Bloomberg:Why Businesses Can’t Stand Free Markets

Written by admin on December 25th, 2010

Nice Bloomberg piece on how businesses use lobbying to restrain competition.

Bloomberg

This practice has been around for as long as there have been businesses and governments. The great economist Milton Friedman cited the example of the Interstate Commerce Commission in his 1990 book “Free to Choose.”

Farm Power

In the late 1800s farming interests demanded that government rein in the railroads amid the perception that they misused their power to influence local politics and set freight rates too high. The railroads responded by working with Congress to form the ICC, a regulatory agency populated with industry insiders. It fixed prices and limited new railroads from entering the business.

At the urgings of the railroads, the ICC brought the trucking industry — a source of competition — under its jurisdiction in the 20th century. It limited the number of trucking licenses, thereby constraining entry into the industry as shipping volumes ballooned and helping to prop up prices that would have fallen in a free market.

These and similar practices are rampant today, and not just among railroads or funeral directors. Each year, private corporations in America receive about $100 billion in subsidies from the federal government, gaining an advantage over those that don’t receive such handouts.

Double Prices

Take the Fanjul family, which controls Florida Crystals Inc. and Domino Sugar, owns more than 400,000 acres of sugar cane farms and produces one-third of Florida’s sugar. Yet, the federal government protects them against competitors by imposing U.S. import quotas that maintain sugar prices at artificially high levels. U.S. consumers and businesses have had to pay twice the world price of sugar on average since 1982, according to economist Mark Perry.

Why? The fact that the sugar industry spends millions in lobbying might be one reason.

The U.S. sugar lobby contributes millions of dollars to political campaigns to maintain federal support for the subsidies, according to the Center for Responsive Politics. The Fanjul family alone spent $715,000 on lobbying in 2008 and has spent an estimated $2.6 million on political campaigns from 1979 to 2006.

 

Leave a Comment