Classical Liberals Aren’t Naive About Massive Enterprise
Adam Smith. (Image from Wikimedia Commons.)
Big business has become a point of friction between conservatives and classic liberals, especially social media and other internet companies that come under the heading of big tech. Conservatives are increasingly saying that laws like antitrust law must restrict large corporations to prevent them from jeopardizing American values. Classical liberals disagree, which sometimes leads to accusations of naivety from our conservative friends. I respectfully refuse; Classic liberals have always been suspicious of big business.
We can trace this skepticism all the way back to Adam Smith, who famously stated, “People of the same profession rarely meet, even for fun and diversion, but the conversation ends in a conspiracy against the public or an invention to raise prices. “While this is often used to suggest that Smith was in favor of economic regulation, the opposite is true. The rest of the passage notes that such conspiracies are normal responses to regulatory restrictions. We burden companies, so they raise prices and harm consumers. Jen Psaki and Elizabeth Warren, take note.
Conservative business critics often make a similar mistake. Companies relocating their production are harming the cities in the heartland? Clearly a conspiracy against the public, inspired by the love of mammon! No, it is far more likely to finally break the camel after years of regulation and tax hikes. Tech Companies Restricting Speech? They obviously hate us and want to silence us. No, it is much more a reaction to laws around the world punishing companies for “misinformation” and threats of stricter regulation in the US. Look at the number of laws and regulations around the world pushing them in this direction.
We have seen the results of companies that have tried to stand up to the government over the years. It rarely ends well for them. Lobbying is one of the few tools they have, but their ability to do so is constantly under attack. And now they have vice presidents on the environment and diversity acting as government officials from within, often using corporate lobbying to call for further restrictions.
Nor do classical liberals naively believe that all companies are advocates of freedom or are doing God’s work. Again, Adam Smith is our guide. He remarked: “We do not expect our dinner from the benevolence of the butcher, brewer or baker, but rather out of consideration for their own interests. We do not turn to their humanity, but to their self-love and never talk about our own needs, but about their advantages. “
In other words, companies are selfish, maybe even greedy. However, the market turns these sins into virtuous results. We get our dinner because of them, and market discipline keeps sins from being too much of a problem. When regulation gets in the way, market discipline breaks down. For example, this discipline gives us good customer service, but in a jurisdiction where tips are prohibited, the incentive to provide better service disappears.
This distrust of the economy, combined with the recognition of the positive effects of the market economy, is the reason why most classical liberals describe themselves as market-friendly, not business-friendly. We could celebrate some of the great strides Amazon has brought us in terms of bundled services, fast delivery, and lower transaction costs, but we wouldn’t have a problem with Amazon being forgotten.
It is this relentless competitive process that leads the classical liberals to celebrate what we call creative destruction. Old businesses collapse when new ones emerge, providing greater value for consumers and new jobs for workers. However, this process can be short-circuited by regulations that create entry barriers for innovative newcomers and consolidate old companies.
Oddly enough, this would be the effect of the policies that many conservatives are now supporting. Notice how many streaming videos these days show an ad from Facebook announcing the company’s support for “updated internet regulations” such as: B. the amendment to the law known as Section 230? These “updates” would make it difficult for an emerging social network to compete with Facebook.
Ah, say conservative critics, but what about monopolies? Adam Smith knew that the source of monopoly power was the state and wrote that “monopolists, by constantly understaffing the market and never fully meeting actual demand, sell their goods well above natural prices”. But competition is fierce, so monopolists need a government charter or regulatory equivalent to maintain their position.
All antitrust law does is to replace competition with government action, and all that goes with it. The state regulates, companies achieve monopoly status, the state breaks them up and the existing regulations help to create new monopolies. There are fewer and fewer bureaucracy circles.
When it comes to riding the tiger of bureaucracy, who is just naive? Classic liberals, who say the government is corrupting, or conservatives, who think everything will be different this time, and they could steer the bureaucratic machinery – consisting of employees who disagree with the goals of the conservatives – in such a way that they achieve their goals perfectly ? The latter is known as the nirvana bug. If there is one central virtue in the conservative worldview, it is that it learns from history. It’s strange that when it comes to big business, classic liberals remember that lesson and conservatives who forget about it.
It is much better to let the market act instead. The invisible hand strikes the bureaucrat’s ink-stained hand every time.
Iain Murray is Vice President of the Competitive Enterprise Institute and author of The Socialist Temptation.
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