Pro-Market, Not Pro-Business

This article by Bruce Bartlett belongs in the “I was thinking about posting on this topic but someone beat me to it” category.

Bartlett makes a very important point: pro-market is not pro-business. More precisely current big businesses don’t have an incentive to encourage free markets. They would prefer that governments lock out their competitors to guarantee their own continuing profits. That isn’t conservative economic policy. That is economic pandering.

Conservatives need to keep this distinction in mind when analyzing government action in the economy. Just because a successful business wants certain types of government regulation does not mean that the measure in question is pro-market. It could very likely be merely pro-that-business. Ideologically conservatives believe that generally free markets lead to increased growth and innovation when compared with other systems. Businesses often try to pull a fast one on us by suggesting meddlesome pro-business measures which act to protect their profits. That doesn't fit the model. Businesses which are protected from competition do not grow and innovate in the same way as businesses which are constantly forced to respond to competitors. Conservatives ought not have a vested interest in any particular current business, we need to express an interest in the system as a whole. If one established company is replaced by two better and newer companies, we should be thrilled. It isn't the function of conservative economic policy to insure the survival of current businesses. We are merely supposed to encourage the overall health of the economy. The argument we apply to outsourcing is just as true for businesses.

A couple of examples:

Farm subsidies--great for large company farms, awful for anyone who eats food or pays taxes.

Disney getting a huge copyright extension--great for Disney, not so great at striking a balance between intellectual property and public use.

Steel Market Protectionism--great for inefficient steel mills, awful for people who use steel in cars, machines and buildings, atrocious for international trade negotiations.

Bartlett also provides an example:

The worst example of subverting conservatism to aid business is the recently enacted Medicare drug benefit, which the Bush administration rammed through Congress with unprecedented pressure. This legislation will cost trillions of dollars. A key reason for the high cost is that it applies to all elderly, including those who already have drug coverage from their employers or private insurance. It would have cost a fraction of what it will cost now to aid only those without drug coverage. The incredibly more-expensive option was chosen exclusively to benefit big businesses. The universal option justified the inclusion of large business subsidies in the legislation in order to keep companies from simply dropping their retiree drug coverage and dumping it all on the taxpayer. Some large companies are anticipating hundreds of millions of dollars from the federal government in coming years funds that go straight to their bottom lines, relieving them of a liability they already have.

I suspect that another reason for this 'universality' was as a sop to Democrats, but the business reason was probably just as important.

In any case I think it is vital for conservatives to pursue pro-market policies instead of pro-business policies. In some cases that will mean butressing union rights. In some cases that will mean making competition against established companies much easier. We shouldn't be afraid of that. And as a great side benefit, it will insulate us somewhat from the worst of the class warfare charges because we won't be protecting business, we will be growing the economy. That isn't always the same thing.

Posted by Sebastian Holsclaw at February 12, 2004 2:59 AM