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Rhett Butler Comes to Washington

Tuesday, October 13, 2009

It would be wise for businesses to band together to defend free-market culture and make their money from our civilization’s rise.

In the inaugural issue of National Affairs, University of Chicago Professor Luigi Zingales has a shrewd piece on Capitalism After the Crisis arguing that “the nature of the [economic] crisis, and of the government's response, now threaten to undermine the public's sense of the fairness, justice, and legitimacy of democratic capitalism.”

One of his main points concerns the distinction between being pro-market and being pro-business. Much as the Left tries to conflate these, they are different indeed.

Business, especially big business, is happy with crony capitalism, franchised monopoly, or any other device that will avoid the Darwinism of the free market. Of the billions of dollars now spent lobbying, almost none supports the free market as a concept or an institution. “While everyone benefits from a free and competitive market,” Zingales writes, “no one in particular makes huge profits from keeping the system competitive and the playing field level. True capitalism lacks a strong lobby.”

‘True capitalism lacks a strong lobby.’

Zingales has interesting things to say about the history and implications of the “serious tensions [that] emerge between a pro-market agenda and a pro-business one,” in the United States and elsewhere, and his conclusions are not cheery. He thinks the administration is “launch[ing] us on a vicious spiral of more public resentment and more corporatist crony capitalism so common abroad—trampling in the process the economic exceptionalism that has been so crucial for American prosperity.”

Actually, Zingales may be a bit of an optimist, because the situation is even worse than he depicts. Crony capitalism is irritating, but, within limits, much of it is hardly important. Which company gets a franchise or a contract does not matter much, as long as the project itself is productive and the work is competently done. A tipping point comes when the lobbying for special advantage turns into lobbying for programs that destroy the economic health of the nation, and this is where those billions in lobbying money are, increasingly, going.

For example, the indispensable reports on the continuing disaster for small business of the Consumer Product Safety Improvement Act. “Like the other giant in the business, Hasbro, Mattel actively lobbied for CPSIA’s passage, and even as the law has brought undreamt-of woe to thousands of smaller producers of kids’ products, the two big companies seem to be doing rather well under it.”

The lobbying over climate change and green energy grows more intense as the underlying “science” weakens, because the companies committed to making money out of climate change subsidies are frantic to double down before the wheels come off the bus. Health companies are lobbying for vague reforms that address none of the real problems of healthcare—such as the employer base, mandates, state restrictions, tort reform, and lack of portability. Finance companies are accused of looting the Treasury, and of promoting dysfunctional trading systems so that they can skim.

One of Zingales’s main points concerns the distinction between being pro-market and being pro-business. Much as the Left tries to conflate these, they are different indeed.

Since business is business, companies can adopt the philosophy of Rhett Butler in “Gone with the Wind,” that as much money can be made from a civilization’s destruction as from its rise. Furthermore, while it might be thought to raise some problems of personal ethics, management can take the next step and say they owe it to the shareholders to help that destruction along if that is where the opportunities are.

However, it is unlikely that the increasingly mutinous middle class will understand such fine points of corporate and Washington ethics, or forgive a business culture that promotes destruction and stagnation. The danger is that the public does not understand that crony destructionism is about as far from market capitalism as one can get, so heaven knows where we will wind up.

Perhaps business can learn from Rhett, who was less scoundrely than he claimed, because he at least did not actively try to destroy his civilization. We know he joined the Army, after an honorable career as an entrepreneurial blockade runner. We don’t know exactly how he got rich after the war, but if he was a scoundrel, he was a productive one.

So while one cannot escape one’s time, and if destruction is at hand it is reasonable to go into the salvage business, it would be wiser for businesses to band together to defend free market culture and make their money from our civilization’s rise instead.

James V. DeLong is vice president and senior analyst of the Convergence Law Institute, LLC, and special counsel in the Washington, D.C. office of Kamlet Reichert, LLP.

Image by Darren Wamboldt/Bergman Group.

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