The Corner

All the Ways Businesses Get Special Treats from the Government

Business people love to say how much they cherish free markets, while decrying government interventions that limit entrepreneurship and personal freedom. But the truth is, business people when given a chance happily give up free-markets in exchange for cronyism.

Think about it. Competition is good for consumers because it keeps prices low while increasing the quality and choices of products and services. Yet competition is hard work for businesses. They have to fight for customers by innovating and evolving in ways that consumers demand. To avoid the gritty work of fighting it out in a free market, organized private interests lobby the government for special regulations, preferential tax treatment, and laws that keep out competition. They lobby lawmakers to constrain the same free markets in which they originally achieved success. This practice has been around for as long as there have been businesses and governments.

For example, the great economist Milton Friedman cited the Interstate Commerce Commission in his 1980 book Free to Choose. In his new paper, “The Pathology of Privilege,” my colleague Matt Mitchell has documented all the ways that private businesses get stuff from the government, often at the expense of all of us, and certainly at the expense of capitalism. Here is an interactive visual (click on the buttons on the image) of what cronyism looks like:

As the Washington Examiner’s Tim Carney wrote this morning:

The research Mitchell brings together helps show why government-granted privilege is so important to big business and so costly to the rest of society. In one key finding, he highlights research indicating that free markets, with fewer barriers to entry and fewer bailouts to prop up failed giants, make it harder for dominant businesses to maintain dominance. . . .

Big business wants safety, but big-business safety hurts the rest of the economy.

The bottom line, is that for everyone’s sake, it is time to really save capitalism from the capitalists, or more importantly, put an end to the unhealthy marriage between private companies and the government.

The whole paper is here, and our cronyism project page is here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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