Pro-Business or Pro-Market?

by Reihan Salam

Ezra Klein has been arguing that the Obama administration is pro-business, and I actually think he’s right in an important sense: the president has long been interested in subsidizing industry, as he explained to Bloomberg BusinessWeek at great length early in his term. And I strongly endorse the following by Ezra:

I got at this in Wonkbook today, but it’s worth thinking harder about the idea — propagated by many on the right and some in the business community — that this president is somehow anti-business. The health-care reform bill bends over backward to preserve each and every private industry currently overcharging us for our care. The Obama campaign publicly supported the bank bailout and then repelled the populist measures to really hammer banker pay when they got into office. The financial reform bill didn’t break up the banks, set leverage requirements in statute or do any of a number of other things that would’ve really hurt the financial industry. The auto bailout was designed to preserve the existence of America’s auto industry, and even The Economist has admitted that the Obama administration did everything in its power to “restore both firms to health and then get out as quickly as possible.” The various stimulus measures have been designed to directly support businesses or indirectly support the people who those businesses rely on.

He goes on to suggest that the stronger argument is that the White House has been too focused on business interests, and I’m inclined to agree. Part of the problem, as Tim Carney has taken great pains to explain, is that there’s a difference between being pro-business and pro-market. This is something of a conservative shibboleth, but it’s a valuable one. The best recent formulation of the case against pro-business policies and for pro-market policies was made by Luigi Zingales of the Booth School in City Journal last year:

It has to move from a pro-business strategy that defends the interests of existing companies to a pro-market strategy that fosters open competition and freedom of entry. While the two agendas sometimes coincide—as in the case of protecting property rights—they are often at odds. Established firms are threatened by competition and frequently use their political muscle to restrict new entries into their industry, strengthening their positions but putting their customers at a disadvantage.

Zingales goes on to explain the implications of this distinction for financial regulation and subsidies for established firms. Suffice it to say, only a handful of Republicans have taken Zingales’s advice to heart, though I still think that his message has the potential to resonate strongly with grassroots conservatives.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.