Free Exchange: More government failure: like kryptonite to supercapitalism!
IF ROBERT FRANK'S characterisation of Robert Reich's new book, "Supercapitalism", is accurate, then it seems pretty naive. The problem with supercapitalism, apparently, is that when the government has massive power to interfere in markets, firms will compete to use the government to get a leg up on the competition. Somehow I doubt that's the way Mr Reich puts it, but that's what it sounds like to my jaded ears.
[Quoting Frank] Once some companies discovered they could gain an edge by influencing government decisions in their favor, rivals had little choice but to join the fray. And once some candidates began altering their votes to attract contributions, others faced strong pressure to follow suit. Reich documents in lurid detail the explosive growth of corporate lobbying expenditures and campaign contributions since the 1970s.
…….
And the arms-control agreement would be some kind of constitutional change that strictly limits the scope of goverment's spending and regulatory powers. That is, the way to end the arms race of legislative favour-giving is to put an end to the legislative capacity of favour-giving. Unless there is a secret warehouse teeming with vats of nutritive fluid in which a new genetic strain of wholly civic-minded statesmen is being incubated, there is no other way; laws about the proper scope of law-making need to rein the politicians in. Now, as history shows, clever office-seekers will find ways around even the tightest constitutional constraints. But some kind of truce of rectitude among politicians (and a pony!) can be nothing more than a utopian wish. Politics provides legislators strong incentives to myopia; it is an advantage to see no further than next election. And what do you call the first "warring faction" to defect from the arms-control agreement? A majority.
Mr Reich's big fresh idea? Campaign finance reform! That's the truce, I guess. But if corporations can't jockey for the billions regulatory and fiscal discretion puts on the table, then they'll do what? Sigh and send money to the March of Dimes instead? Legislators will do what? Mutate into sober Solons who don't look for new ways to extort support from the interests they can make or break? Mr Frank seems to think new restrictions on who can support whom politically is a very fine idea. But isn't this just one more way to lodge the hope that the government will, someday, finally, catch its own tail? Consider the question while reading the political scientist John Samples on "The Fallacy of Campaign Finance Reform".
And, again, that governments can tilt the playing field to create winners and losers is supposed to be a problem with capitalism?
Anyone who has worked in industry competitive analysis can tell you that many large corporations love government regulations. Regulations make it more costly to do business. Large corporations can absorb regulatory environments better than smaller firms that may be attempting to enter the market. If the large firm can influence legislation in certain ways (which it is better able to do with its deep pockets), that legislation becomes part of the large firm's competitive advantage. The more government regulates, the more "investment" is needed by corporations in politics to protect their competitive advantage or block someone else's competitive advantage.
Enron was a major backer of carbon caps because they knew it would make their natural gas less expensive relative to other fossil fuel products. It was also precisely because of excessive regulation, not the lack of regulation, that Enron could shift things around as easily as it did. The regulatory process was so complex that it was hard for watchdogs to get a handle on what was happening.
There is no way to escape some industry regulations altogether, but I don't think social activists are often aware of the unintended consequences of bringing government into the picture, picking who becomes the winners and losers. We need to think more creatively.
Leave a Reply