- - Wednesday, December 28, 2011


Offended by bailouts for the rich and laws that benefit the few at the expense of the many, Americans from both ends of the political spectrum are rebelling. The tea party movement is fighting to control government excess by cutting taxes and reducing spending. The Occupy Wall Street movement seems to advocate tearing down everything big and rich in American society, except big government of course.

The tea party effort is grounded in core values of the American Revolution. Our Constitution is a charter for limited government, listing what our government may and may not do. The tax revolt that inspired the original tea party clearly indicated that Americans weren’t going to surrender their hard-earned wealth easily.

The Occupy Wall Street movement, to the extent it has a coherent agenda, seems to envision a world where government - apparently driven by high ideals and selfless humanitarianism - exists mainly to protect the average citizen against the predations of the powerful. Such a government never was and never will be.

In the real world, governments - whether democracies or dictatorships - act primarily in the interests of those who are already powerful: the rich and the politically influential. Who, after all, puts the government in place and helps it stay there? It’s those who have the power, whether economic, political or even military. Government is the status quo at work. You can look far and wide without finding a government that is acting as an agent of revolutionary change in a society.

It is true in America that we have concentrations of wealth from which extraordinary economic power is derived. Our corporations are designed to concentrate wealth and effort, to produce the goods and services that make us prosperous.

There’s rarely a problem when corporations operate in a free market. Competition holds down prices and ensures high productivity. As consumers, we get the maximum value for our money.

But what happens when competition breaks down? If one company can monopolize a sector, it can charge higher prices and provide less value.

For the Occupiers, this is an excuse for government intervention: to regulate, to tax or to break up the monopoly. But then government, the biggest monopoly of all, grows even bigger.

A more thoughtful approach might be to ask, “Why did competition break down?” Maybe the sector is a natural monopoly where competition makes no sense. It would be incredibly wasteful, for example, to have two companies trying to install sewer lines in our houses. But natural monopolies are few and far between, and even the few are susceptible to competition when technologies change. The cellphone has effectively eliminated any talk of telephone service as a natural monopoly.

But what about concentrations of power that aren’t so natural? What about health care, insurance, banking and even local activities such as hair dressing and taxi service? Competition has broken down in these sectors not because of some inherent flaw of capitalism, but rather because of the interference of government, through subsidies, regulations and licensing or other entry restrictions.

In almost every case, government interferes in the market not to help the little guy or promote competition, but to secure the advantages of those already in the business. It’s called regulatory capture, and it is a pervasive characteristic of the regulatory process in the U.S.

Government regulators act on behalf of the regulated industry, and within the industry they act on behalf of the biggest and most powerful - all at the expense of smaller competitors and the general public.

Never expect government to act on behalf of the little guy. Our government, and governments everywhere, are in the pockets of the powerful. The best we can do, and thank heaven we have a strong Constitution to help, is to keep government under control. The free market isn’t perfect, but given a chance, it will spur competition - the best way to benefit the many.

Terry Miller is the director of the Heritage Foundation’s Center for International Trade and Economics and the Mark A. Kolokotrones fellow in economic freedom.

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