RALEIGH – If you think about it, public approval of social institutions tends to vary according to size. Big business is bad, small business is good. Voters tend to have more respect for their local governments than they do for the state and federal governments. Even mega-churches, while appealing to their own adherents, are usually viewed more skeptically than small community churches are.
Politicians express similar sentiments – indeed, they frequent pander to the “small-is-beautiful” preferences of their constituents. But in many cases, the public policies these politicians implement favor the large over the small.
An inconsistency in politics? How shocking.
You can see the dynamic playing out in Washington, where congressional leaders and the Obama administration ritually praise small business and small investors even as they hatch ever-larger bailout schemes to prop up big automakers, insurers, and financial institutions – which become convenient tools through which to impose governmental power on the private economy. These bailout policies are extremely unfair to small-business competitors. Thanks to political pressure, the automaker bailouts also favored Big Labor over small equity investors, who got wiped out.
President Obama’s new plan to reform financial regulation will worsen the effect, by creating incentives for firms to get big enough to merit special treatment in the future. As Peter Wallison wrote in the Wall Street Journal last week:
[T]he administration’s plan would create what are essentially government-sponsored enterprises like Fannie Mae and Freddie Mac in every sector of the financial economy – insurers, securities firms, finance companies, bank holding companies, and hedge funds – where these specially regulated firms are to be designated. The result will be devastating for competition. Larger firms will squeeze out smaller ones and aggressive small companies will have less opportunity to overcome the government-backed winners.
At the state level, the divergence between populist rhetoric and elitist policy has been evident for decades. Consider the widespread preference for government-franchised monopolies rather than “messy” competition in markets for cable TV, electrical power, and natural gas. Advocates argue that these industries require such massive capital investment that they are “natural monopolies,” meaning that it would be impossible for subsequent entrants to the market to compete. If so, then, why do state and local governments bother to grant exclusive franchises at all?
The reason, history reveals, is that these monopolies usually required political protection to establish. Insider pull gave some emerging companies an advantage over users in procuring government favors.
The result is perpetually to submit matters to public authorities that ought to be worked out in the marketplace. For example, the state’s two big natural-gas companies, Public Service Company of North Carolina (PSNC) and Piedmont Natural Gas, are currently engaged in a dispute about their franchise territories.
The Union County city of Monroe decided to make a deal allowing its local residents to obtain natural gas via a connection to a pipeline in the service territory of PSNC. Monroe is in the Piedmont service territory. The latter has asked the North Carolina Utilities Commission to block the Monroe pipeline deal.
Shouldn’t customers be allowed to purchase services from whatever provider they choose? Of course. But large institutions, even in the face of public skepticism, tend to enjoy more power on the halls of government than small ones, including consumers.
The solution is not to try to reform the process. It is to minimize the power of government to dictate the terms and outcomes of private interactions. That’s the real way to extend power to the people, and to end the inordinate power of Big Anything.
Hood is president of the John Locke Foundation