Several years ago, during the worst weeks of our economic crisis, I was discussing the difficult financial situation that America was in with a business man. At one point, he said, “You have to agree with me on this. We are both pro-business.” I smiled and said, “Maybe you are, but I am not. What I am is pro-free market.” My acquaintance said, “They are the same thing.” A lively exchange followed and he just shook his head at me.
What was going on? Some of this may seem like semantics but I sincerely believe that it is a big part of the problem these days. A free market or pro-market person such as myself wants a society that fosters free and open competition and free entry and exit in all industries.
Pro-business, to me, in recent years, has sometimes taken on a connotation that is incompatible with free markets. The great Nobel Laureate Milton Friedman put it succinctly when he wrote, “Business corporations are generally not defenders of free enterprise.” Friedman went on to say that many corporations have become addicted to some form of corporate welfare.
Large established corporations have significant lobbying presence in Washington, DC. Lobbying is considered as being pro-business but I would argue that it is not often pro-market. Most of the time it is arguing in support of existing well entrenched businesses and asking for special favors. Sadly, often the support they desire from government is to throw up barriers to competition, both domestic and foreign.
In a free market, if you continue to lose money, you go out of business. You either get better or a lot better at what you are doing or some other entity comes along and takes your place. Free marketers are often called hard hearted when they talk of the “cleansing effect” of recessions. What they are saying is that inefficient producers or service providers are weeded out in a weaker economy. The fact is that most new businesses fail and it has always been that way. A free market if truly free does not protect a company from losses, competition or even bankruptcy.
Former Federal Reserve Chairman Paul Volker (a man whom I admire greatly) said of financial institutions after the 2008-2009 debacle, “If you are too big to fail, you are too big.” Will America learn? Or, will the next time we hit crunch time the established players with their well oiled machines lobby hard for support under the guise of being “pro-business”?
Capitalism or the free market is not failing. What is not successful is capitalism as we now know it which is a pro-business agenda that props up the large and often inefficient players.
If you would like to contact Don Cole directly, you may reach him at email@example.com