Big Business Loves Big Government

It is a widely accepted myth that corporations are a right wing, free market capitalist phenomenon, but in reality big government has a essential role in breeding big business. In his 2007 book about the history of the left during the 20th century Liberal Fascism, Jonah Goldberg discusses the relationship between government and corporations, and why corporations like this set up.

First Goldberg gives two high profile examples of corporations being forced into the political game by the government. The first was Microsoft which boasted for years that it had no involvement in Washington D.C., until Bill Gates was forced to testify before congress after Antitrust litigation was brought against him. Since antitrust laws are written in such a way as to include practically every business in America as operating in violation of the law, it is hard to take that litigation as a sign of actual wrongdoing on Microsoft’s part. After this episode Gates hired an army of lobbyist, lawyers, and consultants to battle the government. As for Wal-Mart:

In the 2000 presidential race, Wal-Mart ranked 771st in direct contributions to federal politicians. In the intervening years, unions and regulators began to drool over the enormous target the mega retailer had become. In 2004 Wal-Mart ranked as the single largest corporate political action committee. In 2006 it launched an unprecedented, “voter education” drive.

Golberg reminds readers that businessman does not mean free market capitalist. In fact capitalism involves risks, and businessmen do not like risks. Therefore the loyalties of the businessman are not to free market economics, but rather to opportunity. If the government can guarantee profits and lack of competition, the corporation will be fine with any government intrusion, and will essentially work for the government in order to get their kickbacks.

Goldberg gives the example of the regulatory costs of implementing the Americans with Disabilities Act requirement that offices be fitted for wheelchair access, and other good intentioned regulations to help the disabled get around. Coca Cola does not care about the costs of updating their building, because Pepsi will have to make the same changes, therefore the companies are still on an even keel. But the small soda making company that we have never heard of also has to make these changes to their facilities. As a percentage of costs, the burden is much higher on the smaller company who do not have vast profits to dip into, and do not have vast customers to pass the cost off on by a fraction of a cent at a time. Instead the prices of the product must go up, making the small soda maker unable to compete with Coke and Pepsi. Further expansions the company planned must be put on hold to comply with the government regulation. Just complying in and of itself costs the small company disproportionately more because they do not already have a team of lawyers to implement the new laws. Or government regulation can keep a company from growing, for instance, if that small soda company had 499 employees and would be required to implement the changes upon hiring the 500th employee, a $30,000 position could end up costing millions.

Big Tobacco found out about the benefits of government intrusion to corporations, when in the 1990’s  they agreed to pay a $246 billion settlement to state governments. Big Tobacco raised prices high enough to cover the cost of the settlement, and make more profits than before. Since smaller tobacco companies then thrived with lower prices, the state government who had received the settlement payments from Big Tobacco stepped in and demanded the smaller companies make settlement payments as well. This caused the smaller companies to have to raise their prices to the point where they could no longer compete with big tobacco. Therefore the government’s efforts to “reign in big tobacco” made it bigger, and ensured a lack of competition from smaller competitors.

Years earlier the energy crisis led to Jimmy Carter starting the Energy Department “which became–and remains–a piggy bank for corporate interests”. Just look at the way Energy Department loans were given to companies like Solyndra, whose main investor, George Kaiser, had raised $500,000 for Obama during the 2008 election. His company got half a billion dollars from the government, then went out of business, but the bankruptcy was structured so that Kaiser would be paid back before the taxpayers. The rich get richer, and the poor get poorer, all because the government was trying to “reign in” big oil back in the 70’s.

It happens time and time again, that the government involves itself in one business or another to try to solve problems which may or may not exist. The regulations made are easily paid for and complied with by big corporations, while the little guy struggles to come up with the capital to meet regulations. This happens with subsidies to large farms, which force smaller farms out of business. It happens with drug companies, because the FDA charges fees to approve drugs. As a result half of the revenue of the FDA comes from big pharmaceutical companies, who influence the FDA to make regulations that put small competitors out of business, and maintain cartel like control over the pill industry. Now our government has gotten involved in healthcare, to make care more affordable. The only result which can come from this is insurance companies get bigger, and it becomes harder and harder for doctors and medical staff to do their job, and do it well.

Government involvement in the economy always amounts to force, and only in an economy absent of force will individuals thrive, and take society with them to unprecedented heights.

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