The Big We Really Need to Beware
We Can't Fault Free Enterprise for Violations by Big Government
JULY 01, 2004 by WAYNE DUNN
Filed Under : Free Market, Coercion, Subsidies
It’s funny how an innocent little word like “big” can be used to help conjure up images of corruption. Just think of what’s usually meant by “big oil,” “big drug companies,” and “big corporations.”
But are big businesses inherently bad, as some would like us to believe?
Consider that when markets are free, there’s only one way for a business to become big: by pleasing a growing number of consumers. There’s simply no such thing as a corporation that expands by selling what no one wants or by charging higher prices than people are willing to pay. It can achieve growth only by profitably accommodating consumer wishes. Otherwise, consumers will withdraw their patronage and bequeath economic power to the derelict company’s more worthy competitors—or if there are no competitors, consumer desire will invite them.
Thus in a free-market system, consumers are the real power brokers. As Ludwig von Mises put it, “On the market of a capitalistic society, the common man is the sovereign consumer whose buying or abstention from buying determines what should be produced and in what quantity and quality. . . . Big business always serves—directly or indirectly—the masses.”1
But in a semi-free-market system, such as ours, there’s a second way a business might get bigger: through government largess. For instance, let’s say Widgets Inc. has hit on hard times—competitors are running rings around it. Widgets’ chairman of the board, however, has “friends” in Washington. Before long, Widgets’ chief competitor is struggling to fend off the Justice Department’s Antitrust Division. The scales have been artificially tipped. Consumer Will has been usurped by Political Pull.
Another example: XYZ Corp.’s revenues have tanked, and it needs cash now to stay afloat. But its credit is already overextended. It just so happens, though, that the company sits in the district of a powerful congressman. XYZ gets a federal bailout.
Here again, the scales have been artificially tipped. Where people wouldn’t willingly spend their money in their capacity as consumers, they were forced to spend it in their capacity as taxpayers. Free markets were trumped by political freewheeling.
Now, most everyone knows shady things like that go on. Such political favoritism, in one variation or another, is practically an everyday occurrence. But people tend to confuse the sickness with the symptoms. They observe that the injustice is associated with business, and on that basis conclude that “free markets” are to blame and that government should “rein in corporations.” But failing to distinguish government meddling from free markets just because both involve business is like failing to distinguish shoplifting from buying just because both involve goods on the store shelf.
The term “free market” doesn’t refer to politicians’ being free to decide who wins and loses in the market. It refers to the market being free from government tampering and control—which it clearly isn’t in scenarios like those mentioned. The real problem, then, isn’t that business corrupts the political process, but rather that politics corrupts the business process.
Regardless of how big his company is, a businessman acting on his own can’t physically force anyone to do anything. A storeowner, for instance, has no more right to pull a gun and make you buy his goods than you do to pull a gun and seize them. For a business to physically force you to do something, it must in some fashion tap into the political muscle of the state. This is true, because, as Ayn Rand wrote, “a government holds a legal monopoly on the use of physical force.” She continued: “The nature of governmental actions is: coercive action. The nature of political power is: the power to force obedience under threat of physical injury—the threat of property expropriation, imprisonment, or death.”2
In light of that, consider, for example, a burgeoning criticism of big developers: that they’re using eminent-domain laws to force property owners to sell their land.3 The evil here isn’t that the developers are “big,” or that they want to buy land, or that they want to build shopping centers. It would be just as wrong if the situation were reversed and “the little guy” was using eminent domain to force corporate giants to sell off their property.
The root of this wrong is the government—underwritten as always by law—compelling innocent parties to act against their will. It is because of such injustices that Frédéric Bastiat laments in the opening lines of his 1850 classic, The Law: “Instead of checking crime, the law itself [has become] guilty of the evils it is supposed to punish.”4
There’s certainly nothing commendable about a businessman who solicits bureaucrats for favors. But worse than that is the politician empowered to dole them out. Who’s more villainous—a crook who’d like to steal your car or a cop who hands him the keys?
And what of the honest businessman, who desires simply to sink or swim by his own ability? Well, he’s in a quandary. Since we don’t have an unfettered free market, he’s in the position of either being at the mercy of those with political pull or of having to lobby for the “privilege” of being let alone. Again, who’s worse—the guy who pays protection money or the thugs who require it of him.
It’s ludicrous to fault free enterprise for what are actually violations of free enterprise. It’s absurd to ascribe to capitalism the sins of statism. If there’s any “big” to beware, it’s big government.
- Ludwig von Mises, The Anti-Capitalistic Mentality (South Holland, Ill.: Libertarian Press, 1972 ), pp. 1–2.
- Ayn Rand, “America’s Persecuted Minority: Big Business,” in Capitalism: The Unknown Ideal (New York: New American Library, 1967), p. 46.
- See, for example, Steven Greenhut, “Costco’s Big-Box Political Clout,” Orange County Register, July 23, 2002; www.ocregister.com/commentary/columns/greenhut/2002/greenhut20020623.shtml; and Ron Scherer and Adam Parker, “Brooklyn Brouhaha: The Controversial Drive to Host a Sports Team,” Christian Science Monitor, February 4, 2004, www. csmonitor.com/2004/0204/p02s01-usgn.html.
- Frédéric Bastiat, The Law (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1974 ), p. 1.