Pro-Market Does Not Mean Pro-Business: Opposing Barriers to Entry

From many debates about the free market, one tends to get the impression that some everyday Keynesians and Social Democrats, as well as Socialists, often consider free-marketeers as people who unconditionally defend businesses, no matter what reprehensible things they may do. This impression seems to be rooted in the following logic:

Premise 1: Free-marketeers often or always oppose regulations on businesses.
Premise 2: Without the restraint of such regulations, the pursuit for profits would lead to reprehensible practices, such as child labor, terrible working conditions, monopolies, etc.
Premise 3: Businesses oppose all regulations and state involvement in the market economy because it will only hurt them.

Conclusion: Free-marketeers are pro-business.

Premise 1 is certainly correct, though some within the category of “free-marketeers” may make some exceptions, while most others would not. I will here mostly focus on explaining why Premise 3 is at best misleading, but in future essays I will also take on Premise 2 which contains a lot of common misconceptions that takes some time to unpack.

Do businesses really oppose all regulations and state involvement in the market? Certainly, they oppose that which takes a heavy toll on their own operations and makes it more difficult to keep their business up and running. But it can also turn to the advantage of some businesses. The largest businesses are a lot more flexible and insensitive to the impositions of new regulations like instating a minimum wage, increasing the capital gains and the corporate tax rate, etc. than smaller businesses. To smaller businesses, it’s a barrier to entry. What that means is that for entrepreneurs who’re just at the idea-stage or the planning stage of their business will have more difficulty in actualizing their business — not to mention becoming a succeeding one — than they would otherwise, and might prevent many from starting their businesses altogether as they find it’s not worth it when weighing the costs and benefits. This appears to be the real reason why, for instance, Jeff Bezos lobbies Congress to increase the federal minimum wage and Bill Gates calls for increasing the capital gains tax (though they present their stances as philanthropic).

This is what restrictions tend to do, but what about direct state involvement in which businesses succeed or not? Here I’m referring to lobbying — when businesses ask for money and special privileges by politicians and get what they want. Congress has cashed out over $3 billion annually since 2008 in lobbying spending. Under such a system, the most politically well-connected are the ones who get the most benefits — which tend to be the biggest businesses — at the expense of everyone else (smaller competitors, taxpayers and customers). Free-marketeers oppose this kind of state involvement just as much as regulations like those mentioned above — because the ultimate consequences are similar.

Thus we see that free-marketeers oppose regulations and state involvement for almost the exact opposite reason that would be expected. Free-marketeers don’t want businesses being able to just do whatever they want. They want to encourage competition in the market so that ultimately the customer is the boss of the entrepreneur, the competition which such regulations and state involvement stifles. The only significant “class conflict” there is in the economy is that between smaller and bigger business competitors in a market regulated by the State. A free market sets close to equal standards to everyone; State intervention benefit those at the top.

Conclusion: An important reason why free-marketeers oppose regulations and State involvement is that they often primarily benefit the biggest firms at the behest of their smaller competitors and makes it more difficult for new competitors to enter the market.

4 thoughts on “Pro-Market Does Not Mean Pro-Business: Opposing Barriers to Entry

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s