Does favoring free enterprise mean favoring business?
American political rhetoric seems to operate on a regular cycle, like a clock, which is
why it seems lately like we are reliving the Clinton years.
The story goes like this.
A democratic administration with lefty ideas gets elected pushes hard for a series of goofy
be reforms like proto-socialized medicine which prompts a backlash and thereby a rethinking
among the rulers who then tack to the right and become centrist by praising the great
contribution that the business sector makes to American life.
Most of these grandiose shifts Obama is going through one now are illusory and pointless,
like slapping a new color of paint on a car that is traveling in one direction in order
to fool people into believing that it is a different car going in a different direction.
But what interests me most here is the rhetoric and the way the left uses it.
They imagine that they got themselves in trouble by being seen as too pro-government and not
sufficiently in favor of business, as they understand that term.
And so then comes the change when they discover phrases like private sector and even words
It's all superficial, and these shifts suggest that the left accepts a caricature of capitalism,
the belief that it is the system that favors the largest and most established capital owners
in society.
So when things start to go wrong with the socialist agenda, they reach out to the corporate
kingpins in the name of becoming friendly to free enterprise.
Look at Obama's pathetic attempts to reach out to business.
The Administration claims it is reviewing government regulations to find those for which
the cost outruns the benefits.
Well, we could make some progress here by turning the Department of Energy, Education
and Labour into sports arenas, but that's not what the Administration has in mind.
Instead, you are to go to Regulations.gov and comment if you can figure it out.
I bumped into one rant that seems typical, some giant racket about home energy upgrades,
but no doubt that this site is more safety valve than work order.
Obama also has some new thing he established in the White House called the Council on Jobs
and Competitiveness, and this is supposed to represent his new centrism.
And who is to head it?
Not the owner of Cupcake Kitchen down the street in my neighborhood, but rather Jeff
Immelt, the CEO of General Electric of all people.
And this is supposed to signal some kind of new turn for the administration.
Obama's advisors imagine that his image has become tainted with the impression that he
is too much in favor of big government.
Hmm, where did that come from?
And so now is the time to do the Clinton thing and triangulate by being pro-business and
hence this new council and new appointment.
Yes, it is a hoax on many, many levels.
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
From Alexander Hamilton to Goldman Sachs, a careful look at the history shows that there
has been no major expansion of government that some sector of big business hasn't backed
with pressure and funding.
Who won from the mercantilism of the 19th century?
Who came out ahead in the war socialism of Woodrow Wilson?
Who was the major power behind the economic regimentation of the New Deal?
What sectors of American life made out like bandits during World War II and the Cold War,
and the regulation of medical care and the American workplace in the 1960s and 1970s?
Without exception, the corporate elite were behind every push for expanding the Leviathan
State.
The 19th century history here has been carefully documented by Thomas de Lorenzo.
Murray Rothbard has revealed the role of business in World War I.
The post-war period through the New Deal is documented by Butler Schaeffer in his great
book In Restraint of Trade.
The New Deal racket received a thorough exposé with John T. Flynn.
The Cold War and after are shown to be radically pro-business in For a New Liberty, as well
as Robert Higgs' excellent works.
And this is just the US case, it's been true in every country where free competition was
was overtaken by state interventions.
There are several pieces of the puzzle one must understand to see why this is so.
The largest companies have a strong interest in crushing upstarts any way they can.
In a free market, they do this through better products at better prices.
But that's a hard knock life.
The struggle to stay on top in this rat race consumes all energies.
Profits are always threatened in unexpected ways.
Share is never really secure.
The capitalist in this system feels like a slave to consumers, and there is always another
entrepreneur out there with a better idea to market.
Not even gigantic companies can be sure that they can hold on.
In a mixed economy, the government itself becomes an occasion of sin.
Capitalists are all too happy to jump out of the rat race and reach for the levers of
power.
And to do what?
to grant favors, privileges, security, protection against failure, and, crucially, to stultify
competition by imposing business costs they have already absorbed onto their less lucrative
competitors.
This is how the minimum wage and health care mandates in every manner of regulations comes
to be imposed on the entire business sector.
It is a tactical move by the dominant players.
It is the same with the regulatory agencies, who hardly make a move without pressure and
consultation from business interests.
Antitrust is the classic case, protecting big business against competition.
But it is true with labor mandates, health mandates, environmental mandates and everything
else.
It's true with patents, great inflations, higher taxes, mandated workplace benefits,
Consumer Product Regulations, and everything else.
They are all mechanisms to cartelize the market on behalf of the biggest players, while the
rhetoric about the small guy is just the political excuse.
A book that absolutely blew me away was written by Ludwig Erhard, the great Misesian-influenced
The most reformer of the post-war German economy, a passionate opponent of the interventionist
state and a man who deserves nearly all the credit for the so-called miracle experienced
by Germany after the war.
The book is a patient but compelling argument in favor of free competition, and a plea to
move away from wartime cartelization, from which the German business sector benefited
mightily.
The book is outstanding on its own terms, but much more interesting is the intended
audience, not consumers, not intellectuals, not voters, but business itself, for Earhart
knew what so many others seemed not to know, namely that the business sector is among the
least likely to favour the free market.
It was this sector more than any other that needed to hear the message.
And this becomes transparently obvious in the case of General Electric, which is as
Mr. Imelt himself is a good case in point, not an advocate of free enterprise, but rather
an enthusiastic champion of regulation, green energy subsidies, high regulatory barriers
in energy, not free trade, but export-driven trade, and a loud proponent of regimentation
in general, insofar as interventions end up benefiting his company.
This guy finds a very happy home in the halls of power, pushing for all kinds of policies
that the state will love.
But back to Obama's new centrism.
What puzzles me is that left-wing triangulation of this sort could possibly fool anyone.
The idealistic left is undoubtedly upset with Obama's new turn, but are these people really
naive enough to believe that there is such a thing as big government that is somehow
untainted by the backing of big business.
As for the Chamber of Commerce Republicans, can they really be fooled into believing that
such moves amount to a new friendliness on the part of Obama to the interests of the
private sector?
Mises wrote in his inspiring book, Liberalism – still the Bible of Liberty after all these
years – that freedom is not about being in favor of the business sector.
in the business sector is the strongest and most well-heeled opponent of freedom.
Did we not learn this during the succession of Bush-Obama bailouts, all designed to privatize
the gains of big business and socialize its losses?
These bailouts had nothing whatever to do with macroeconomic stabilization or with the
general interest of society, they were all about looting society to favor large banks
Products and Corporations like General Motors and AIG, protecting the state's friends
from the wiles of market change.
Mises goes on to speak of the tragedy of liberalism.
As a doctrine, it is not favoured by any single special interest, and certainly no single
political party.
It is, nonetheless, in the interest of the whole society over the long term.
Indeed, it is the wellspring of civilisation.
It is for this reason that Mises believed that liberalism needs dedicated champions in
all walks of life.
Otherwise, we end up with endless cycles of phony change, such as we observe by looking
at the Whole History of Presidents after Midterm Elections.