Kinship

Pejman Yousefzadeh and I are having some disagreement as to the degree, if any, to which big government is a natural ally, rather than a hindrance to big business. The opening sallies are here, attached to Mr. Yousefzadeh's comments on Markos Moulitsas's unlikely new incarnation as a libertarian. Responding to my criticisms, Mr. Yousefzadeh says:

... sadly, big government is never an ally of business -- big or small. No business favors or welcomes the massive amounts of regulation that is brought about thanks to the interventionism of big government.

Well, Timothy Carney would disagree. [Also here.] So would Daniel Gross, writing of old-line companies dumping their underfunded pension obligations onto the government. So would Robert Caro, who described in The Power Broker how Robert Moses enlisted the support of New York's main banks and construction firms for his political aims by overpaying them.

Let me also give an example from my own experience, dealing with the second-worst legislation of the young millenium: Sarbanes-Oxley regulations. These cost my employer a few tens of millions of dollars yearly in direct costs, and perhaps five times that in lost productivity and time wasted in ass-covering. To me, as an employee, they are an unmitigated negative. But my employer is a very large investment bank, and can afford the SOX regulatory costs (especially in the current environment) much better than its smaller competitors might be able to. This helps to preserve the oligopoly power of the top-tier firms; limited competition leads directly to higher profits.

All this illustrates a structural principle: governments do not generally innovate, and they do not change the basket of goods they consume in response to innovation by others. Money raised in taxes and spent on public works is, to a certainty, being transferred to established outlets and paid, in the end, to established companies -- without the need for those companies to innovate.