Of Bootleggers and Baptists
Last week I was accused of being a stooge for the powerful. It wasn’t the first time, and it probably won’t be the last. What did I say that caused this charge? I suggested that the market should be given a greater role in the provision of health care.
Well, then, you might say, what more need have we of witnesses. Everybody knows that free markets are in the interests of the powerful. That’s why big businesses are so opposed to government intervention in the economy.
Changing the subject completely, I was reading an article in the DC Examiner only a few hours later when my eyes fell upon the following sentence:
Philip Morris, openly and without qualification, backs Kennedy’s and Waxman’s bills to heighten regulation of tobacco.
That’s odd. I thought big business was supposed to be against government regulation of industry.
Well, yes and no. Businesses tend to be opposed to government intervention if they think it will hurt them. They are all in favor of it if they think it will help them or hurt their competitors.
In the case of tobacco:
all regulation adds to overhead, and thus falls more heavily on smaller firms. Second, restrictions on advertising help Philip Morris’ Marlboro, a brand everyone already knows, by keeping lesser-known brands in the shadows. (Existing restrictions on advertising have already helped Philip Morris in this regard, with an added benefit spelled out in Altria’s annual report: “Marketing and selling expenses were lower, reflecting regulatory restrictions on advertising and promotion activities. … ”)
Nor is this sort of thing limited to tobacco. Lots and lots of legislation marketed as being for the common good in fact turns out to benefit larger (and hence more politically powerful) companies as against their smaller rivals. This is what economist Bruce Yandle calls the “bootleggers and baptists” phenomenon. Bootleggers stand to benefit from prohibition as much as anyone else. But as it wouldn’t really do for bootleggers to hold a rally on Capitol Hill, Baptists form the public face of the drive for legislation, while bootleggers work behind the scenes and reap the rewards.
Sometimes the bootlegger and the Baptist merge in the person of a single individual. If you watched much TV in the last year, you’ve probably seen ads for the so-called ‘Pickens Plan’ being promoted by Texas businessman T. Boone Pickens. The plan, which calls for massive government subsidies and intervention to promote alternative energy, which would help fight global warming, reduce dependence on foreign oil, and, purely by coincidence, benefit Pickens personally.
The moral: Don’t equate being pro-free market with being pro-big business. Sometimes the interests of large businesses oppose government interference in the economy. Often they do not. There’s a reason the Republican with the lowest ranking according to the U.S. Chamber of Commerce is Ron Paul.
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