Niskanen Center scholars Brink Lindsey and Steven Teles recently published a new book, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality, detailing abusive rent-seeking practices across various sectors of government bureaucracy, including occupational-licensing regimes, zoning rules, and financial regulations.
While the entire book is insightful, among the authors’ most shrewd observations is their pinpointing of the biggest blind spots on the left and right of the political spectrum. According to Lindsey and Teles, the Left misses the logical conclusion of its claim that big money hurts politics, and the Right misses a different conclusion, one inherent to its assertion that big government distorts markets.
Most of us are familiar with the stereotype of conservatives as unfeelingly cerebral and liberals as too emotional. Many unthinkingly repeat the line that the Left is caring and the Right cold. But Lindsey and Teles illuminate a subtler dynamic:
It is also an article of faith among many progressives and liberals that, especially because of the role of money in politics, plutocracy exerts a strong and baleful influence over public policy. If plutocrats are indeed that powerful, does it really make sense that they would only use their power to produce neutral rules that in practice happen to favor the rich? Would it really not occur to them to push for rules that actively redistribute upward?
Indeed, many of the same liberals expressing concern about the undue influence of wealthy donors on politicians also defer to the wisdom and good nature of government. It is as though they are unaware that government is composed of the very politicians they argue are in the pocket of wealthy benefactors.
All too often, the wealthy interest groups that liberals loathe are embedded directly in government. Occupational-licensing boards, for instance, are regularly dominated by industry insiders who use their power not to protect the health and safety of the general public, but to restrict competition. In one surreal example, the Arizona State Board of Cosmetology cracked down on cosmetology student Juan Carlos Montesdeoca, who had committed the unspeakable crime of cutting hair for the homeless without a license to do so. The cosmetology board was, of course, controlled by industry insiders so concerned with restricting their vocation to licensed members that they couldn’t abide a kind man helping homeless people.
The Left misses the logical conclusion of its claim that big money hurts politics, and the right misses a different conclusion, one inherent to its assertion that big government distorts markets.
Fortunately, Republican governor Doug Ducey stepped in to support and protect Montesdeoca, but others have not been so lucky. Sandy Meadows was a widow living in Louisiana who used floristry to support herself — something she’d not had to do before her husband passed away. Unfortunately for Meadows, the state of Louisiana requires an occupational license in order to arrange flowers. She repeatedly attempted to pass the licensing exam — a largely subjective aesthetic test — but she was unable to do so. “A panel of working florists would grade the arrangements and decide whether the applicant was good enough to set up shop and compete with them. Usually they said no,” wrote her lawyer, Clark Neily.
Upon learning that Meadows was managing the floral department at a grocery store, the Louisiana Horticulture Commission threatened to shut down the entire store if she did not cease her unlicensed practice of floristry. The store was ultimately forced to let Meadows go. Neily’s account of what happened next is tragic:
Prevented by government from doing the only work she knew, Sandy had no way to make a living. She had no car, no phone, and, on the last day I saw her alive, no electricity because she couldn’t afford to pay her utility bill. In October 2004, Sandy Meadows died alone and in poverty because the State of Louisiana wouldn’t allow her to work in a perfectly harmless occupation — and I couldn’t persuade a federal judge to protect her right to do so.
It isn’t just occupational-licensing boards that restrict market access to worthy Americans, either. Zoning regulations often “protect homeowners’ property values at the expense of access to housing for everybody else,” Lindsey and Teles make clear that. “In other words, zoning exists to transfer wealth from new buyers to existing owners.” In some places, for instance, regulations prohibit residents from having home businesses. Nashville even forced one couple to stop advertising their home address as a place of business, causing them to lose significant revenue. The result of such rules is that less affluent prospective homeowners must choose to live farther from centers of opportunity or move to less expensive, less economically fertile areas.
Liberals must realize that such regulations are not the outcome of benevolent government actors. But of course, it isn’t just the Left that suffers from cognitive dissonance. The Captured Economy makes clear that the Right, too, has a log in its eye:
Many conservatives and libertarians have taken it as their mission to defend the distribution of income in capitalist societies. Ironically, at the same time many of those same people criticize the enormous growth in government intervention and the resulting absence of serious competition in many sectors of the economy. But if it is true that the state has increasingly warped market competition, then that must show up in the distribution of income. It is no accident, we will argue later, that many of the richest Americans derived their wealth from sectors of the US economy where competition has been stifled and distorted. So conservatives and libertarians should not simply dismiss the subject of inequality as a function of envy or a hatred of free enterprise.
Conservatives regularly lament the size of government and its oppressive influence on business owners and regular Americans. But they are quick to dismiss the systemic inequality of opportunity that results as a myth, ignoring scores of cases like Meadows’s and Montesdeoca’s that prove otherwise. After all, it was the government, not opposition to free enterprise, that denied Meadows the opportunity to make a living by allowing established florists to restrict competition through onerous licensing requirements. And without help from a powerful government actor, Montesdeoca may have been robbed of his opportunity to keep pursuing a cosmetology license despite the altruistic nature of his actions.
The Left complains of the undue political influence bought by wealthy special interests, but it regularly trusts the actions and intent of the very government that is subject to that influence. Meanwhile, the Right complains that big government is overly intrusive and burdensome, but it denies the existence of the systemic inequality that results from its overreach. Maybe we should all focus on correcting our own hypocrisies before we turn to those of our political opponents.