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I recommend this series, which offers a succinct summary of how regulations are either motivated from- or captured by- business. Such regulatory advantages are largely a consequence of a big-government footprint. Reducing the size of government is the only practical way to reduce political capitalism. Excerpts from the first segment:

Editor note: This piece is reproduced from the website www.politicalcaptitalism.org with the permission of the author. This post, the first in a series, is germane to the current debate over climate/energy legislation that is backed by a number of large U.S. corporations (Enron then; GE, Duke, DuPont, etc. now).

Political capitalism is a private-property, market-oriented system that is compromised by business-sponsored government intervention. It is a socioeconomic system in which many or most regulations, subsidies, and tax-code provisions result from the lobbying efforts of directly affected businesses and their allies.

Today in the United States, there is greater political transparency and competition between political elites than was evident in the business-dominated past (the 19th and most of the 20th centuries). Interventions routinely result from non-business special interests representing education, the environment, labor, minorities, religion, retirees, science, and taxpayers, among others. Still, business interests—unified or in opposition—are arguably the most important of the elites that compete for special government favor in American politics today.

There are two avenues to business success under a private-property, profit-and-loss system. When using the economic means, or free-market means, businessmen provide goods or services in an open market and rely on voluntary consumer patronage. When using the political means, businessmen obtain a governmental restriction or favor that provides the margin of success beyond what consumer preference alone would give. Market entrepreneurship is the way of capitalism; political entrepreneurship, or rent-seeking as it is known in the economics literature, is the way of political capitalism.

Business interests welcome competition for the things they buy (to minimize costs) far more than for things they sell. They may profess support for free enterprise in general but not in their particular area. There, competition is disparaged as “unbridled,” “cut-throat,” “excessive,” or “unfair,” and calls are made to constrain the free market.

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The following constraints on rivalry have characterized political capitalism, particularly from the mid-19th century until today:

Import restrictions. A tariff or quota on foreign goods that can raise prices and increase market share for domestic industry

Price supports. A price floor, as for an agricultural product, that allows a firm or firms to have greater and more predictable revenue

Grant protection. A government permit, franchise, or license to enter into a line of commerce that reduces the number of competitors in order to advantage the established firm(s). Under “natural monopoly” public utility regulation, franchise protection is accompanied by rate regulation (the so-called regulatory covenant).

Loan guarantees. Taxpayer-backed obligations that reduce or eliminate risky business investments such as those undertaken in a developing country.

Antitrust laws. The spectrum of laws against charging more, the same, or less than one’s rivals—called “monopolistic,” “collusive,” or “predatory” pricing respectively—which result in many more private than government antitrust lawsuits.

Subsidies. Grants for research and development that are made in areas considered to be in the public interest, such as non-polluting energy technologies.

Quality standards. Minimum standards that advantage larger firms or firms at the high end of the quality range at the expense of lower-end competitors.

Tax favors. Special tax provisions that favor some companies or industries at the expense of other companies or industries.

These interventions alter the production of goods and services compared to what would exist from consumer demand alone.

Please continue reading Political Capitalism…