The State is not your friend. How Corporatism makes your life worse.

Olly Neville February 12, 2013 4
The State is not your friend. How Corporatism makes your life worse.

Previously I argued that libertarianism was not a defence of the rich and powerful, as the wealth concentration that exists only is possible under the system of corporatism we have today. Many people seem to think that governments are the ones that help and protect people in our society against the evil of big corporations. In fact the government and big business are on the same side – corporations use the state to screw you, the little guy. Whilst I cannot claim to know the full exhaustive list of how the state screws you, I will have a go.

The most obvious ways of how the state makes you worse off are, well, obvious. Look at all the taxes the government has and you will see that well over 60% of your income goes to the state, much of it spent on special interests which have strong lobbying powers (including the industrial military complex, bailing out the banks, etc). Tax also benefits the big companies at the expense of the little guy; the higher the tax rate, the higher the cost to enter a market. If income tax is high you have to pay workers more, if corporation tax is high you have less to invest and less incentive to join, and if sales tax is high you have to spend more acquiring the basic necessities to enter the market. If tax is complicated (11,000+ pages suggests it is) the rich and powerful can afford to avoid it, whilst the little guy can’t. Big corporations pay less tax and so can make more profit than small businesses, allowing them to undercut, advertise more and all manner of other ways that having an unfair advantage keeps established firms in the ascendancy.

Indeed the art of taxing itself makes everyone worse off; Feldstein in 1999 research showed that every $1 taken in tax cost the economy up to $2 in output, and with the multiplier effect shown to be less than 1 every £1 of government spending grows the economy by less than £1. By its very existence, government lowers prosperity, growth and our quality of life.

Trade barriers are another way that the government screws you – barriers to trade make cheap food from Africa more expensive, meaning British farmers benefit at their expense. There is no incentive to become more efficient or lower waste if the competitors’ prices are artificially raised. British consumers eat more expensive food because the government forces the price up. However, it is the third world African farmers who lose out the most, struggling to get by when really they should be seeing huge demand for their low cost products.

Laws against victimless crimes also make you worse off. Want to inject something into your own body harming only you? Government doesn’t let you; you have to pay extortionate prices to get low quality drugs. Want to have sex with someone for money in a voluntary transaction? Government doesn’t let you; you have to sneak around like a thief and risk all manner of diseases.

The state further racks up huge debts on your behalf (not that you asked them to). Debts so large even the state cannot pay them. So what does it do? Devalue its currency. Inflation is a tax that governments use to lower the value of their debt. It also lowers the value of your savings and income. Not only does manipulating interest rates lead to boom and bust cycles, it is used by the government to benefit itself at the expense of most of us. The poor and middle class have it worst; the rich are more likely to have inflation proof assets, so that they even can gain from it.

Regulations again benefit big business over small, and consequently producers over consumers. The more regulations you enact, the harder, more expensive, and more complicated it is for new businesses to start up. Big corporations can afford teams of compliance officers to understand and manage regulation, whilst the small businessman has to take hours stressing over paperwork – hours he isn’t spending growing his business. Indeed in some cases – banking for example – regulations are so complicated and onerous that almost no new entrants can join the market. Unitl recently we hadn’t had a new bank in Britain for 150 years. When Metro Bank set up in 2010 the founders said that FSA and BoE regulation made it almost impossible for them to enter the market. The result? Banks, left without fear of new entrants, have bought up the limited competition knowing that no one can take their place and have now become huge oligopolists, as opposed to the semi-competitive banking system we once had. They are able to raise prices, manipulate markets, and basically milk consumers because of this position. They aren’t the only ones; Murdoch’s media empire was built on corporatism, on connections he had with governments, allowing him to skirt regulations and rules that others fell foul of. Pharmaceutical companies fear no competition in a market so tightly regulated that entrance becomes almost impossible due to cost. Big business don’t fear this regulation; they love it and the corporatism it creates. That is why the majority of big businesses wish to stay in the EU, whilst the majority of small business wish to pull out; indeed it is why big business often ask for more regulation!

More obvious ways that the state ruins your life is via state run industries – Education (7% of pupils attend private school yet they have disproportional representation in business, politics and society. A worryingly high number of Government educated pupils don’t have basic reading or writing focus, Government focus on Universities have meant the less academic amongst us have lost out hugely. Huge number of people leave state education without basic skills let alone the ability to get a job) Train travel (still nationally run, the franchise system is a fantastic example of corporatism with government awarding monopolies in services to a few providers, the barriers to entry set up by the corporatist way big business has been built in mean that rolling stock operators make a huge profit at our expense) the NHS (costs more per person than full BUPA coverage, no real competition means poor standards don’t get punished, far less efficient than more private systems in Germany, Holland or Singapore along with woeful treatment of patients) and Energy (companies make tiny profit compared to the tax that Government makes, indeed the majority of energy price rises are due to Government meddling with green tariffs and targets) are just more obvious examples of how the state directly lessens everyone’s quality of life.

 

However, there are less obvious ways that the state is benefiting big corporations at your expense. One of them is intellectual property. Look at the film industry, at the moment (as this fantastic piece points out) they are able to externalise their policing costs, making taxpayers foot the bill so that they can earn a relatively small bit of extra profit via staggering releases in different countries. Your taxes go up so their profits can rise.

Intellectual property in general harm consumers and benefit big business. The huge pharmaceutical companies mentioned earlier get 15 years as monopoly producers of drugs they invent. That’s 15 years guaranteed income, where they can raise prices and not fear being undercut. People around the world die because big corporations are given legal privileges. Look at Apple and Samsung, buying up patents left right and centre, stopping anyone who tries to enter the Smartphone or tablet market and suing each other to try and gain market advantage. Intellectual property creates monopolies with the rights and the ability to charge how they please, at your expense.

Just imagine what technology you might have if patent laws hadn’t prevented new firms entering the market. Just think of the life saving drugs we might have at low prices if pharmaceutical companies were forced to innovate and compete, producing cutting edge products rather than resting on guaranteed income with no incentive to improve. Imagine your quality of life if your life earnings had been doubled instead of being ripped from you by the government; imagine how cheap your car, your house, your TV would have been if government regulations, trade barriers, taxes and planning laws didn’t exist.

This is just a small look at the ways government makes your life worse. There are many many others, that could cover pages and pages, from state provided ‘free’ health care actually costing more per month per person than private alternatives, to government immigration barriers making products more expensive and the amount you have to pay in tax higher. Big government and big business are two sides of the same coin. Big Government always leads to corporatism and corporatism screws everyone except big business. This is not capitalism, this is not free and voluntary exchange, this is the awesome (awful) power of the state being used to benefit the few at the expense of the many. The road to hell may be paved with good intentions; the way to impoverishing a nation is paved with well-meaning government actions (and many not so well-meaning). Every time you call for the government to do something as opposed to stopping doing something you are making the situation worse. Every attempt to help the little guy actually helps the big ones, every initiative, plan, action and bill that passes through government gives the corporations more power and you less. The government is not on your side, and the government is not your friend.

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  • Christopher Gage

    Loved it. Compelling stuff.

  • http://twitter.com/KevinDjkth ッ Kevin Hughes

    It’s all good stuff, but could be made much clearer, in my view, if you start by asking what a corporation actually is in legal terms, and whom has granted this status. .

  • Me

    Why would you want African food coming to Britain when we already have farmer, do you want Africans to starve to death?

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