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NOTE 45. Does Favoring Free Enterprise Mean Favoring “Business”?

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Does favoring free enterprise mean favoring business?

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American political rhetoric seems to operate on a regular cycle, like a clock, which is

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why it seems lately like we are reliving the Clinton years.

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The story goes like this.

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A democratic administration with lefty ideas gets elected pushes hard for a series of goofy

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be reforms like proto-socialized medicine which prompts a backlash and thereby a rethinking

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among the rulers who then tack to the right and become centrist by praising the great

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contribution that the business sector makes to American life.

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Most of these grandiose shifts Obama is going through one now are illusory and pointless,

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like slapping a new color of paint on a car that is traveling in one direction in order

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to fool people into believing that it is a different car going in a different direction.

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But what interests me most here is the rhetoric and the way the left uses it.

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They imagine that they got themselves in trouble by being seen as too pro-government and not

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sufficiently in favor of business, as they understand that term.

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And so then comes the change when they discover phrases like private sector and even words

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It's all superficial, and these shifts suggest that the left accepts a caricature of capitalism,

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the belief that it is the system that favors the largest and most established capital owners

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in society.

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So when things start to go wrong with the socialist agenda, they reach out to the corporate

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kingpins in the name of becoming friendly to free enterprise.

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Look at Obama's pathetic attempts to reach out to business.

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The Administration claims it is reviewing government regulations to find those for which

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the cost outruns the benefits.

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Well, we could make some progress here by turning the Department of Energy, Education

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and Labour into sports arenas, but that's not what the Administration has in mind.

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Instead, you are to go to Regulations.gov and comment if you can figure it out.

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I bumped into one rant that seems typical, some giant racket about home energy upgrades,

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but no doubt that this site is more safety valve than work order.

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Obama also has some new thing he established in the White House called the Council on Jobs

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and Competitiveness, and this is supposed to represent his new centrism.

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And who is to head it?

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Not the owner of Cupcake Kitchen down the street in my neighborhood, but rather Jeff

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Immelt, the CEO of General Electric of all people.

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And this is supposed to signal some kind of new turn for the administration.

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Obama's advisors imagine that his image has become tainted with the impression that he

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is too much in favor of big government.

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Hmm, where did that come from?

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And so now is the time to do the Clinton thing and triangulate by being pro-business and

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hence this new council and new appointment.

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Yes, it is a hoax on many, many levels.

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The first great error here is the mental habit that many have of thinking that big government

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and big business are somehow at odds.

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The whole of American history, from the beginning to the present, suggests precisely the opposite

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From Alexander Hamilton to Goldman Sachs, a careful look at the history shows that there

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has been no major expansion of government that some sector of big business hasn't backed

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with pressure and funding.

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Who won from the mercantilism of the 19th century?

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Who came out ahead in the war socialism of Woodrow Wilson?

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Who was the major power behind the economic regimentation of the New Deal?

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What sectors of American life made out like bandits during World War II and the Cold War,

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and the regulation of medical care and the American workplace in the 1960s and 1970s?

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Without exception, the corporate elite were behind every push for expanding the Leviathan

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State.

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The 19th century history here has been carefully documented by Thomas de Lorenzo.

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Murray Rothbard has revealed the role of business in World War I.

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The post-war period through the New Deal is documented by Butler Schaeffer in his great

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book In Restraint of Trade.

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The New Deal racket received a thorough exposé with John T. Flynn.

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The Cold War and after are shown to be radically pro-business in For a New Liberty, as well

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as Robert Higgs' excellent works.

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And this is just the US case, it's been true in every country where free competition was

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was overtaken by state interventions.

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There are several pieces of the puzzle one must understand to see why this is so.

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The largest companies have a strong interest in crushing upstarts any way they can.

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In a free market, they do this through better products at better prices.

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But that's a hard knock life.

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The struggle to stay on top in this rat race consumes all energies.

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Profits are always threatened in unexpected ways.

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Share is never really secure.

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The capitalist in this system feels like a slave to consumers, and there is always another

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entrepreneur out there with a better idea to market.

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Not even gigantic companies can be sure that they can hold on.

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In a mixed economy, the government itself becomes an occasion of sin.

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Capitalists are all too happy to jump out of the rat race and reach for the levers of

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power.

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And to do what?

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to grant favors, privileges, security, protection against failure, and, crucially, to stultify

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competition by imposing business costs they have already absorbed onto their less lucrative

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competitors.

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This is how the minimum wage and health care mandates in every manner of regulations comes

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to be imposed on the entire business sector.

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It is a tactical move by the dominant players.

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It is the same with the regulatory agencies, who hardly make a move without pressure and

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consultation from business interests.

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Antitrust is the classic case, protecting big business against competition.

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But it is true with labor mandates, health mandates, environmental mandates and everything

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else.

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It's true with patents, great inflations, higher taxes, mandated workplace benefits,

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Consumer Product Regulations, and everything else.

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They are all mechanisms to cartelize the market on behalf of the biggest players, while the

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rhetoric about the small guy is just the political excuse.

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A book that absolutely blew me away was written by Ludwig Erhard, the great Misesian-influenced

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The most reformer of the post-war German economy, a passionate opponent of the interventionist

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state and a man who deserves nearly all the credit for the so-called miracle experienced

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by Germany after the war.

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The book is a patient but compelling argument in favor of free competition, and a plea to

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move away from wartime cartelization, from which the German business sector benefited

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mightily.

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The book is outstanding on its own terms, but much more interesting is the intended

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audience, not consumers, not intellectuals, not voters, but business itself, for Earhart

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knew what so many others seemed not to know, namely that the business sector is among the

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least likely to favour the free market.

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It was this sector more than any other that needed to hear the message.

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And this becomes transparently obvious in the case of General Electric, which is as

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Mr. Imelt himself is a good case in point, not an advocate of free enterprise, but rather

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an enthusiastic champion of regulation, green energy subsidies, high regulatory barriers

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in energy, not free trade, but export-driven trade, and a loud proponent of regimentation

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in general, insofar as interventions end up benefiting his company.

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This guy finds a very happy home in the halls of power, pushing for all kinds of policies

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that the state will love.

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But back to Obama's new centrism.

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What puzzles me is that left-wing triangulation of this sort could possibly fool anyone.

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The idealistic left is undoubtedly upset with Obama's new turn, but are these people really

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naive enough to believe that there is such a thing as big government that is somehow

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untainted by the backing of big business.

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As for the Chamber of Commerce Republicans, can they really be fooled into believing that

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such moves amount to a new friendliness on the part of Obama to the interests of the

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private sector?

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Mises wrote in his inspiring book, Liberalism – still the Bible of Liberty after all these

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years – that freedom is not about being in favor of the business sector.

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in the business sector is the strongest and most well-heeled opponent of freedom.

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Did we not learn this during the succession of Bush-Obama bailouts, all designed to privatize

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the gains of big business and socialize its losses?

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These bailouts had nothing whatever to do with macroeconomic stabilization or with the

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general interest of society, they were all about looting society to favor large banks

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Products and Corporations like General Motors and AIG, protecting the state's friends

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from the wiles of market change.

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Mises goes on to speak of the tragedy of liberalism.

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As a doctrine, it is not favoured by any single special interest, and certainly no single

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political party.

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It is, nonetheless, in the interest of the whole society over the long term.

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Indeed, it is the wellspring of civilisation.

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It is for this reason that Mises believed that liberalism needs dedicated champions in

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all walks of life.

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Otherwise, we end up with endless cycles of phony change, such as we observe by looking

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at the Whole History of Presidents after Midterm Elections.