Massachusetts Senator Elizabeth Warren’s run for the presidency is going to be focused on restructuring the socio-economic system of the United States into one chock full of rules in hopes of hindering those with the most money from having more influence.
It’s a typical cry from populists on both sides of the aisle: Washington (or insert state capital city or city hall here) isn’t working, so we need to fix it. President Donald Trump took a similar stance with his 2016 campaign ads, while politicians like Texas Senator Ted Cruz and New York Congresswoman Alexandria Ocasio-Cortez have struck similar tones in their rhetoric from time to time. It’s Populist 101 dating all the way back to the 1824 “corrupt bargain” election between John Quincy Adams, Andrew Jackson, William H. Crawford, and Henry Clay.
There is something to the complaints from populists regarding the problems in government.
“Those people with a lot of money buy a lot of political influence in Washington,” Warren outlined rather well to Bloomberg late last month. “And year by year, year by year, year by year they’ve gone to Washington for decades now and said, “Hey, listen, can we just change the rules on this part? Can we just…a little bit? How about just a little bit more, and a little bit more?”…”
The only people who disagree with Warren’s statement are those who end up taking advantage of said rule changes. Where Warren goes wrong – as expected – is her declaration the problem is unfettered free markets.
“Capitalism without rules is theft,” Warren declared a few seconds after vowing she actually believes in capitalism. “Encouraging companies to build their business models on cheating people, that’s not capitalism. That’s not competition in the market place. That’s not producing consumer surplus. So what I believe is capitalism with serious rules. And that means rules that everybody gets a chance to play.”
Time out. Full stop.
This notion “capitalism without rules is theft” is just plain lunacy, and unfortunately, a belief which prevails on both sides of the major political spectrum – regardless of ‘how invasive’ the rules end up being for businesses and consumers.
I’m currently sitting in a cigar store. I paid $10 to the business in exchange for a CAO Brazilia and a Diet Coke, and enjoyed both whilst sitting in a comfortable chair with access to WiFi to write the piece you’re currently reading. I’ll soon head to a grocery store or restaurant to buy food which I will receive in exchange for money. I’ll go to a different outlet for my business, should any of the companies not give me a pleasurable experience.
I am able to spend money at these businesses because I earned it by using my writing ability for money. No one is forcing me into just one ‘job’ and I can choose to find another one should I choose to. Free markets (aka capitalism) have done more to enhance my life than anything else, except for my own personal religious beliefs.
The times when people end up feeling ‘stuck’ or don’t have options to switch to another job aren’t because of capitalism without rules. It’s because of capitalism with rules. One only needs to look at the 2013 fight in Dallas over Uber and Lyft. The city was roundly criticized online and in the media for almost bowing to the wishes of Yellow Cab to regulate the transportation network companies out of existence. It wasn’t capitalism which almost killed transportation network companies, but cronyism or the buying and selling of politicians.
Warren’s tribe of political thinking see the rules as the way to make sure fair play happens. Yet, it’s completely the opposite. Big Tech is all powerful because state and local governments have shelled out billions in “freebies” under the guise of economic growth. Texas required hair braiders to be set up like a barber shop – and be licensed – before an Institute for Justice lawsuit tossed out the regulation. The previous regulations benefited the barbershop industry, regardless of whether it was intentional or not. Georgia’s proposed regulations on hemp are protectionist to the extreme, while Boston requires all businesses to be registered with the city – even if it’s for Airbnb, meaning the hotel industry has a leg up on everyone else. Cities all across America gave major carveouts to cable and Internet companies – meaning you have limited choices if you want to switch from one provider to the other.
It’s the rules which turn capitalism into cronyism and allow Warren’s hated “tippy top” the ability to have as much influence – real or imagined – as they do.
No rules would mean everyone would have the chance to compete against one another.
“The evolution is this: Services are exchanged against services, values against values,” French economist Frederic Bastiat wrote in Harmonies of Political Economy – Book One. “When a man (or class) appropriates a natural agent, or a new process, his demands are regulated, not by the labor he undergoes, but by the labor he saves to others. He presses his exactions to the extreme limit without ever being able to injure the condition of others. He sets the greatest possible value on his services. But gradually, by the operation of Competition, this values tends to become proportional to the labor performed; so that the evolution is brought to a conclusion when equal labor is exchanged for equal labor, both serving as the vehicle of an ever increasing amount of gratuitous utility, to the benefit of the community at large. In such circumstances, to assert that Competition can be injurious to the laborer would be to fall into a palpable competition.
It would be wise to remember this before suggesting capitalism with rules is better than anything else.