Politics

Defending Capitalism From Mackinac's Corporatist Hordes

May 29, 2013, 8:08 AM


I will be checking-in at the Mackinac Policy Conference in an Adam Smith necktie. Sporting the image of the world’s most important capitalist thinker may seem like a transparent attempt to curry favor from the pro-business crowd at the Detroit Regional Chamber’s annual event. It’s not.

The Adam Smith tie is actually intended as a subversive, if subtle, statement against the kind of anti-capitalist policies advocated by the entrenched business interests that will populate the Grand Hotel this week.

There’s nothing these Babbitt types love more than free market rhetoric and some old-fashioned deregulation. However, look beyond the sales pitch and you’ll there’s nothing business interests like more than government protecting their profit margins from the perils of an open marketplace.

I’ve taken time this year to highlight some particularly egregious examples (the auto dealer cartel and the skunk works contractors inherent conflict of interest) of government-corporate collusion. These aren’t exceptions to the rule. Just take a look at the Mackinac Conference's sponsors and you’ll find a roster of anti-capitalist actors perverting the marketplace.

The “diamond sponsor,” Blue Cross Blue Shield of Michigan found themselves in trouble with then-Attorney General Mike Cox in 2007 because they were a little too profitable for a supposedly not-for-profit charity. Did they become more philanthropic? Nope. They got Lansing to pass special legislation that allowed them to become a for-profit business.

“Platinum sponsors” include AT&T, MLive Media Group (my former employer) and PNC Bank.

AT&T’s billions in public subsidies were an issue for both Republicans and Democrats in 2011 when the telecom giant wanted to merge with TMobile. PNC was the first bank to take advantage of TARP funds. Five other TARP banks also have spots on the sponsorship roster.

MLive’s owners, the Newhouses, benefited from the inherently anti-free market Newspaper Preservation Act when their St. Louis paper formed a joint operating agreement with the St. Louis Post-Dispatch. More famously, so did the Detroit Free Press and News. The News is a “nickel sponsor” and the Freep/News’ Detroit Media Partnership’s is a “gold sponsor” this week.

Funny thing about the Newspaper Preservation Act, Richard Nixon opposed it on the advice of his economic advisors until Hearst Publishing’s CEO gently reminded Nixon that newspaper editorial boards might not have warm thoughts about Tricky Dick if he vetoed this legislation. Thirty years before new media changed the journalism marketplace, multi-billion media corporations were already hiding from competition behind government’s apron strings.

Welfare Queens (Not Who You Think)

I could go on, but you get the picture.

Actually, one more example: “gold sponsor” Delta Airlines. The airline industry failed to properly secure their passenger services, so we rewarded that failure with a massive post-911 bailout and an army of TSA agents to check our shoes for contraband and to protect the friendly skies from the dangers of large bottles of shampoo. Airlines are probably the worst welfare queens in the United States.

The perils of the marketplace are for the little guy. Big business, with so many friends in government, can privatize the profits while socializing the risks and loses. Organizations like the Detroit Regional Chamber and events like the Mackinac Conference have morphed into agents to protect this regime of anti-capitalist, “pro-business” public policy. Or more accurately pro-entrenched business public policy. These cats hate creative destruction like Lenin hated stock markets.

This is an unacceptable. It’s bad for society. It’s bad for democracy. Most certainly, it’s bad for the marketplace.

In the name of being pro-business, we’ve gutted the vital public infrastructure that even free marketeers like Smith and F.A. Hayek believed served the public good and the market. We’ve subsidized existing businesses and protected them from potential competitors that might better serve customers. We’ve also so dramatically tipped the balance of power between labor and management that real wages have been stagnant for a generation despite skyrocketing corporate profits and historically low corporate tax rates.

How To Do It Right

As a service to fellow attendees, let me explain how these things should work: The public sector shouldn't help business, train workers, or create competitive climates. It should build and maintain a robust public infrastructure for education, transportation, social services and public safety/justice. Hayek thought health care could also operate in this public sector space, but let’s not quibble over that right now.

This public infrastructure is the platform on which the marketplace operates. We all arrived at the Grand Hotel, for example, thanks to our public system of highways and byways. The private sector then brings goods and services to market at their own risk. Businesses compete with each other without seeking favor from the government. Sometimes a competitor finds a better way and your business loses. Just ask Blockbuster. Or Packard. Or the Detroit Times.

It would behoove the captains of industry arriving on Mackinac Island today to think long and hard about the type of public policy they want to create. The no fear/no favor capitalist system, with its healthy public institutions, envisioned by the likes of Adam Smith can make many a businessperson quite wealthy — even if their effective tax rate is higher than 14% — in a stable society. In contrast, the end game for these crony corporatist schemes usually ends with a lot of well-dressed people lined up against walls.

Trust me, folks, that's not as much fun as lining up for drink at the Grand Hotel's happy hour.


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