Big Government Begets Big Business, and Vice Versa

"The myth is widespread and deeply rooted that big business and big government are rivals--that big business wants small government." 
--Timothy Carney

I'm working my way through a very instructive book, The Big Ripoff: How Big Business and Big Government Steal Your Money, written by Timothy Carney.

There is a standard public perception about big business, the everyday consumer, and government regulation, and it goes like this:  Government regulations and bureaucracies protect consumers from the predatory actions of big businesses, actions they will undoubtedly take if left to themselves in an unregulated, laissez-faire market.

Carney does a good job of picking this fantasy apart, one documented, historical case at at time.  The truth of the matter is that large, well funded and connected businesses benefit from government's over-involvement and regulation of the market.  Onerous regulations, a complicated tax code, and government subsidies (corporate welfare) make it very difficult for those pesky upstart competitors to cut into market share.  What's more, deregulation (smaller government) increases the chances that larger corporations will have to face up to the natural market forces of competition and free enterprise.

Some interesting instances Carney has the reader consider:

• Enron energetically lobbied government to sign onto the Kyoto Protocol, which would have heaped piles of new regulations on their operations.
• Philip Morris lobbied for passage of tougher regulations on the tobacco industry.
• Representative Ron Paul, a true advocate of free enterprise, smaller government, and less regulation in the market, receives far less contributions from corporations than Representative Barbara Lee, an outspoken advocate of socialist ideals and legislation.
• Upton Sinclair, author of the muckraking book about the meat packing industry, The Jungle, himself acknowledged federal inspection of the industry resulted from the request of the industry itself.
• Supposed champion of unrestrained capitalism Andrew Carnegie wrote in the New York Times he favored "government control" of the steel industry. (This, of course, after he sat atop the industry after decades of operating in a free market.)
• Elbert Gary, president of U.S. Steel, testified before Congress it was his belief government should control steel prices. 

The last point on Gary provides a valuable lesson.  Gary was unable to maintain a private trust of steel producers wherein they colluded to set prices on the market promising to not lower their prices below a certain level.  With no government involved, trusts and cartels must persuade their cohorts to play along in manipulating the market and providing consumers with higher-than-need-be prices.

Gary, however, ran into problems: the steel companies in his trust kept breaking away and selling steel at a cheaper price.  That whole competition things works, until government makes it illegal.  He could not keep his trust in order, and the basic economic function of competition drove down steel prices and eroded his trust--both good things for the consumers, the larger market, and free market enterprise.

So what did Mr. Gary do?  He turned to the federal government and asked it to do what he could not do in the free market: control and regulate his competitors.  He succeeded. The government, through regulation, made competition illegal, something that cannot happen in the free market.

So much for that whole notion that all business is interested in small government.