Over the past year, I’ve been describing the concept of a “company state” in which Rhode Island’s economy becomes increasingly premised on the expansion of government services (in part by creating or importing new clients for existing services) as leverage to take money from other industries and other states. That’s not the full extent of the model, though. After all, private companies in those other industries have to react to changes in the economic landscape.
Boston University School of Law economist James Bessen has done some research finding that, throughout the country, corporations’ profits are increasingly premised on their ability to manipulate government. Investment in “regulation and lobbying,” he calculates, accounts for around 1.2% of corporations’ increase in profitability, compared with around 1.4% deriving from investment in new capital assets and around 0.25% attributable to research and development.
This development has potential to be disastrous. For one thing, it changes the nature of businesses. Beyond having to devote resources to artificial activities that have nothing to do with their core products or services, they must also become adept at intertwining themselves with the government, making that a core activity common across the economy. The nation’s major industry, in other words, becomes political manipulation. As this progresses, less and less other stuff that actually grows the economy and improves lives will get done.
For another thing, this sort of institutional cronyism locks out competition. Smaller companies that must remain nimble can’t afford to be greasing government palms and dodging fabricated obstacles. Without that competition both for customers and employees, the average American has less leverage as a consumer and as a worker. Progressives who think they can use government as the people’s voice in these transaction are delusional.
People don’t need elected and appointed nannies to make sure we don’t treat each other unfairly, and it’s simply too obvious to ignore that pretending we do concentrates a great deal of money and power in the hands of a select class.