Arnold Kling  

Unchecked and Unbalanced Watch

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John Kay writes,


Control of rent-seeking requires decentralisation of economic power. These policies involve limits on the economic role of the state; constraints on the concentration of economic power in large business; constant vigilance at the boundaries between government and industry; and a mixture of external supervision and internal norms to limit the capacity of greedy individuals in large organisations to grab corporate rents for themselves...

A stance which is pro-business must be distinguished from a stance which is pro-market. In the two decades since the fall of the Berlin Wall, that distinction has not been appreciated well enough.

Thanks to Mark Thoma for the pointer. Read the whole thing.

In my view, the current Administration is pro-business and anti-market--the worst possible combination. By pro-business, I mean that it likes businesses that survive on the basis of subsidies and regulatory advantages.

In my second forthcoming book (the one you can actually order), I focus on the problem of concentrated political power and what might be done about it.


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CATEGORIES: Political Economy




COMMENTS (5 to date)
Robbie writes:

"By pro-business, I mean that it likes businesses that survive on the basis of subsidies and regulatory advantages. "

I appreciate what you are saying with this line, but I think you are really describing how you view the implementation of their ideas.

Really I think those who are pro-business would say the core of their idea is to support and help the businesses that currently make up most of our economy. ( and "provide" jobs..)

Now I agree this is stupid for all sorts of reasons and does result in policies which advantage those currently receiving subsidies etc. But until you argue against the views they would actually ascribe to themselves then there is no hope of changing people's minds.

agnostic writes:

Pro-business and anti-market would make us look more like a limited-access order than an open-access order.

We saw a triumph of that view between WWI and WWII, but so far it doesn't look like things are going in that direction this time around.

hacs writes:

I agree, partially, with John Kay, one question is the concentration of mass effect powers, but a high degree of decoupling among those with more power and those with less power also contributes to the result.

To reduce the economic power of the political power does not decrease the political power of the economic power, on the contrary, the political power of the economic power is augmented at long term. The economic power of the political power is, ultimately, the public face of the political power of the economic power, and that is true in any kind of political regime of any epoch. Thus, to claim that reduction of the state and deregulation is beneficial for us is to deny the political power of the economic power as the main force in the modeling of the state and their institutions, an utopia.

In the world, as I see it, we need to deal with those actors, realistically. They and their powers are parameters in the real world. So, how do we attach our beneficial to their beneficial, and vice versa? I used to think in democracy as an answer, but China expelled me from my utopia.

hhoran writes:

I would certainly accept the need to be critical of the biases of the current administration, but the comment's blatant bias obscures the real issues

1. The massive shift towards an anti-market government serving corporate rent seekers radically accelerated during the previous administration. To narrowly attack the current Administration is not only insulting but makes solutions more difficult. The entire political elite (including much of the media) have totally bought-in to these corporatist rent-seeking values. Attacking isolated politicians you don't like is a dumb approach. Its a bigger problem

2. Criticism needs distinguish between the roles of the legislative and executive. The Senate was always the heart of the corporatist rent-seeking program (go reread Caro's Master of the Senate, or various gilded age histories). Key Democrats including Obama and Clinton, clearly share the Senate mindset. The recent shift is the complete gutting of executive branch and regulatory agencies that exerted some level of constraint or counter-balance (however crude) against Congressional rent-seeking tendencies. The entire government now serves the corporatists. If you want to play blame games vis-a-vis current/recent events, you'd focus rather heavily on Republicans

3. If you want to see where this is going under the current administration, look at the airline antitrust immunity cases. 26 previously independent North Atlantic airlines are about to consolidated into a permanent cartel of 3 in a market that hasn't had successful new entry in 22 years. All of the recent applications were rubber stamped by the Bush DOT. Obama, professing concern about the total collapse of antitrust enforcement, appoints Christine Varney to run the Antitrust Division. Her first major move is to challenge the DOT Continental/Star Alliance immunity decision, as totally lacking any legitimate evidence. The DOT hadn't even made a pretense of analysing public benefits--they simply listed the benefits claimed by the applicants. The review methodology was literally "cut and paste". DOT (which is strictly manned by Bush holdovers in this area) ignored DOJ's criticism--its final decision basically told DOT to jump off the nearest bridge, and signaled its intention to similarly approve the pending BA/AA immunity application. If DOT approves BA/AA, it is a huge win for the corporatists and any hope of Varney's that existing laws need be followed is out the window. But this is a case (unlike Wall Street) where there's no Democratic constituency benefiting from extreme airline consolidation. Will Obama eventually set up some independent islands in Washington that can push back against the lobbyists? Or will Rahm Emanuel show the corporate rent-seekers that the Democrats are going to be just as friendly as the Bush crowd. If you think rent-seeking is an important issues, this is one of the front lines of the battle

Colin K writes:

While the Republicans of 1998-2006 are certainly part of the problem, attacking them now would only serve to further advance Nancy Pelosi's creation myth about "draining the swamp" and whatnot.

The best thing that smaller-government advocates can do right now to advance the cause is to help elect Republicans, even RINOs in swing districts. And then, if the GOP comes to power, criticize it relentlessly until it cleans up its act or loses to the Democrats, whence the cycle begins again.

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