote, “support Sunday closing laws that shut down all the local bars and liquor stores. Baptists support the same laws and lobby vigorously for them. Both parties gain. …”
Locally, for instance, the Restaurant Association of Metropolitan Washington is lobbying for strict rules on food truck parking, in the name of “the needs of the public” for sidewalk space and parking places. Of course, brick-and-mortar restaurants benefit from any regulation that makes life harder for their rolling competitors who can’t afford to lease a downtown storefront.
The research Mitchell brings together helps show why government-granted privilege is so important to big business and so costly to the rest of society. In one key finding, he highlights research indicating that free markets, with fewer barriers to entry and fewer bailouts to prop up failed giants, make it harder for dominant businesses to maintain dominance.
Noting the passage in the AP article that congressional Republicans”and their ideological leaders argue that the marketplace should dictate what businesses thrive and falter, not Washington,” blogger Ace of Spades responds:
Yes, that’s so controversial.
Remember the days when Democrats (and their media Spirit Squad) railed against Republicans for “favors to big business”? Well, the Democrats have changed their position, and the media has quickly followed suit.
You could see a similar transformation slowly occur in the stories about rising gas prices after Democrats took control over Congress and the Senate in 2006. At first, the MSM cranked all sorts of “pain at the pump” stories. Presumably, once the Obama team sent the word that they would use high gas prices (which arguably helped to accelerate the economic crisis in the fall of 2008) as yet another crisis they wouldn’t let go to waste to push their own brand of enviro-crony-corporatism, the legacy media began to churn out reasons why high gas prices were a good thing, and looked the other way rather than lick their chops at running campaign-killing news stories when Obama promised to bankrupt energy businesses he personally didn’t approve of.
But the difficultly with the story line that AP tried to push this week is that despite the increasingly left-leaning tilt of the business world, it’s rather difficult to turn on a dime nearly a century of conventional wisdom that Republicans = big business. Even Winston Smith would find trying to advance the narrative that “Conservatives make it rough for business” to be a hard sell.
Besides, after watching Occupy Wall Street gang-up on business in the fall of 2011, more than a few people would look at a headline that “Conservatives make it rough for business” as a good thing, to be encouraged. Maybe even wish they’d bring the pitchforks a little more.
OK, maybe that last thought is stretching it a bit. But nowhere near as much as AP tried to do this week.
Related: At Bookworm Room: “Let’s do the time warp again — Progressives keep urging those failed economic policies.”