Wednesday, August 06, 2008

Big Business and politicians: a dangerous combination.

It was 1988, but I still remember one particular night at the movies. It was unusual in several ways. First, the film being shown had never been shown to a large audience prior to this. Second, the showing was being hosted by the film makers, Francis Ford Coppola and George Luckas. Third, Luckas attended with his then girl friend Linda Ronstadt. Fourth, the film, Tucker: The Man and His Dream, instantly became one of my favorites and did so entirely on its own.

Admittedly the film does what Hollywood always does with factual stories --- make them better. Reality rarely lives up to Hollywood standards. And if films were meant as historical documentaries that would be a problem. But the artist, the film maker, recreates reality. Good art ought to always be better than reality.

What this film does is dramatize an important political reality but first a brief synopsis. Preston Tucker wants to build the “car of the future”. But in post-World War II America that means getting hold of assets that the government tied up for war production and is now releasing according to what benefits the politicians who have the power. Preston surprisingly gets to use a factory but only due to union pressures for a new car factory.

He sets about building his dream car. But men brought in through financial deals, who have connections with the auto industry, want to interfere and prevent his innovations. A U.S. Senator, working on behalf of the Big Three auto companies, begins to interfere and targets Tucker. The Big Three fear the innovations and the cost of “retooling” to catch up with him. They want to use political power to stifle competition. The Senator wants to be cozy with the Big Three since that is profitable to him. The Senator, from behind the scenes, uses the court system and the media to try to destroy Tucker and his company.

Here you have big business portrayed as corrupt, uncompetitive, and opposing an open, free market. In other words, you have a dramatic representation of what actually does happen in the world of state capitalism -- which is vastly different than the world of the free market.

Adam Smith, the first major author of a treatise on capitalism wrote about how businessmen use will enter into agreements to use political power to rip off people. Big Business thrives on political interference and fears free markets. They always have and always will. There are a few exceptions, of course, but the low-lifes that you find at Archer Daniels Midland or Enron are more than typical.

Let us start with the premise that all businessmen, and the rest of us as well, are greedy. We want as much as we can get for as little effort as possible. In free markets the way to expand wealth is to produce what people want. To advance yourself you must advance the living standards of others. Since you have no power to force them to purchase from you then you must seduce them with things they want and are willing to buy. That is the economic means of profit.

The other method for profiting is the use of the political means. Through state power one redistributes wealth from unwilling consumers to favored business interests. This can be done in a multiplicity of ways. Sometimes the state merely bans competition outright. This how Bell Telephone grew so big -- other competitors in there markets were forbidden for decades. This is often true of electric companies for instance.

Another use of political power to redistribute profits to the wealthy is the use of tariffs. They drive up the costs of foreign competition thus encouraging consumers, of their own free will (as they see it) to buy the local product. Another method favored by the business elite is a series of regulations which actually cost business lots of money.

Why would they impose such high costs on themselves? This is favored by the established big companies in order to prevent smaller companies from arising and effectively competing with them. Each regulation drives up the cost of business. The major corporations can afford to have an entire department which just dots the "i" for the bureaucrats. The small guy can’t. This additional cost is not really a cost to the big corporation, but an investment that pays hefty dividends by preventing new competition from coming into the market, thus favoring the established, wealthy few.

The more political involvement in the market place the happier the major big corporations will be. They know how to influence that process. They have the massive sums of money necessary to buy the candidates. All one has to do is watch how Big Business interests purchased the support of Hillary Clinton and Barack Obama when it comes to the ethanol scam. The only people who really benefit from ethanol are the major Agricultural companies and the Big Energy companies that produce it and collect the subsidies.

Too often our friends on the Left think that this process is capitalism at work. But this process is politics at work. Remove the power of the politician and the business interests are forced to compete in open markets. Those seeking wealth via the economic method love that. Those seeking wealth via the political process hate it. Because the Left doesn’t understand this well they frequently end up being used by the very Big Capitalists that they hate.

The business interests whip up some hysteria demanding regulations. The Left climbs on board, foolishly thinking that will reign in Big Capital. Big Capital uses the regulations to stifle competition screwing over the consumers and small and mid-size businesses wanting to compete. One need merely read the history of the antitrust legislation to see precisely how major Wall Street interests used Left-wing sentiments and political pull to push through legislation that made industry less competitive and more profitable for the Big Boys.

This is not to say that Conservatives are any smarter. They certainly aren’t. They have a tendency to think that all Big Business is some bastion of morality and a testament to the virtues of free enterprise.

What the Conservatives also fail to understand is that it is precisely this kind of political power that creates the welfare state which they oppose. If government were simply to regulate markets, stifle competition and monopolize power and capital in the hands of the few, it would eventually collapse or face a revolt.

Instead the government then purchases the support of the public by offering them benefits to try and undo some of the unpleasant consequences of previous interventions in the economy. When regulations are put into place, which increase the profits of the Big Boys, there are unhappy consequences. Unemployment, for instance, will be higher. The politicians then buy off the unemployed with benefit schemes. As Sheldon Richman puts it, government is very good at breaking people’s legs and then making them happy by giving them crutches. And the Left is always ready to hand out crutches without considering how that helps the process of breaking legs in the first place.

This works because the crutches from government are very visible. But the process by which legs are broken is not so obvious. A make-work program creates obvious jobs for the “unemployed”. The regulations which prevent jobs from opening in the market, and thus creates that unemployment, are not so obvious. Often the measures which harm people are subtle, difficult to see, and complicated to understand. The benefits are always visible, obvious and simple. That the benefits are always less than the costs is rarely understood.

Whether Tucker isn't entirely accurate, when it comes to the facts, that is not the point. That the film shows how major business interests use political power, however, is important. And this film shows that process very well. It is a process that I wish more people understood, both on the Left and the Right.

I say that because, if it were understood better, a great deal of the division that people assume exists between Right and Left would actually disappear. Certainly there would still be points of differences, some real, some as illusionary as this one. But understanding this political process would help bridge our gaps and move us toward a more unified solution. This understanding is amazing because it really does unite some views long believed to be polar opposites. It does show the ugly side of Big Business and it also illustrates Reagan’s point that “government isn’t the solution, it’s the problem.”

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