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Source link: http://archive.mises.org/15416/does-favoring-free-enterprise-mean-favoring-business/

Does Favoring Free Enterprise Mean Favoring “Business”?

January 25, 2011 by

The first great error here is the mental habit that many have of thinking that big government and big business are somehow at odds. The whole of American history from the beginning to the present suggests precisely the opposite. FULL ARTICLE by Jeffrey Tucker

{ 24 comments }

Daniel Hewitt January 25, 2011 at 9:06 am

Here is another related article that I read this morning, that compliments Jeff’s article well.

http://www.bloomberg.com/news/2011-01-25/obama-s-pro-business-optics-are-an-illusion-commentary-by-caroline-baum.html

Jordan Viray January 25, 2011 at 4:04 pm

Good find, Daniel. While it’s sad that Obama thinks that the government will be able reform itself in the service of the economy, what’s even sadder is that he’ll convince a great deal of people of that tonight.

It’s good to see Mises.org point out how “Big Business” and government collude against the free-market. In some ways that does not happen enough. I don’t know how Libertarians ended up being painted as shills for contemporary big business when that is emphatically not the case but I do know that such articles will go a long way to correcting that misconception.

There’s a lot of anger against corporations as well as government which gives us a good opportunity to provide a solid framework for the how and why of the disaster around us. I personally enjoy the more academic side of things, don’t get me wrong, but from an advocacy standpoint there’s a lot of room for improvement here.

J. Murray January 25, 2011 at 9:35 am

For someone serious about repealing bad regulations, repeal every last one of them passed since 1900. That should be a good start.

Matt R. January 25, 2011 at 9:48 am

It’s always nice to be reminded of what a true free market is. Great article.

Stephan Kinsella January 25, 2011 at 10:09 am

Great article. The collection of information about how big business colludes with the state is helpful. I gathered some other examples in my post State Antitrust (anti-monopoly) law versus state IP (pro-monopoly) law:

See note 10 and accompanying text of my article Reducing the Cost of IP Law (“Once again, as in the case of minimum-wage, social-security, and prounion laws, federal legislation works in favor of big business, … For a recent example, UPS is currently lobbying Congress to enact legislation that would redefine its rival, FedEx, as a trucking company rather than the airline it started out as in an attempt to make it easier for the Teamsters union to unionize FedEx drivers and raise their wage rates—and of course FedEx’s cost structure. See Del Quentin Wilber & Jeffrey H. Birnbaum, Taking the Hill By Air and Ground: Shift in Congress Favors Labor, UPS Over FedEx, Washington Post (September 14, 2007).

See also Murray N. Rothbard, Origins of the Welfare State in America, Mises.org (1996) (“Big businesses, who were already voluntarily providing costly old-age pensions to their employees, could use the federal government to force their small-business competitors into paying for similar, costly, programs…. [T]he legislation deliberately penalizes the lower cost, ‘unprogressive,’ employer, and cripples him by artificially raising his costs compared to the larger employer.… It is no wonder, then, that the bigger businesses almost all backed the Social Security scheme to the hilt, while it was attacked by such associations of small business as the National Metal Trades Association, the Illinois Manufacturing Association, and the National Association of Manufacturers. By 1939, only 17 percent of American businesses favored repeal of the Social Security Act, while not one big business firm supported repeal.… Big business, indeed, collaborated enthusiastically with social security.”); Llewellyn H. Rockwell, Jr., “The Economics Of Discrimination,” in Speaking of Liberty (2003), at 99 (“One way the ADA [Americans with Disabilities Act] is enforced is through the use of government and private ‘testers.’ These actors, who will want to find all the “discrimination” they can, terrify small businesses. The smaller the business, the more ADA hurts. That’s partly why big business supported it. How nice to have the government clobber your up-and-coming competition.”); Rothbard, For A New Liberty (2002), pp. 316 et seq.; Rothbard, The Betrayal of the American Right, 185-86 (2007) (“This is the general view on the Right; in the remarkable phrase of Ayn Rand, Big Business is ‘America’s most persecuted minority.’ Persecuted minority, indeed! To be sure, there were charges aplenty against Big Business and its intimate connections with Big Government in the old McCormick Chicago Tribune and especially in the writings of Albert Jay Nock; but it took the Williams-Kolko analysis, and particularly the detailed investigation by Kolko, to portray the true anatomy and physiology of the America scene. As Kolko pointed out, all the various measures of federal regulation and welfare statism, beginning in the Progressive period, that Left and Right alike have always believed to be a mass movement against Big Business, are not only backed to the hilt by Big Business at the present time, but were originated by it for the very purpose of shifting from a free market to a cartelized economy. Under the guise of regulations “against monopoly” and “for the public welfare,” Big Business has succeeded in granting itself cartels and privileges through the use of government.”); Albert Jay Nock, quoted in Rothbard, The Betrayal of the American Right, 22 (2007) (“The simple truth is that our businessmen do not want a government that will let business alone. They want a government they can use. Offer them one made on Spencer’s model, and they would see the country blow up before they would accept it.”).

See also Timothy P. Carney, The Big Ripoff: How Big Business and Big Government Steal Your Money (2006), and also Rothbard, Confessions of a Right-Wing Liberal (“This is the general view on the right; in the remarkable phrase of Ayn Rand, Big Business is “America’s most persecuted minority.” Persecuted minority, indeed! Sure, there were thrusts against Big Business in the old McCormick Chicago Tribune and in the writings of Albert Jay Nock; but it took the Williams-Kolko analysis to portray the true anatomy and physiology of the American scene. … As Kolko pointed out, all the various measures of federal regulation and welfare statism that left and right alike have always believed to be mass movements against Big Business are not only now backed to the hilt by Big Business, but were originated by it for the very purpose of shifting from a free market to a cartelized economy that would benefit it. Imperialistic foreign policy and the permanent garrison state originated in the Big Business drive for foreign investments and for war contracts at home.”)

See also the Wikipedia article on Rothbard: “Rothbard was equally condemning of relationships he perceived between big business and big government. He cited many instances where business elites co-opted government’s monopoly power so as to influence laws and regulatory policy in a manner benefiting them at the expense of their competitive rivals. He wrote in criticism of Ayn Rand’s “misty devotion to the Big Businessman” that she: “is too committed emotionally to worship of the Big Businessman-as-Hero to concede that it is precisely Big Business that is largely responsible for the twentieth-century march into aggressive statism…”[49] According to Rothbard, one example of such cronyism included grants of monopolistic privilege the railroads derived from sponsoring so-called conservation laws.[50]

Patents are state-granted monopolies, which are in “tension” with antitrust law; you can have and use this monopoly, even though it technically seems to violate the antitrust laws, so long as you don’t abuse it. This means that the larger companies who amass the large patent arsenals (and cross-license with each other) sort of have immunity from antitrust law while smaller competitors are not only subject to the anticompetitive effect of the patent monopolies possessed by the big players but also subject to antitrust law still. Absent antitrust law perhaps smaller companies could cartelize somehow to combat the patent monopolies of the big companies–for example perhaps they could form defensive patent pooling arrangements–pools that might under current law violate antitrust (I am not sure, have not looked into it in detail). I.e., the antitrust law (maybe) gives enough of an exemption to big companies to acquire large patent monopoly arsenals and to cross-license with each other forming anticompetitive barriers to entry but does not give enough of an exemption for smaller companies to collude and cartelize and form defensive patent pools. I sense that this is basically one thing that is going on.

Another example would perhaps be Big Sports. If I recall correctly federal antitrust law had to grant a special exemption to certain college or large sports leagues, so that they would not be hampered by antitrust law. I can imagine that the combined effect of antitrust law and the special exemption might give some favoritism to the NFL etc. This may be on point but not sure it’s the only one: http://en.wikipedia.org/wiki/Sports_Broadcasting_Act_of_1961.

guard January 25, 2011 at 11:10 am

Thank you for this article. Lies are so entrenched that it is almost impossible to effectively communicate anymore. “Free trade” and “free enterprise” for example, both governed by thousands upon thousands of pages of regulations. Referring to corporations as the “private sector” when they are direct creations of the state.

Barry Loberfeld January 25, 2011 at 11:14 am

FROM HERE:While many adherents of the Left made their peace with the poverty and tyranny of the Communist bloc, some did not, which to this day poses the question: How can these people continue to believe socialism a corrective for all the wrongs they denounce — we can recall Ralph Miliband’s classic Marxoid list of exploitation, poverty, war, imperialism, and the “crimes of the ruling classes” — when these always exist pervasively in those People’s Republics where every drop of capitalism, their hypothesized source, has been wrung from the social fabric? It’s not so much that they close their eyes as it is that they avert them — towards a sight in which they believe they find confirmation: the presence of these wrongs in the “capitalist West.”

And who can deny it? Who can deny, say, the West’s imperialism? But with this and the other stated evils, we must ask: What element of the semi-capitalist West was responsible — the free market or the coercive state? In Britain, who thundered the loudest against colonialism? The classical liberal advocates of laissez faire, who condemned imperialism long before the birth of the founder of the Soviet Empire. It was the “Tory socialism” of Disraeli, not the free market, that sent British troops overseas.

And the “crimes of the ruling classes”? What were these ever but the deeds, not of truly private businessmen, but of the State? What does Ralph Nader’s denunciation of “corporate socialism” concede except that the corporations owe their current privileges, not to laissez faire, but to government intervention? Which leads us to now ask: What exactly is the “capitalism” of these anti-capitalists? Is it “Little England”-ism or mercantilist imperialism? Free trade or protectionism? Laissez faire or interventionism — A or non-A? Just as theocracy cannot denote both the union and the separation of Church and State, so capitalism cannot be both the union and the separation of Firm and State.

Orthodox Marxism cynically — amorally — rejected the possibility of neutrality and equity in political matters. All government was the special interest of one “class” or another. Just as capitalism ushered in the rule of the bourgeoisie, so would socialism bring about the “dictatorship of the proletariat.” But how does capitalism — that is, the free market — represent the special interest of “capitalists” (i.e., nonmanual laborers)? If respect for property rights favors “capitalists,” then why do corporations seek subsidies (each for its own self, mind you, not for the entirety of its purported “class”)? If unregulated commerce leads to monopolization by these “capitalists,” then why do real-world businessmen turn to government to provide them with monopoly entitlements (optimally, only for their own company, not for all “capitalists” including their competitors)? And if free trade benefits this class and no other, then why do each country’s business leaders — and union members — lobby for tariffs on imports? We seem to forget that the classical liberals formulated their principles of private property, laissez faire, and free trade — rejected by the Left and Big Business alike — not against the graspings of the have-nots, but in opposition to policies that favored the few over the common good. All of the classic Marxoid evils existed before the advent of liberal capitalism, which arose specifically to eliminate them — and did so most impressively.

Gurrie January 25, 2011 at 11:46 am

A very good article. Just 3 comments:

1) There should be more mention of the banking system as being the prime example and prime mover of the private manipulation of governmental levers of power.

2) We classical liberals have too often resorted to “grand conspiracy” theories in our language and our analysis, as though such concepts as “big government” and “big business” can be reduced to identifiable individuals or cabals, rather than the overly broad and pat phrases that they are. There undoubtedly are small conspiracies behind the legislative acts that protect certain existing businesses, but it is the broadly held public mindset that it is o.k. to use government in this way that is the real problem. Are we better off trying to educate people about sound economic principles, or to frighten them with stories of evil wizards lurking behind the curtain? Maybe a little of both, but hopefully more of the former.

3) I don’t agree with Stephan Kinsella that IP is an example of governmental promotion of monopolistic powers. If IP is, at least for a time, the “property” of its inventor, it should be protected by government just as any private property should be protected by government. If it is not the property of the inventor, then it should not be protected. The debate should be about whether or not it is, or should be, considered property.

nate-m January 26, 2011 at 12:27 am

2) We classical liberals have too often resorted to “grand conspiracy” theories in our language and our analysis, as though such concepts as “big government” and “big business” can be reduced to identifiable individuals or cabals, rather than the overly broad and pat phrases that they are. There undoubtedly are small conspiracies behind the legislative acts that protect certain existing businesses, but it is the broadly held public mindset that it is o.k. to use government in this way that is the real problem. Are we better off trying to educate people about sound economic principles, or to frighten them with stories of evil wizards lurking behind the curtain? Maybe a little of both, but hopefully more of the former.

The scary thing is that there is no secret conspiracy. There is no need. If there is secrets it’s kinda pointless because the amount of stuff that the government does out in the open is enough to condemn it as pure evil. They just do whatever the hell they want out in the open and when anybody questions them about it they just lie about the motivations. The public at large just seems to shrug it off.

3) I don’t agree with Stephan Kinsella that IP is an example of governmental promotion of monopolistic powers. If IP is, at least for a time, the “property” of its inventor, it should be protected by government just as any private property should be protected by government. If it is not the property of the inventor, then it should not be protected. The debate should be about whether or not it is, or should be, considered property.

IP does not have anything to do with private property. The whole term ‘IP’ is a lie in itself.. a lawyer’s trick to try and frame the debate with no substance behind the term.

It’s much easier to make a compelling private property argument for regulations like minimum wage or antitrust legislature then it is for IP regulations.

Gurrie January 26, 2011 at 11:23 am

Nate-m,

I’m sorry, but I don’t see any private property argument at all for minimum wage or antitrust legislation. As for IP, I believe there is an argument.

Clearly, a novel idea that one carries around in one’s own head is private property, “private thoughts” if you will. You can choose to share it with others or not, as you see fit. If they come up with the same or similar idea on their own, that is coincidence, not usurpation of your idea, and the idea is no longer truly private, but is still not in the public domain.

If one so desires, one can use the idea commercially without patent protection. These are called trade secrets and enjoy such protections as criminal laws against theft.

A long time ago (long before any modern versions of “big government”), some inventors started to seek, and receive, the protection of the sovereign for their ideas, precisely so they could put them into the public domain but with the protections afforded to private property. And just like private real property, it could be rented out to others in the market. The government never told the inventor what he could or couldn’t charge, only the market decided that.

The enforcement of patents are up to the courts, not the police or the Patent Office. Their decisions are all fact-related, not prescribed by statute. There are many close similiarities between how IP laws are administered and how court enforcement of contracts are administered. Moreover, I see nothing that is more “anti-libertarian” about IP laws than about property or contract law generally.

Deefburger January 25, 2011 at 11:47 am

Very nicely said. Positive rights once created will be sought after through the control of the institution that holds them. What you illustrate here so well is that whomever can get the closest to those rights and the source of those rights will benefit directly from the use and control of those rights.

Politics becomes the means of maintaining the belief in the positive rights as well as a means of producing more. More beliefs in more powers. The problem with belief in power is in the use of it. Free markets and Liberty do not depend on belief systems but rather depend on knowledge. Mises’ knowledge problem for central planners is irrelevant to the power holders. They only require the belief to exist in order to wield it. Actual knowledge of real outcome from that use is a PR problem not a reality problem. The reality problem only shows itself to those without the power. The users of the power don’t care about the knowledge. The knowledge is irrelevant to the belief and the power. The real outcome is only relevant to those who don’t have the power.

This is why the government and politicos appear to waffle back and forth from left to center to right and back. They are not changing their means, only changing the beliefs that support the power. As actual outcomes surface in reality for the electorate, the rhetoric changes to emphasize a different belief and raise support for power in some other direction. Real outcome is only useful if it can be packaged as evidence of the “good” that came from the belief and thus reinforce the positive right of power. Otherwise it is ignored.

Take the current financial crisis for example. The power to effect the economy created the outcomes through the actions of the institutions wielding that power. The solutions given to correct the outcome involved more power and “fixes” that effected only those institutions involved. People still lost their homes, jobs, etc. even though the outcome from the reuse of the same powers have “helped” save the power brokers. The rhetoric changed but not the power.

Look at the patent system. Only the most powerful corporations can afford to use the power offered by the positive rights granted by that system. Same with copyright. Even though you may own the copyright when you write the book or record the song, you can only use the right if you have the backing to afford to use it. To get that, you have to sell the right. Who ends up holding that power?

I was watching Mythbusters the other night and they super-cooled a beer. When it was struck on the table a balloon of ice began forming and quickly froze the whole bottle of liquid inside. Positive rights once instituted will expand their influence in much the same way. They may sit dormant for a time, but once a shock is given to the system, those who seek power will find the positive right an attractive nucleation point and the power quickly expands into the system. Government with positive rights will bloom and eventually engulf the entire system, and ruin the beer at the same time!

The whole of Humanity needs to grow up and stop believing in super powers and positive rights of any kind, institutionalized. Make a contract with privilege in the contract and that is ok because that is between you and whomever your contract is with. But institutionalized positive rights are a recipe for disaster every time, and the users of the power will do their damnedest to convince you otherwise.

Obama could put on a Super suit today and hold a press conference touting the superiority of his suit. Those of us who wish to believe will find no problem and see the “S” on the suit to mean “Super”. Those of us who know will see the “S” and think “Stupid” instead. But “Super” is all you will hear from the corporate media!

There is no power other than Human will and Human organization of existent resources and ability. It is not necessary for humanity to believe in anything other than it’s own capabilities to survive and flourish. In fact, Humanity by the necessity of existence in reality and not never-never land has proven it’s ability to cope in reality without any use whatsoever of beliefs. In the end, only knowledge will suffice to maintain a living person, or a living community. Real goods, real services, real know-how are what ultimately get things done. Powerful people and powerful beliefs do not do anything for the system as a whole, other than remove what is really there in exchange for a belief and a promise of salvation.

I sat in Pat Paulsen’s chair. The seat of power itself if he had been elected president. It wasn’t any different than the one I’m sitting in now. If you are surprised by this, then you need to do a reality check. Obama’s chair in the oval office is no different. He farts in it just like everybody else did before him.

How silly and childish a behavior to believe in positive rights given to seats of power. Why do we do it? Why do we insist on creating institutions of power? Why do we keep re-trying belief in centralized government and centralized power when the results in reality have always been a fail?

BioTube January 25, 2011 at 1:47 pm

Just a little nitpicking: every “effect” in paragraph four should be “affect”.

guard January 26, 2011 at 10:22 am

You insist there is only man, and can’t figure out why man creates powers to his own detriment. Practically all of humanity throughout history has believed in powers higher than man and out of his control. It should be obvious to anyone that man’s general relationship with power is one of worship. The modern enlightened man is in the laughable position of continuing to worship the powers while claiming they don’t exist.

agdrummer January 25, 2011 at 12:11 pm

Most Excellant J.T.!!!!

Rick January 25, 2011 at 3:07 pm

Well said.

The area I live in is majority democrat, with independents rising. Unemployment is close to 10%. There is a lot of talk about “creating jobs”. But for too many people that seems to mean just waiting for a big corporation to shake hands with a local politician, put their stakes down here, and like magic that will take care of the “unemployment problem”. The only problem is that it doesn’t happen very often, if ever, and when it does happen on occasion a big corporation can’t employ everyone and many of their employees will be transplants anyway.

I tell people whenever the opportunity presents itself that one way to greatly lower the unemployment rate now is too stop waiting for big corporations and government to join forces in your town. Instead repeal all of the obsolete and counter-productive laws and regulations that limit the regular everyday exchange of goods and services between local residents and small businesses. Onerous licensing, zoning, land use, protective trade cartels, etc., that make regular people less free to exchange all needs to stop. Right now it’s freedom for the politically well connected, and rules and regulations that fleece everyone else.

Mark January 25, 2011 at 3:10 pm

This point may be the most important thing to teach average people about capitalism and government subsidization of business. As we know, capitalism gets blamed for all sorts of government/business shenanigans, and liberal thought leaders are not inclined to distinguish between conservatism and republicanism anyway.

Sadly, government subsidization of large corporations is the one thing republicans and democrats cooperate on.

I was lucky to learn about this years ago. I took administrative law in law school and we had a case which illustrated how the large airlines used the FAA to put small airlines out of business by seizing their business records for regulatory inspection in the days before xerox machines.

Ken January 25, 2011 at 3:39 pm

Brilliantly presented as usual.

pinkteddybear888 January 25, 2011 at 8:52 pm

Resource concentration is what I find most of my arguments with anti-capitalists comes down to. Mr. Tucker’s article is good but a little hand-wavy (in which I mean he points to books which are no doubt invaluable, but where are the crisp statistics that resource concentration is a function of government power, not inherent in capitalism?).

The history of resource concentration seems a bit ambiguous to me. Mr. DiLorenzo combats the anti-trust propaganda very well (here, here, and here), and Mr. Armentano’s book is indispensable. However, wealth did seem to increase since since the 1700s (Williamson and Lindert). Of course, this could have been caused by government power and stifling, but I haven’t seen this demonstrated so clearly. I agree with Mr. Tucker’s theoretical and moral arguments — that governments enable resource concentration that would not occur otherwise — but I haven’t found these types of arguments to be very persuasive of anti capitalists. I’m not blaming Mr. Tucker, I have nothing better to add, but really I’m asking — is there a good, crisp argument for this? As Higgs argues, wealth inequality is meaningless without asking what caused it — I just don’t see the clear argument on what caused it.

Dan January 25, 2011 at 10:55 pm

“The whole of American history from the beginning to the present suggests precisely the opposite.”

Completely true. From the the copyrights/patents and duties/imposts/excises written in the Constitution to the broadcast-licensing, welfare/warfare, corporate-subsidizing and “privatizing” America of today, America was always a contracting nation and has never been free-market nor free-trade.

Tom Puckett January 26, 2011 at 2:40 am

Mr. Tucker could not be more timely or spot on with his analysis. The State of the Union speech pretty much validated his entire premise. The call to subsidize the “clean” electric auto industry is a case in point. Since the USA gets over 50% of its electric and energy from the consumption of coal and to create that electricity coal has to be burned, is that really cleaner than any other fossil fuel? Obama has hardly been a friend to the coal industry and yet he plans to power vehicles that run on this plentiful USA energy source while simultaneously limiting its production? Neat. How about the environmental problems that will invariably arise when the batteries for these vehicles need a means for disposal? Someone will get to that later…
The current business-political culture works very hard to create a new class of oligarchs. Pay off the right people in positions of power and get a “turn” at making money instead of letting the market decide its value to the public. We should subsidize windmills and solar collection even though the technology for these mediums is woefully inadequate to meet current and certainly not proposed demand? Germany and France who have more than their share of windmills are racing to build coal fired plants to compliment their substantial nuclear energy plants. Why is that? Is the economic development of China tied to its use of coal for energy? Hmm…
The liberal president supporting “businesses” whose product cannot succeed in the market is hardly a positive economic model. Until the technology improves so that solar or wind energy makes a viable impact on the market beyond the production of windmills and solar panels, it is decidedly anti-free market to support these entities beyond speculative investing potential.
Rewarding incapable or undeserving businesses the lion share of a market is not the province of government. Plain and simple, it is an attempt to re-distribute the wealth of the fossil fuel industries into the nascent green economy despite its lack of functional product.
Tucker’s observation on the ridiculousness of Obama’s centrism are perfect. You cannot create markets with wealth you confiscate(taxes), to fund products that don’t work,suppress markets that do to make your friends rich and then have thinking people believe you support the markets.
If you become a centrist or compromise with someone you know is wrong or in error, guess what…you are wrong too.

David January 27, 2011 at 11:32 pm

Interesting article. Great content! Thank you!

Dave Free Products January 27, 2011 at 11:34 pm

I wonder what is going to happen next. interesting

Vanmind January 29, 2011 at 4:05 pm

Funny, then, that I see mises.org plagued with javascripts from the CIA’s front operation facebook.com and from the NSA’s front operation google.com.

“Ooh, be sure to friend us on spookbook — I mean, on facebook. And don’t forget to sign up for an email account hosted by the one and only gmanmail.com — I mean, by the one and only gmail.com”

Hell, you can’t even do a simple search on this site without enabling Spookle scripts. Way to fail, mises.org…

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