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How Big Government Perpetuates Big Business

HeroicInvesting.comIn the midst of the recent bailout initiatives and unprecedented expansion of the government bureaucracy, there is a perception by many that the unparalleled expansion of government power is necessary to control “Big Business.” This perception comes from the relentless news stories chronicling the excesses of major corporate executives. The net result of all this propaganda is inevitably to create a swell of envy that compels the listless masses to insist that “somebody do something” to stop this perceived atrocity.

Naturally, the government steps in as a valiant self-proclaimed savior to prevent these “Big Business” interests from perpetuating their rapacity with crushing rules and regulation. Typically, these regulations are cheered on by the ‘little guy’ that the politicians purport to serve. Unfortunately, the reality of these situations is much more complex and significantly more sinister.

One gleaming question that never seems to be answered by the so-called independent media is why the government insists on ‘bailout’ packages for these supposedly evil business ventures. If things are really so bad, why not simply allow the businesses to go into bankruptcy so that their assets can be liquidated and sold to more responsible parties? (Granted, the fact that these reviled corporate interests spend large amounts of time lobbying may have some influence on the matter) Instead of following this seemingly obvious course of action, the self-worshiping politicians repeatedly opt for more ‘regulation’ on these businesses.

However, what is the impact of the proliferation in rules and red tape? Is there a systemic problem that is being caused by this perpetual string of bailouts and regulation? The answer to both these questions is that the interests of massive corporate entities are advanced while the path for new business interests is blocked.

The way that this phenomenon unfolds is by passing rules and regulations that increase the cost of conducting business in a particular industry. Since all entities in the industry must pay the compliance costs for meeting the regulatory requirements, it creates a natural advantage for the larger companies that can dissipate this cost over large amounts of revenue. Conversely, it crushes the momentum for new entrants that must meet these regulatory costs while trying to build a revenue base . . . effectively creating a large rock that must be pushed uphill.

As these regulations compound on top of one another, the net effect is to protect the massive corporate interests from competition by creating so many barriers to entry that new competitors become all but extinct. Thus, we see that the seemingly simple solution of allowing incompetent entities to go bankrupt is abandoned in favor of layering on more complex rules that increase the power of government, increase lobbying, and decrease competition for the corporations. Because of this, it would be quite prudent to view the next self-proclaimed savior of the ‘little guy’ with a critical eye. Generally speaking, the only people that politicians are interested in savings are themselves. Furthermore, they don’t seem to care how much of your wealth they need to destroy in order to achieve this goal.

  • Big Government and Big Business perpetuate the existence of one another
  • Government regulations increase costs for new companies
  • These increased costs shield Big Businesses from competition
  • Business interests fund lobbying for politicians
  • The net effect is to protect corporate and political interests from competition by stifling innovation and competition

“A government big enough to give you everything you want is a government big enough to take from you everything you have.” –Gerald R. Ford

The Heroic Investing Team

HeroicInvesting.com

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