THE POLITICAL SPORT OF PROTECTIONISM
Attorney Jonathan Emord
June 7, 2010
The most popular sport in the District of Columbia is not football, basketball, baseball, hockey, or soccer, it is law making. As a young Washington lawyer in my early twenties I watched as some of the largest corporations in the world hired law firms filled with some of the brightest young lawyers to invent public policy justifications for the creation of anti-competitive laws.
Corporate officers and in-house counsel would meet with their lawyers to plan ways to achieve economic ends that the companies could not attain in the market. Intense competition coming from new market entrants, you say? No problem, legal measures could be devised to make market entry so costly as to prevent it all in the service of some costly regulatory scheme said to be in the “public interest.” Major corporate players in other markets trying to enter yours, you say? No problem, licensing requirements could be devised that could only be met by industry incumbents, thus locking those in other industries out of your market.
Hundreds of billable hours were spent on crafting complex regulatory schemes with elaborate public interest justifications, all to achieve economic advantages for particular market players. The regulations would variously impose significant costs affordable to market leaders but beyond the means of new market entrants or, if not beyond their means, costly enough to curb their expenditure of funds for competitive activities like advertising, research and development, and new product launches. The law became a tool for the creation of state-sponsored oligopolies and monopolies.
This political sport of protectionism has long been the means by which many leading companies and their lawyers and lobbyists have amassed great wealth. The riches came at the direct expense of others’ civil and economic liberties. In the end, unwitting consumers also suffered from increased costs and less innovation.
Once the anti-competitive regulations and public interest justifications for them were crafted, elaborate private dog and pony shows would follow for the heads of the regulatory agencies and members of Congress. Few were ignorant of the real reason for the game being played. The agency heads understood that by adopting the proposed regulations they would provide legal protection for industry leaders. This was variously justified on the speculative argument that newcomers offered shoddy products, refused to abide by existing regulations, or threatened to destabilize markets in ways that would cause consumers to experience a loss of quality and reliability. Members of Congress regardless of political stripe likewise understood the real reason for the regulations to be anti-competitive. In short, in this world of smoke and mirrors, the dog and pony show was expected but the real rationale for the law lurking just beneath the surface was left largely unmentioned but was transparent to all.
Indeed many agency heads and members of Congress would often exact concessions from the industry as a quid pro quo for adopting the anti-competitive laws. Those concessions would involve ceding to regulators decision making power over certain previously private, discretionary industry choices, but industry gladly accepted the loss of freedom as part of the price to be paid for a guaranteed market share.
In addition, through a long history of paybacks, regulators and members of Congress understood that their support for anti-competitive measures would be repaid after their government employment ceased with lucrative positions in the private sector financed by the companies that benefited from the protectionist laws.
That corrupt system has grown tremendously since I first saw it upon arriving in Washington, D.C. twenty-five years ago. The vast majority of laws adopted today are the by-product of this sordid bargain between industry leaders and agency heads or members of Congress. The corruption infects every aspect of law and politics in our nation’s Capitol. It is the way politicians and regulators achieve “industry consensus” in favor of new law. It is why so many laws that appear to consumers to be against the interests of industry are in fact supported by industry leaders (because the regulatory burdens create protection against new competition).
To be sure, there are many leaders of companies who would gladly forfeit to regulators their freedom of choice over what to sell, how to advertise, and where to market products if in exchange those regulators would grant the companies market protection and drive competing businesses out of the market. Many a corporate executive has made just such a bargain, and many more are working to achieve it right now.
This anticompetitive political sport, indulged in by many unprincipled and hedonistic people who lack honesty and feel no remorse for the destruction of the rule of law they cause to happen, sacrifices basic rights and turns the federal government into a den of thieves where protectionist deals crowd out time and resources available for the legitimate work of government. To be sure, for the charlatans who play this sport the Constitution is an afterthought, if even that, as they proceed to feather their own nests by eliminating barriers to unlimited government, putting the instrumentalities of government to work for favored corporate interests.
As this betrayal of the Constitution continues, it succeeds in supplanting liberty with tyranny at every turn. We cannot expect to see an end to the destruction of constitutional government until we throw out the incumbent politicians and bureaucrats who have played this game for so long and eliminate the anti-competitive laws they have created.
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Ultimately, we must enact legislation that forbids government employees and elected officials from being employed by any company that has directly benefited from government regulation supported or enforced by those employees and officials. In addition, no elected official should be able to create institutions through law that later employ them upon their retirement from government service.
© 2010 Jonathan W. Emord - All Rights Reserved