Big Business and the State

"The plane we flew in on this morning...leased from AIG. Construction downtown...AIG. Life insurance 81 million policies with a face value of $1.9 trillion. Billions of dollars of teachers' pensions. You want 'too big to fail?' Here is is!"
--Henry Paulson (Too Big to Fail)

Embedded in this piece is a nice history of the increasingly cozy relationship between government and big business. He integrates a number of key events, including:

Henry Clay and the Whigs' 'American System' which included planks for protectionist tariffs and government subsidized 'internal improvement' projects that benefitted large business.

The American System baton was handed to the Republican Party in 1854. It is straightforward to argue that big business influenced Lincoln and the prosecution of the Civil War.

Post Civil War, 'political entrepreneurs' such as many railroad operators relied on monopolistic grants, subsidies, and loans from the federal government. 'Market entrepreneurs,' on the other hand, were unassisted, and even opposed, by the government.

By 1900, competition was chewing into many large business franchises, driving many corporate leaders to approach Washington for 'regulation' to help keep competition (especially from new entrants) under control. Large businesses allied with administrations beginning with Theodore Roosevelt to advance their agendas.

The Progressive era strengthened the alliance between big business and the State. Progressive 'reforms' such as compensation laws were favored by big businesses and their affiliates.

Despite what history books suggest, no period period matched the New Deal for its incestuous relationships between business and government. FDR's National Industrial Recovery Act was essentially a copy of Mussolini's facist industry verticals. Welfare programs such as Social Security were backed by large corporations as an instrument for levying outsized burdens on smaller, nimbler competitors. FDR's administration also saw the rise of the military industrial complex which survives to this day.

The author lists some of the myriad government policies that prop up big business: licensing laws, regressive taxes, giveaways, military spending contracts, patents and copyright laws, secured higher ed loans, banking regs, credit expansion.

The incestuous relationship between big business and the federal government has clearly been a bipartisan effort. This administration has been no exception, providing bailouts, regulations, low interest rates, etc that favor incumbent operators at the expense of upstarts.

Yet we find President Obama arguing that the federal government is here to protect people from 'big business.' Of course, this administration is doing nothing new. As noted by the author, "'Liberal' politicians have long advanced their own power while serving the very monopolists they claim to oppose."

If you are one of the many who buy the 'government must protect you from big business' argument, then you are being played.