Tag: Big Business

Milton Friedman on Business’s ‘Suicidal Impulse’

In a Wall Street Journal column titled “Silicon Valley’s ‘Suicide Impulse’” (Google the title if you can’t access it), Gordon Crovitz cites Milton Friedman’s speech to a Cato Institute conference in Silicon Valley in 1999:

In 1999, economist Milton Friedman issued a warning to technology executives at a Cato Institute conference: “Is it really in the self-interest of Silicon Valley to set the government on Microsoft? Your industry, the computer industry, moves so much more rapidly than the legal process that by the time this suit is over, who knows what the shape of the industry will be? Never mind the fact that the human energy and the money that will be spent in hiring my fellow economists, as well as in other ways, would be much more productively employed in improving your products. It’s a waste!”

He predicted: “You will rue the day when you called in the government. From now on, the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation. Here again is a case that seems to me to illustrate the suicide impulse of the business community.”

You can find the full text of Friedman’s talk here.

For more on business’s suicidal impulses, see “Why Silicon Valley Should Not Normalize Relations With Washington, D.C.” by entrepreneur T. J. Rodgers; “The Sad State of Cyber-Politics” by Adam Thierer; and my own “Apple: Too Big Not to Nail.”

Do Free Markets Tend Toward Concentration? The Case of Banking

Perhaps the most significant difference between my own views and those of my progressive friends is on the relationship between business and government, especially “big business”. I’ve on more than one occasion heard that government needs to be there to off-set the power of big business. That without government, corporations would just continue to grow. Well to me that sounds like an empirical question.

Thanks to the Economic Freedom of the World report, we have some good indicators of just how free-market oriented a country is. What we need are measures of concentration. Unfortunately, these are a little harder to come by. Fortunately, the Office of the Comptroller of the Currency (OCC) did a survey about a decade ago (1999), the data for which are reported in Barth, Caprio, and Levine’s Rethinking Bank Regulation. The measure of concentration is the percent of deposits accounted for by the five largest banks. One could argue for a better measure, but it’s all we have.

The results? It would appear that the freer an economy, the less concentrated its banking system. The chart below offers a scatter diagram, along with a regression line. The vertical Y axis measures concentration and the X axis economic freedom (the higher the number, the freer the economy). Admittedly, the relationship is not a strong one, with a correlation of only -0.11, but it is negative. If anyone knows of comparable measures for other industries, I would encourage them to either send me the data or reproduce this analysis for other industries.

“Liberalism’s Problem in One Graph”

That’s the title of Ezra Klein’s blogpost last night. Americans are increasingly distrustful of Big Government, it seems (64% in 2011, up from 35% in 1965), as opposed to Big Business (26% versus 29%) and Big Labor (8% versus 17%). Here’s the graph:

Of course, given that Big Labor these days is mostly in the public sector, you can really add its total to that of Big Government. And given corporate subsidies, part of Big Business can be thrown in there too. In any event, sobering news for the Occupy Wall Street crowd, and surely an electorate for political candidates who want to shrink the size of government.

“… this only applies to big business …”

The union- and trial-lawyer-backed Paycheck Fairness Act, which would greatly expand the scope of lawsuits against private employers alleging gender pay inequality, has run into considerable resistance in Congress. The Bangor Daily News, for example, notes that middle-of-the-road Maine Sens. Olympia Snowe and Susan Collins, known for their willingness to support some Democratic initiatives, have criticized the PFA as “broad,” “unprecedented,” and costly to employers (Snowe) and as likely to “impose excessive litigation on the small-business community” (Collins).

Democratic Rep. Chellie Pingree (D-Maine), on the other hand, is impatient with all such objections:

“If there is litigation in the future, that is minor compared to making sure that people get fair pay for the work that they do,” Pingree said. “It is also important to say that this only applies to big business, this does not apply to the sandwich shop around the corner.”

What do you think she means by “only applies to big business” and not “the sandwich shop around the corner”? Keith Smith at ShopFloor checked out the language of the bill, which by its own terms would affect employers subject to the federal Fair Labor Standards Act of 1938. Does the FLSA apply “only … to big business”? No; according to the U.S. Department of Labor, it covers “almost every employee working in the United States.” To begin with, the law covers all employers that have two or more employees and do at least $500,000 a year in business. But that’s just the start, as Smith explains:

Even if a business meets these thresholds, the only employees who would not be covered by the FLSA would be the ones who do not produce goods for interstate commerce, or closely-related process or occupation directly essential to such production, who are not involved in domestic service and are not engaged in interstate commerce. So that means if an employee makes a phone call to another state, sends mail to another state, travels to other states or even processes credit card transaction [he or she] is engaged in “interstate commerce”.

It sounds as if Rep. Pingree has a distinctive, not to say eccentric, understanding of what constitutes “only … big business”.

Business Roundtable: We Love/Hate Big Government

Regular readers of this blog know that big corporations often are enemies of free markets and individual liberty. So it is hardly suprising to know that the Business Roundtable, a lobby representing CEOs of major companies, supported the wasteful and ineffective stimulus program in 2009 and the bloated new health care entitlement in 2010. Big companies, after all, are quite proficient at working the system to obtain unearned wealth and to rig the rules against smaller competitors.
 
What is surprising, however, is that representatives of that organization now have the chutzpah to complain about a “hostile environment for investment and job creation.” Equally galling, the group has published a document called “Policy Burdens Inhibiting Economic Growth.” We’ve all heard the joke about the guy who murders his parents and then asks the court for mercy because he’s an orphan. The Business Roundtable has adopted that strategy, except this time taxpayers are the butt of the joke. Here’s an excerpt from the Washington Post report:

The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama’s closest ally in the business community, accused the president and Democratic lawmakers Tuesday of creating an “increasingly hostile environment for investment and job creation.” Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and “harm our ability … to grow private-sector jobs in the U.S.” …The final straw, said Roundtable president John Castellani, was the introduction of two pieces of legislation, now pending in Congress, that the group views as particularly bad for business. One, a provision of the administration’s financial regulation overhaul, would make it easier for shareholders to nominate corporate board members. The other would raise taxes on multinational corporations. The rhetoric accompanying the tax proposals has been particularly harsh, Castellani said, with Democrats vowing to campaign in this fall’s midterm elections on a platform of punishing companies that move jobs overseas. …Seidenberg polled the members of the Business Roundtable and a sister organization, the Business Council. The result was a 54-page document, delivered to Orszag on Monday, chock full of bullet points about actions taken or considered by a wide array of executive agencies, including the White House Middle Class Task Force and the Food and Drug Administration. We believe the cumulative effect of these proposals will help defeat the objectives we all share – reducing unemployment, improving the competitiveness of U.S. companies and creating an environment that fosters long-term economic growth,” Seidenberg wrote in a cover letter for the document, titled “Policy Burdens Inhibiting Economic Growth.”

Meet the New Minerals Management Service

In a move reminiscent of the George W. Bush administration, the Obama administration is cracking down on the Minerals Management Service…by changing the agency’s name.

The MMS has fallen into disrepute because, well, as E&ENews PM put it, “employees accepted gifts from oil and gas companies, participated in ‘a culture of substance abuse and promiscuity,’ and considered themselves exempt from federal ethics rules.”  The “drug and sex abuse [occurred] both inside the program and ‘in consort with industry.’ “  The New York Times reports that MMS employees “viewed pornography at work and even considered themselves part of industry.”  Yet this government agency somehow failed to prevent the oil spill in the Gulf of Mexico.

So the Obama administration is giving MMS a makeover.  The agency formerly known as the Minerals Management Service will hereafter be known as the Bureau of Ocean Energy Management, Regulation, and Enforcement.

That’s exactly how the Bush administration dealt with the unpopularity of the Health Care Financing Administration, the agency responsible for Medicare and Medicaid: by changing its name to the Centers for Medicare & Medicaid Services.  With candor and humor – two scarce commodities in such circles – Bush’s HCFA/CMS administrator Tom Scully explained the rationale:

The health care market … is extremely muted and extremely screwed up and it’s largely because of my agency. For those of you who don’t follow CMS, which used to be called HCFA, we changed the name because it was so well loved. I always say it’s kind of like when Enron comes out of bankruptcy, they’ll probably change their name. So, HCFA—Secretary Thompson and I decided to confuse everybody. We changed the name to CMS for a couple of years so people wouldn’t realize we’re actually HCFA. So far, it’s worked reasonably well.

For more on the pervasive cozy relationship between big business and big government, read Tim Carney’s Obamanomics.

For even more candor and humor concerning Medicare, read David Hyman’s Medicare Meets Mephistopheles.

The Sleazy Combination of Big Business and Big Government

There’s an article today in the Wall Street Journal showing how already-established companies and their union allies will use the coercive power of government to thwart competition. The article specifically discusses efforts by less competitive supermarkets to block new Wal-Mart stores. Not that Wal-Mart can complain too vociferously. After all, this is the company that endorsed a key provision of Obamacare in hopes its hurting lower-cost competitors. The moral of the story is that whenever big business and big government get in bed together, you can be sure the outcome almost always is bad for taxpayers and consumers.

A grocery chain with nine stores in the area had hired Saint Consulting Group to secretly run the antidevelopment campaign. Saint is a specialist at fighting proposed Wal-Marts, and it uses tactics it describes as “black arts.” As Wal-Mart Stores Inc. has grown into the largest grocery seller in the U.S., similar battles have played out in hundreds of towns like Mundelein. Local activists and union groups have been the public face of much of the resistance. But in scores of cases, large supermarket chains including Supervalu Inc., Safeway Inc. and Ahold NV have retained Saint Consulting to block Wal-Mart, according to hundreds of pages of Saint documents reviewed by The Wall Street Journal and interviews with former employees. …Supermarkets that have funded campaigns to stop Wal-Mart are concerned about having to match the retailing giant’s low prices lest they lose market share. …In many cases, the pitched battles have more than doubled the amount of time it takes Wal-Mart to open a store, says a person close to the company. … For the typical anti-Wal-Mart assignment, a Saint manager will drop into town using an assumed name to create or take control of local opposition, according to former Saint employees. They flood local politicians with calls, using multiple phones to make it appear that the calls are coming from different people, the former employees say. …Former Saint workers say the union sometimes pays a portion of Saint’s fees. “The work we’ve funded Saint to do to preserve our market share and our jobs is within our First Amendment rights,” says Jill Cashen, spokeswoman for the United Food and Commercial Workers Union. Safeway declined to comment. …Mr. Saint says there is nothing illegal about a company trying to derail a competitor’s project. Companies have legal protection under the First Amendment for using a government or legal process to thwart competition, even if they do so secretly, he says.