Thursday, 9 October 2008

Regulation and Big Business

With all the talk of 'more regulation' that's currently doing the rounds, I thought it would be very much worthwhile to re-emphasise the simple but often overlooked fact that regulation has historically been campaigned for by big business as a tool to protect it from competition. Regulation often imposes large fixed costs on firms. So it stands to reason that the players best placed in the market to withstand it are the largest: small businesses are hit disproportionately hard. See for a paradigmatic case on how this can be to the interest of those wishing to avoid competition, the debacle that is the EU Biocidal Products directive.

Anyway I recently came across this article by the excellent Roderick Long, debunking the idea that the New Deal in particular was aimed at cracking down on the power of big business:

"There’s a popular historical legend that goes like this: Once upon a time (for this is how stories of this kind should begin), back in the 19th century, the United States economy was almost completely unregulated and laissez-faire. But then there arose a movement to subject business to regulatory restraint in the interests of workers and consumers, a movement that culminated in the presidencies of Wilson and the two Roosevelts.

This story comes in both left-wing and right-wing versions, depending on whether the government is seen as heroically rescuing the poor and weak from the rapacious clutches of unrestrained corporate power, or as unfairly imposing burdensome socialistic fetters on peaceful and productive enterprise. But both versions agree on the central narrative: a century of laissez-faire, followed by a flurry of anti-business legislation.

Every part of this story is false..."

I'd highly recommend reading the whole thing.

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