Crony capitalism is a problem. Big businesses can have disproportionately high influence on our government. This is a problem that both the left and the right traditionally agree upon.
Where we diverge, however, is on how to tackle this issue.
Listen to the Democratic candidates, and, despite their attempts to differentiate from one another, all of them will be offering some form of the same solution: to increase the size of government.
Regulations, oversight committees, bureaucracy – all of these options mean that the size and scope of government is dramatically expanded in an effort to shift influence from big business.
We all remember the activists in the Occupy Wall Street movement camping in downtown New York City with homemade signs and posters lambasting the 1%. This crowd nearly unanimously identified on the left, which means the politicians they supported were the ones looking to government to make things better.
Capitalism, says the left, promotes unfair influence.
This is incorrect, and the reason we can’t get ahead of this cronyism is because we are exacerbating the problem by turning to government as our solution.
Big government creates the opportunities for big corruption.
Bill Frezza, of Forbes, puts it this way:
“Would a farmer who put out a trough of slop be surprised if it attracted a bunch of pigs? Yet activists who promote enlarging the size and scope of government always seem to be shocked when one program after another is hijacked by corporations that find it easier to seek favors in Washington than customers in the marketplace.”
Our healthcare is costly in America. The industry is only quasi-capitalist. For the most part, it is dominated by gigantic insurance companies that have incredible influence and vast resources to maintain high costs for simple goods, like saline solution, and heavily regulated goods, like prescription drugs. In a completely free market, other new producers would enter the industry and offer the same or better goods and services for less, bringing the overall industry prices down. This is tough to do in our healthcare industry because of the mountain of regulations and the insulation written into federal code to maintain this system.
The taxi industry was traditionally incredibly insulated. A medallion – a government allotted license to own a taxi – cost hundreds of thousands of dollars to purchase. Few newcomers could front the money to enter the industry. Now, Uber, Lyft, and other ride-hailing services have turned the taxi business on its head – but not without taxi companies ferociously lobbying local governments to throw every imaginable roadblock in their way.
In an effort to play the great equalizer, the government churns out whole volumes of regulations for businesses to follow. The effect of the swelling regulatory state in America is disproportionately harmful to small businesses. Big businesses have the money and staff to ensure they meet all these requirements. They hire dozens of people, full time, as compliance officers. Entire careers are found in following the US government’s incredibly complicated and burdensome regulatory mandates. Small businesses can’t afford these same resources, and ultimately fewer last in highly regulated industries. This is known as regulatory capture.
In addition, the bigger the business, the more likely it has the resources and capital to get highly coveted government contracts, favorable government-mandated quotas or tariffs, or even government backed monopoly licenses (like utility companies). This is called rent-seeking.
Regulatory capture, rent seeking, and artificially high prices are all products of unfair market advantages enabled by big government, not helped by it.
Put succinctly by Sam Dugan writing for the Foundation for Economic Education, “When government has more power to regulate business, businesses will respond by shifting more of their resources towards influencing the government to intervene in their favor. Businesses are incentivized to twist the law to their own advantage. [W]hen government has the power to control businesses, businesses will end up controlling the government.”
Some industries need basic government oversight to protect consumers from things they don’t or can’t know about. That’s why conservatives advocate for limited government, not no government.
However, on the whole, most conversations about the problems of crony capitalism and the resulting untouchable wealth of corporations fail to recognize the cause of these things: big government.
The Democrats are peddling snake oil with their endless government-based solutions. They will take more of your money, in taxes and fees, and maintain the system that keeps you down.
Don’t throw the baby out with the bathwater. Capitalism is not the enemy of the people.
Only a freer market can be a true equalizer, defended by a just and limited government.
Bryan Griffin of the London Center for Policy Research is a lawyer and author who specializes in American policy in the Middle East.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.