In the journal of the American Enterprise Institute, James DeLong reviews the National Affairs article "Capitalism After the Crisis" by Prof Luigi Zingales of the University of Chicago. Zingales makes the important disctinction between being pro-market and pro-business. DeLong echoes Zingales, noting that:
Business, especially big business, is happy with crony capitalism, franchised monopoly, or any other device that will avoid the Darwinism of the free market. Of the billions of dollars now spent lobbying, almost none supports the free market as a concept or an institution.
Big businesses spend money lobbying for special advantage. They do not seek a level playing field, but laws and regulations which benefit their own circumstances at the expense of fair competition. Their aim is to use the law to make money, and legislators seem all too ready to comply with their objectives. Toymakers Hasbro and Mattel both lobbied for the Consumer Product Safety Improvement Act, and "even as the law has brought undreamt-of woe to thousands of smaller producers of kids’ products, the two big companies seem to be doing rather well out of it."
Although opponents of capitalism often treat pro-market and pro-business as the same thing, the reality is that it is regulation and government power which offer business a free lunch, while the market makes them work for it. Businessmen oppose monopoly when they are buying, but tend to favour it when they are selling.
Zingales suggests we should "put rules in place that keep large financial firms from manipulating government connections to the detriment of markets." The same could be done for other sectors of the economy. He says that:
The alternative path is to soothe the popular rage with measures like limits on executive bonuses while shoring up the position of the largest financial players, making them dependent on government and making the larger economy dependent on them. Such measures play to the crowd in the moment, but threaten the financial system and the public standing of American capitalism in the long run.
Unfortunately Zingales thinks that the Obama administration has chosen the latter path. And the 1,990 detailed pages of the Health Care Bill provide yet more ammunition for that view.
Dr Madsen Pirie is author of the recently-published "101 Great Philosophers."
