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Column: Government enhancing monopoly power not reducing it

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Happy centennial to the 1912 “Bull Moose Progressive Party.” This short-lived political party had its most notable connection to Teddy Roosevelt — a former president who was its standard bearer and claimed to be “as fit as a bull moose.”

Beyond surviving a famous assassination attempt, Teddy had the best showing for a “third-party” presidential candidate since the Civil War.

The most popular political use of the term “progressive” is for the “Progressive Era” — a period of significant policy changes from the 1890s into the 20th century. “Progressive” policy interests ranged widely — from purifying water to child labor laws, from meat inspection to laws promoting eugenics, from the income tax to anti-trust legislation.

Today, “progressivism” is a related political movement that has extended beyond the Progressive Era. Adherents embrace a mishmash of social, political, environmental and economic reforms — environmentalism, “gay” rights, electoral reform, etc.

In a broader sense, “Progressives” are reform-minded — wanting society to “progress” — more than belonging to a political party or a special interest group. But Progressives consistently pursue more government, particularly at the federal level. In this, they assume a relatively benevolent and knowledgeable government — at least when it’s under their influence.

One strain of progressivism tempers this faith. Many Progressives are cynical about government — at least in the context of “crony capitalism,” where powerful interest groups work with politicians and bureaucrats to benefit themselves at the expense of society.

This brings us to Gabriel Kolko’s seminal 1963 book, “The Triumph of Conservatism.” Kolko is a socialist historian who argued that business leaders, rather than “reformers,” were the chief catalysts behind the Progressive Era’s regulation of business. Instead of a “progressive” era, it “was really an era of conservatism ... a conservative triumph.” In sum, “It is business control over politics rather than political regulation of the economy that is the significant phenomenon of the Progressive Era.”

This assumes that businesses are willing and able to influence policy. Both are common. The incentive to influence policy is universal: It is always in the best interests of suppliers to restrict competition from current or potential rivals. And the ability to influence policy is clear from theory and in practice.

“Public Choice” economics tells us that political activity typically features concentrated benefits and subtle costs. Voters are “rationally ignorant and apathetic” and will tolerate small per-person costs, if they even notice them. Interest groups will passionately pursue such laws through politicians and bureaucrats.

Another key concept in economics is that firms want to charge higher prices and exercise monopoly power. One common mechanism is the cartel, in which sellers collude to increase price and thus profit. But insiders have an incentive to cheat on the agreement, and outsiders have a tremendous incentive to enter a highly profitable industry.

Kolko documents failed attempts to form cartels in many key industries — steel, oil, automotives, agricultural machinery, phones, copper, meat packing and life insurance. Without government assistance, they could not keep cartels together.

Today, we see the same principles play out — from “crony capitalism” to particular regulations in tobacco, alcohol and health insurance. In tobacco and alcohol, suppliers actually enjoy restrictions on their ability to advertise. They don’t need to spend money battling over market share. And the limits on advertising make it difficult for new competitors to emerge.

In health insurance, ObamaCare drives up the demand for health insurance, while insurance mandates require more services to be covered and regulations make it difficult for insurers to compete across state lines.

Kolko observes, “Important business interests could always be found in the forefront of agitation for such regulation, and the fact that well-intentioned reformers often worked with them — indeed, were often indispensable to them — does not change the reality that federal economic regulation was generally designed by the regulated interest to meet its own end, and not those of the public.”

In a word, government — then and now — is far busier enhancing monopoly power than reducing or regulating it.

All of this should be expected. Interest groups and politicians will often act in concert, to the detriment of the general public. In fact, both will use good-sounding ideas to conserve their markets at the expense of consumers and potential competitors.

“Progressivism” and the Progressive Era are no exceptions.

Eric Schansberg, is an adjunct scholar of the Indiana Policy Review Foundation.

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