Sunday, February 5, 2012

Laissez-Faire: Economics vs. Politics

Whew! Time to dust off my blog... Sorry. Life's been... life.

Tried to slide this one post in before the SOPA Blackout on the 18th...but I guess I failed. Whoops.
This is an important issue that's been percolating in my mind for some time now, and this will (in all likelihood) be an incomplete treatment of the subject.

Laissez-faire economics was an invaluable development spurring free market economic growth. Perhaps one of the most surprising realizations was that despite the self-interested actions of each participating individual, the market as a whole benefits from this fiercer competition. In the end, markets are self contained entities, pretty effective at dictating their own behavior for a near-optimal result. Econ 101.
Granted, not always does the market come to optimal solutions, particularly when the effect of their actions is is felt outside the market itself. This is where the principle role of government comes in: to help mitigate negative externalities that affect the nation due to the short sighted actions of market participants.

But in order to do this, an interesting thing happens - we invest a quasi-governmental authority tasked with discovering relevant information with the authority to command and control congress and the people as a whole. What we seem to forget is that agencies are comprised of people who are not, in fact, impartial, but can be swayed by influence, coercion, and incentives. There is a sort of myth-of-the-corporation (I will write about this later) in that we divorce these hulking edifices of their humanity and yet expect them to remain human, moral actors that are somehow impartial to their own self-interests. We the public are shocked when they engage in selfish moves, because we somehow assume that combining a large mass of people into the agency of a single person somehow removes the natural humanness of those people globbed together. That may be true in a market, but that isn't true within a single company where individuals possess external goals that are roughly identical (the success of the corporation as a vehicle for personal success), no matter the amount of in fighting.

So now we have agencies working FOR the government, corresponding with corporations that work WITH the agencies. And lo and behold, a funny thing happens: we notice a pattern where newer actors fight the established systems, and incumbent interests entrench themselves by setting up market barriers. This is, again, economics 101. Large firms leverage size, smaller firms tend to leverage speed. What's interesting is that NOW these firms have the ability to influence large sectors of government with their "expertise," thereby enabling them to act in ways normally inaccessible to them as regular "market actors."

So what happens then?

Small companies tend to fight for open markets and looser restrictions, which allow them to out-maneuver their bulkier competitors.

Large companies fight for market "regulation" because, as entrenched interests, that helps them keep out the young upstarts. Even if they have to take a financial hit retrofitting themselves to the newer regulations, the immense barriers to entry that it erects to new companies helps them preserve their long term bottom line.
"What's good for GM is good for the USA."
As Google learned the hard way, you can no longer ignore what other corporations are doing with patent trolls.

And patent "companies"? They just have a field day.

The problem is, larger corporations have the money to throw around so they can force their rewrites of the law. This inherently upsets the normally efficient market competition by skewing the playing field so far to one side you have to use pitons and a harness to even think of competing. When that happens, you end up with the "broken window" economy - companies (I'm sorry, I meant people) working to hobble their products, criminalize their customers, and stifle all technology and innovation that they're afraid may hurt their bottom line. Oh yeah, and they lie about that too.

But the very nature of a corporation as divorced from it's constituent parts means that there is no such thing as corporate responsibility. We have, nationally and internationally, created a monstrous corporate architecture that is openly and blatantly bribing governments, strongarming citizens, and making up laws to suit itself. We live in an era of laissez faire POLITICS, where this behavior is being adopted by governments themselves, and it's becoming the most dehumanizing element of society today.

We need to fight back.
Capitalism is great.
Democracy works fine.
Combining the two of them is the most insidious form of evil.

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