Friday, October 2, 2015

Business, Politics, and Competition

Alas, it's two against one

Today was Jobs Friday, the Friday every month when the Bureau of Labor Statistics releases its estimate of changes in total employment from the previous month. Most economist and business types in the Twitterverse were disappointed by the increase of 142,000 people gaining employment when the consensus estimate was 200,000 new jobs.

Along with the disappointment came a collective grasping at straws on what it will take to increase employment and wages more substantially. Though the unemployment rate remained at 5.1 percent for the second straight month, wages were stagnant and more of the unemployed gave up looking for work than continued. Additionally labor force participation rate – calculated as the number of people working divided by the working age population – remained at historic lows.

There's a tremendous amount of focus on what the Federal Reserve will and can do with monetary policy to stimulate the economy with interest rates already at zero. And the lack of discussion of fiscal stimulus is tacit acknowledgement of a sclerotic Congress that finds pride in strife.

I'm sure you've heard all the things that could be done with fiscal policy: build/rebuild infrastructure, increase research and development, and so forth. And increasing debt to spend on tangible items right now is fairly painless when there's little to no interest cost (although it takes discipline to pay off the debt when the economy improves). Tax rates have been cut about as far as they can be without ballooning the deficit. But both the income tax and corporate tax codes are full of holes that skew tax incidence (dollars paid, not marginal rates) to create an uneven and – dare I say – unequal playing field. Competition and the free market, apparently, require favoritism and public largesse.

Capitalist tendencies, as I have posted before, run counter to competition for they seek to restrain and eliminate competition to maximize economic rent (greater than normal profit) while seeking favoritism from public institutions. For that matter, progressive tendencies also run counter to competition as they distrust capitalists and seek to control rentiers through government restraints. But, as Paul Krugman of the New York Times wrote, "Rentiers are unlikely to accept their euthanasia gracefully."

"The essence of politics in a democracy is, or should be, genuine competition," so says the Washington Post editorial board, and I wholeheartedly agree. But political capitalists are no different than economic ones: each seeks to maximize votes/rents while minimizing competition and cost. (I don't need to work hard to fill my campaign coffers if no one's running against me.) But if politicians can't get to monopoly, how 'bout duopoly? With no independent members in Virginia's General Assembly they've achieved it in the Commonwealth.

The current "brat pack" dominating the U.S. House of Representatives is made up of a posse of legislative vigilantes, a "self-appointed group of citizens who undertake law enforcement in their community without legal authority, typically because the legal agencies are thought to be inadequate."

So business lobbyists petition government to reinforce their commercial incumbency while elected officials reinforce their political incumbency with gerrymandering, posturing, and intransigency. Both seek to reduce competition by raising the barriers to entry and rigging the game.

Competition is on the ropes, and it's outnumbered. But it's an essential tool for growth and democracy.