Goliath and David
When I first had the idea to write my book Liberal Fascism, I thought I might write it entirely about economics.
The inspiration came from the CEO of the globe-spanning conglomerate Nestlé — a firm so enormous it wouldn’t surprise me if “Nestlé” is actually Swiss French for “Ram Jack Corporation,” or maybe “Skynet.” I was in Switzerland on the sort of junket I naïvely thought I’d soon be going on a lot more of.
As I listened to the CEO talk about his company’s relationship with the European Union, the UN, various NGOs, and his competitors, it became very clear that he didn’t really care much about free markets. Oh, sure, he liked a little competition for efficiency’s sake among his vendors and suppliers, but basically, he saw Nestlé as bigger than all of that — and apparently, so did the various world leaders he dealt with.
Hardly an earth-shattering insight, I know. But it got me thinking about how feckless big business is when it comes to fighting for free-market principles. It also illuminated how big business really doesn’t mind regulations, if the regulations help them secure market share and prevent other firms from competing.
That’s one of the reasons the health-insurance industry was perfectly fine with being thrown into the briar patch of Obamacare. Thanks to the individual mandate, the law protected the big insurance companies by turning them into de facto utilities.
The example I usually use for this sort of thing is the Americans with Disabilities Act. Big corporations didn’t object to it much because they understood that they could pass the costs on to consumers, while the burden of the regulations would prevent smaller, nimbler firms from competing.
When I make this point, people who don’t want to understand its implications look at me funny. “You mean big business likes . . . big government?” Well, here comes NPR to help me make the point. Their reporter Adam Davidson recently did a piece on the Jewish-food manufacturer Manischewitz — a/k/a Big Matzo.
Manischewitz follows incredibly complex rules to guarantee that their matzo (the unleavened bread my people eat around Passover and often, for soup, crumble and mold into soggy spheres with the texture of balled wet toilet paper) is kosher. Squads of rabbis scour the plant, brimming with tsuris (anxiety) over every detail. Indeed, a single violation of kashrut (kosher law) by an employee is punished with immediate termination because the costs of cleaning and restarting the whole process are exorbitant.
Now the regulations in question are rabbinical and theological, not governmental (as the folks at Hebrew National say, “We answer to a higher authority”). But the upshot is the same.
Complying with the rules of kashrut is a burdensome, extremely expensive process requiring special equipment and imposing high labor costs, but it also keeps Manischewitz in business.
Alain Bankier, the co-owner of the company, tells Davidson that the costs of the matzo line “are huge barriers to entry that no businessperson would really start thinking that they could get around, without a huge capital investment. They’d want to buy our company before [trying to compete] — you know, that’s the only way it could make economic sense.”
Or as Davidson summarizes, “rather than being a big, difficult challenge, the owners of Manischewitz say all these rules are a near guarantee that they will never have a lot of competition.”
As new business start-ups are at a 30-year low, and the president pours more and more regulations on big businesses that are doing fantastically well, it’d be nice if someone reminded Barack Obama of this small bit of wisdom from Hebrews.