Why Business Must Keep its Hands Out of Regulation
Even free of outside interest, the government would still create inefficiencies and have numerous conflicts of interest, but a recurring core of over regulation and poor governmental choices is interference by businesses. While there are many legal paths to this, they most often end very poorly for both citizens and most businesses. Business interference in government often leads to poor market outcomes because it fundamentally restructures institutions that were meant to govern the activity of business. Business overreach also allows complacency and inefficiency, as the largest businesses can coast off of favorable regulation and influence. Finally, an excess of business, and government makes it easy to support an increase in legislation which actually worsens the problem.
The role of government in free market thought is to provide a framework that businesses can build upon to create what is far greater than if government were to self-direct economic growth. The highest goal of legislation is to be stable, simple, and as result, easy to navigate for all who fall under the authority of the law. However, rather than giving the free market a creative structure to grow upon, businesses actively changing institutions means that the proper structure is reversed. This is like trying to build a house on an ever changing organic foundation. The needs of one business can change over a few years and so any legislative change, driven by their interest may not even benefit them by the time it goes into effect. While legislation might provide a short term competitive advantage, in most circumstances, it limits the creative potential of the market.
When businesses can affect the government, the most powerful and wealthy businesses have an outsized effect and can secure themselves unfair competitive advantages. Whether that business is a farm or a tech company, they are able to gain subsidies and elaborate regulation meant to create barriers to entry for competitors. Businesses in this lobbying-friendly system are making a good business decision by taking the path of least resistance to earnings. It’s much harder to create a strong business than to use power to manipulate institutions. Rather than the best businesses succeeding, the conditions for success are determined by those who have already succeeded. There is still incentive to keep costs low and increase revenue, but the loss of competition lets businesses who have successfully lobbied enjoy unnatural separation from the rest of their competitors. While it helps against the competitors within their own countries, it makes the country as a whole weaker in comparison to the external world. Other countries with more innovation or better institutions will overtake that country because they don’t allow this artificial slowing of innovation.
Many of the key drivers of anti-business sentiment actually arise from business interference in government. When people talk about the problems with capitalism, they instantly point to the existence of the largest businesses. The problem with this mindset is that many of those businesses only exist through inordinate government support. Difficult regulations in addition to high start up costs mean that these businesses might have been out competed in a less stringent regulatory environment. The web of wealthy elites at the center of government and business create mutually beneficial legislation that damages all businesses that lack socially connected owners. These elites can convince voters that they are creating the mass of legislation out of the kindness of their hearts, but they repeatedly help their own companies disproportionately. The burden of meeting all of these regulations stacks up quickly and becomes an added cost that only the most well-positioned businesses can effectively handle. Nonetheless, people will still look at all of the highly advantaged firms and people and think that the market needs more regulation rather than the enabling of disruption.
