Big Business and Big Government — A bad mix

Lance McMillian's picture

One of the most pernicious misconceptions that populates political debate is the notion that big business and free enterprise are one and the same. They’re not.

Adam Smith – the intellectual father of capitalism – wrote in “The Wealth of Nations,” “The proposal of any new law or regulation which comes from [businessmen], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.”

Smith’s warning shows that the swarm of interest groups now polluting Washington, D.C., is not a recent phenomenon. It has long been the norm for big business to use its money and influence to seek from government some distinctive advantage not available to anyone else.

This pursuit of special favor comes in many forms – tax breaks, tax credits, subsidies, entry barriers that block new players from entering the market, regulations that inhibit consumer choice. The common link in these examples is the resort to government to tilt the natural marketplace to one’s own advantage through the force of law.

Protectionism of this sort always increases the costs borne by consumers. Competition is the lifeblood of free enterprise. When government stifles this competition through acquiescence to the demands of the lobbying industrial complex, the results are predictable.

Prices rise, product selection decreases, and the quality of services offered to the public declines as specially-advantaged businesses have little incentive to satisfy customers who have nowhere else to go. Pay more and get less. Adam Smith was right to be worried.

Not everyone suffers when big business and big government cozy up to one another in this manner. Special treatment for corporate America increases the profits for the favored few. Proceeds from these profits, in turn, make their way into the campaign coffers of the representatives and senators who voted for the special treatment in the first place. It’s a win-win for big business and big government. For the rest of us, not so much.

Other beneficiaries: those who make their living off the complexity of government, lawyers and lobbyists most prominently. The monstrosity of the tax code (3.8 million words and counting) creates plenty of work for those who write it (the lobbyists) and those who interpret it (the lawyers). One of the reasons ideas such as the flat tax and the fair tax generate such fear and loathing is the threat they pose to those who earn their money on the favors that government creates.

Against this backdrop of big business using big government for its own ends comes the incandescent light bulb. Roughly 85 percent of Americans use this as their light bulb of choice. But not for long. Beginning in 2012, legislation goes into effect that effectively bans the production of incandescent bulbs. In their place, compact fluorescent bulbs will become the new normal.

But why? Why would a cheap and effective product, overwhelmingly popular with the vast majority of American citizens, suddenly become illegal?

The answer: because light bulb manufacturers want to increase their profit margins. Unsatisfied with the lukewarm response of the public toward the introduction of compact fluorescent, halogen, and LED bulbs, the light bulb industry decided to take matters into its own hand.

Led by Phillips Electronics and the National Electrical Manufacturers Association, the industry steered legislation through the Democratic Congress in 2007 that spelled the slow death of the incandescent bulb, beginning next year. President Bush signed the bill into law.

Never mind that fluorescent bulbs cost up to ten times as much as incandescent bulbs on the front end. Never mind that fluorescent bulbs are decidedly less bright, which poses a problem with those with poor eyesight. Never mind they do not work with dimmers or that they are composed of toxic mercury, creating a health hazard when they break.

I say all this as someone who actually uses compact fluorescents in my home. My reasoning is that fluorescents save me money over incandescents in the long run. But my choice may not the right one for everybody. And I have little doubt that the price I pay for fluorescents will steadily increase once the competition produced by incandescent bulbs is removed from the market.

Free enterprise works because competition works. Big business, however, too often sees competition not as a chance to improve its products but as a threat to be legislated out of existence. Instead of competing, it lobbies.

The light bulb ban then is simply par for the course – another in a long line of recent examples of Congress siding with the interests of big business over the plain will of the American people.

But there is hope for the future. The American people are beginning to notice.

[Lance McMillian is a Fayette County resident and law professor at Atlanta’s John Marshall Law School.]

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