“Progressive” Government & Big Business: Common and Corrupt Bedfellows

After examining the moral justification for capitalism and the hypocrisy that exists within government regarding the policy of price controls and monopolies, it would be reasonable to conclude that businesses would want as much freedom and competition free from government control as possible within the marketplace. However, ever since politicians and economists first began enacting policies to regulate and “plan” the free market, there have been a contingent of traditionally larger businesses that have been strong advocates for government control and manipulation of the markets. Why would these businesses jump in bed with the government? The answer lies at the end of what my grandfather wisely taught me about years ago: “Follow the money trail.”

A byproduct of the consumer-friendly competition created by capitalism is the requirement of every business to pull its own weight and create value for consumers or risk being overtaken by more innovative, creative and driven competitors. So what is the best way for a large established company to avoid the hard work required to remain its status at the top of its industry? Run to the only institution capable of forcing businesses and individuals to comply with its demands: the government.

Traditionally, political pundits and historians have painted the interests of big business as being aligned with a conservative agenda. However, an examination of the Obama administration’s “cozy embrace of big business,” through its economic policies and bailouts, persuasively illustrates that big business has rarely had such an ally as the government in shielding them from the cruel realities of competition.

A few examples I have stolen from Jonah Goldberg (writer for National Review) will illustrate my point: (1) it has been well publicized that when President Obama called for healthcare reform, insurance companies quickly adopted the mantra that they wanted to be “at the table rather than on the menu.” Translation – insurance companies wanted to ensure that they were in a position to play a profitable and integral role in the upcoming welfare state that will be created through socialized medicine; (2) Phillip Morris, the largest of the tobacco companies, recently supported and realized passage of a so-called “anti-tobacco” bill that benefited Morris’ position in the market because it made it more difficult for smaller, more innovative competitors to compete (the bill made it more difficult for tobacco companies to advertise their products – a nice bill for a large tobacco company looking to retain its 50% market share); (3) GE has willingly jumped into bed with the government on the global warming hysteria by peddling “green” products to Uncle Sam rather than creating and selling competitive products on the free market that create value for consumers. Why? Because GE knows that it wants to position itself as a “favorite” of Obama when cap-and-trade passes so that it can attain a protected industry status, thereby ensuring decades of government subsidization; (4) finally, the most obvious and blatant example of protectionism for big business is President Obama’s proposed plan to deal with “systemic risk” in the financial markets. A quick summary of the proposal shows that big businesses in the financial markets – large banks, insurance companies, etc – will not be permitted to fail if it is determined by the Federal Reserve that such a failure would threaten the stability of the financial markets. This policy creates an obvious incentive for larger financial firms to grow as quickly and attain as much influence within the markets as possible in order to attain a “too big to fail” status (even if it were to involve irresponsible “investments”). By attaining a “too big to fail” status, a business can become lazy and rest assured that it has become a ward of the state and can operate as a careless chronic welfare recipient that has no incentive to do anything other than maintain its status.

Who loses when big business jumps into bed with the government? You do. Individual consumers and small businesses seeking to expand by offering better products at lower prices lose. Individual consumers lose because we never experience the drop in prices and development of new, innovative and more efficient products by smaller, hungrier and aggressive entrepreneurs. Small businesses lose because they don’t have the benefit of government protection from competition and are required to play from an uneven playing field, thereby limiting the prospects of success.

The examples discussed above provide a wonderful illustration of how a planned economy creates inequities that far outweigh the claimed “unfair” consequences of a free market economy. What is the end result of President Obama’s policies that protect big business at the expense of small business and consumers? Any Rand summarizes it best: “The inevitable result of planned economies is a ‘syndicalist or corporative organization of industry in which competition is more or less suppressed but planning is left in the hands of the independent monopolies of the separate industries. This places the consumer at the mercy of the joint monopolist action of capitalists and the workers in the best organized industries.” See what happens when government confuses and corrupts the free market by taking sides and protecting certain “big” business? I don’t fault big business for looking out for their interests by attempting to capitalize on a corrupt government; I fault our corrupt government for taking sides and corrupting the free market.