Crony Capitalism

Possibly, the biggest oversight of our founding fathers was, to not include an article in the constitution regarding the separation of economy and state.  I'm still digging to see if perhaps they didn't actually make a conscious decision to leave the possibility of government interference in the free market.

When I was studying Economics in college, I took a course on government regulation.  My conclusion was that, as a company you wanted regulation - yeah I know, that sounds really wrong.  Keep in mind, that regulators, until fairly recently, didn't bother with little industries, there wasn't really enough voter noise for congress to create new regulatory agencies, and regulations.  Mostly it affects large industries. Here's how it works.

In the early stages of regulation you have a government sanctioned monopoly of some domain.  You are essentially guaranteed a return on investment, more than likely there is  government funds to help you build the business.   The second stage comes from the hiring of the individuals who used to regulate your business or, at minimum putting them on the board of directors.  You now have your Washington insider, who has a serious financial incentive to get additional concessions from the 'new' regulator.  Eventually congress get's involved, usually because of a change in technology, or  a perceived change in the competitive nature of the regulated industry.   Now the regulated corporation sends in the lobbyist, who write bills to favor the company, or industry.  They raise funds for re-election, and in return the bills are passed.  New regulators are appointed, old regulators are given very high paying jobs and put on the board of more companies.   Eventually a previous regulator will split off, and via the campaign finance donations bribery paid, they will be appointed to regulation again, where they with their new insight in to what the company needs, adjust the regulations, selectively enforce, or ignore regulations depending on financial gain to their now future employer.

Sometimes, the push to regulation comes from unions, early on, those regulations were primarily to prevent unscrupulous business operators from forcing workers into unsafe work environments.  That for the most part (not entirely) ended back in the seventies.

In the end, the government who was trying to control the business is in fact, owned by the business. As long as they avoid any monstrously huge public impropriety the politicians will work with them and help them fleece the consumer voter.

AT&T benefited hugely from it's government sanctioned monopoly - the euphemistic deregulation phase, on the surface seemed like a good thing, what it in fact did was create new regulatory conditions on multiple smaller organizations.   Additional opportunities for jobs for regulators, lobbyists, and additional complex regulation that would allow the companies to avoid competition, due partly to the onerous barriers to entry crated by the wall of bureaucratic red tape.

Regulation is used as a giant club which is used to beat potential entrants into the marketplace,  thus stifling competition. The large corporation, a million, or even 100 million dollar legal budget is an asset.  It erects barriers that smaller more efficient, more competitive companies can not scale.

Thus crony capitalism is born.

The last thing a crony capitalist really wants is an elimination of government interference.  There are few if any crony capitalists amongst small business.  That generally only happens if a congress critter leaves office and returns home to start said business, or go to work with a friend and long time supporter.

If you want to see this in operation, take a look at the number of ex regulators working at Monsanto, or Verizon, or AT&T, or .....