The Corner

Sometimes, Being ‘Pro-Business’ and ‘Free Market’ Are Opposed

The Hill has a very telling piece this morning about the mentality of the business community, a group that should be the first to support free-market and small-government policies but has become much more interested in capturing government favors. They’re not only very happy about the prospect of Congress’s reversing the sequester cuts for the next two years, but they also think they’re entitled to this extra spending and claim that it’s good for America:

Business lobbyists are pumping their fists over Speaker John Boehner’s (R-Ohio) slap-down of conservative groups.

Executives at trade groups told The Hill they were pleasantly surprised by the strident remarks this week from the typically laid-back Speaker.  

“You didn’t hear all the applause across downtown?” said Dirk Van Dongen, president and CEO of the National Association of Wholesaler-Distributors (NAW). “Folks were absolutely pleased that he said it. … It needed to be said.” . . .

“I think we have all said it. The business community has been uniformly frustrated at how strident the ideological groups have been in defiance of reason,” said David French, senior vice president of government relations of the National Retail Federation. . . .

“Speaker Boehner said what a lot of us had been thinking for a long time, that these ‘purity for profit’ groups are taking advantage of well-meaning but politically naive members,” said one business group lobbyist.

The pushback by Boehner comes as trade groups are vowing to protect business-friendly candidates in the 2014 elections.

Get that? Business-friendly candidates — candidates who’ve been captured by business interests and are willing to direct government money toward private businesses – will benefit from the financial support of trade groups during the next election because of their support for the deal and because of the wrath they impose on those who fought the budget. There is another name for that: cronyism.

Unfortunately, we often overlook the crucial difference between being free-market and pro-business. Being free-market means creating favorable conditions for better and faster economic growth for all. Being pro-business, however, means creating favorable conditions for specific business interests, often at the expense of their consumers or competitors. This distinction is unfortunately often lost on Republicans who really should know better.

The irony, of course, is that many of the attacks against opponents of the budget deal are framed in terms of “‘purity for profit’ groups” and “conservative interest groups.” While I guess everyone in Washington is an interest group, there’s a substantial difference between the groups who are advocating for less government and those who are lobbying for more government to benefit specific business interest groups, like defense contractors or farmers.  

Now is as good a time as ever to remind readers (and hopefully lawmakers) about the damages of cronyism, and I can’t think of a better paper to recommend on the topic than one by my colleague Matt Mitchell, “The Pathology of Privilege: The Economic Consequences of Government Favoritism.”

He explains that, “Whatever its guise, government-granted privilege [to private businesses] is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.” In the paper, Mitchell lists all the ways that government provides favors to business interests: spending, loan guarantees, regulations, industry-targeted tax breaks, and more.

He also reminds us that this has been going on for a very long time. Lockheed Martin, for instance, one of the loudest voices against the defense sequester cuts, made an early example of a company benefiting from the largess of the government when it avoided bankruptcy by getting about $1 billion in loan guarantees, and other relief, back in 1971. Since then, Lockheed Martin has become a quintessential example of what General Eisenhower called the military-industrial complex. When the military won’t buy the company’s weapons systems, the company is well known for successfully bypassing the Pentagon’s procedures and going straight to Congress instead. 

Congress should keep this in mind when they hear the business community cheering a particular deal. They should remember it when they hear special-interest representatives like David French (the National Retail Federation’s French, that is, not NRO’s David French!) saying things like, “The business community has been uniformly frustrated at how strident the ideological groups have been in defiance of reason.” Cronyism, not opposition to it, is what’s wrong with Washington, and being free-market sometimes means rejecting the “pro-business” argument.


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