How To Get Behind In Business Without Really Trying

Cato has a perfect illustration of the difference between being pro-business and being pro-big-business. And it’s an excellent primer on one of the many many anchors on our economy.

The link describes Governor Granholm’s failure to get the Michigan economy moving, Her plan, such as it was, was the plan that all politicos embrace when it comes to stimulating the economy. She created a river of sweetheart deals for politically powerful businesses — tax breaks, subsidies, regulatory breaks. And it has failed completely.

This is not unusual, it’s normal. The approach of bribing big businesses has met with failure after failure. These efforts create short-term jobs, but long-term catastrophe. Once the incentives dry up, the businesses disappear. Even worse, by giving certain businesses an unfair market advantage, other businesses — the unexpected businesses whose creation the economy depends on — are discouraged from ever appearing. The have to compete on an unlevel playing field.

This never deters politicians from taking the bribery approach, of course. On the contrary, they love this way of “stimulating the economy”. They get to hob-nob and take political contributions from powerful industries. They get to claim credit for anything good that happens and cut ribbons on things. And they get the rush of power that comes with every business decision having to go through their office.

It is, in the end, a perfect illustration of Bastiat’s “what is seen and what is unseen”. Politicians love what is seen — some heavily-subsidized industry opening a factory they can claim credit for. Most of them could give a rat’s backside about what is unseen — the businesses the might have been creating disappearing.

Reason did an amazing series earlier this year on how to save Cleveland that perfectly illustrated how economies should be built. Instead of sweetheart deals, you create an environment with reasonable taxes and simple regulations that encourages all business to succeed. Hong Kong rode this model to be an economic powerhouse with no natural resources. But it seems beyond the ken of our political class.