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Pittsburgh Tribune-Review: “Pro-free trade, not pro-business”

Summary:
In my December 27th, 2005, column for the Pittsburgh Tribune-Review I emphasized the reality that to endorse free markets is emphatically not to be “pro-business.” (Of course, nor is it to be anti-business.) You can read the column below the fold. (For some reason, all but two of my Trib columns from late December 2005 through early April 2006 are unavailable on-line. They appeared only in print. I thank the editors of the Trib for sending to me the texts of these columns.) Pro-free trade, not pro-business Like most people who publicly endorse free markets, I’m often 
accused of apologizing for “business interests” — or worse, of prostituting my 
opinions by selling them to corporate America. If the opinions I express in the Trib, in my blog (www.cafehayek.com) and 
elsewhere

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In my December 27th, 2005, column for the Pittsburgh Tribune-Review I emphasized the reality that to endorse free markets is emphatically not to be “pro-business.” (Of course, nor is it to be anti-business.) You can read the column below the fold.

(For some reason, all but two of my Trib columns from late December 2005 through early April 2006 are unavailable on-line. They appeared only in print. I thank the editors of the Trib for sending to me the texts of these columns.)

Pro-free trade, not pro-business

Like most people who publicly endorse free markets, I’m often 
accused of apologizing for “business interests” — or worse, of prostituting my 
opinions by selling them to corporate America.

If the opinions I express in the Trib, in my blog (www.cafehayek.com) and 
elsewhere generally supported business interests, then it would be my word 
against my accusers’ word that my opinions aren’t motivated by a desire to 
endear myself to corporations.
 Fortunately for my reputation (if not for my wallet), I routinely express 
opinions that run counter to business interests.

If corporations were paying me 
to beat my drum for them, they would sue me repeatedly for breach of contract.

For example, if you show me a tariff, I’ll show you corporations that support 
this protectionism. By shielding domestic firms from competition, tariffs raise 
the profits of protected firms at the expense of consumers.
 Yet despite the great benefit that many businesses enjoy from protectionism, 
free-market advocates — including me — outspokenly and unconditionally oppose 
such protection. (The Virginia license plates on my car read FRE TRDE.)

The 
reason is simple: We understand that protectionism harms consumers and 
undermines widespread prosperity.

What about other issues such as minimum wages and “price gouging”?
Like many economists, I oppose minimum-wage legislation. But this opposition 
has nothing to do with concern for businesses welfare. Instead, I worry 
exclusively about the low-skilled workers who are unable to find jobs because 
minimum-wage legislation prices them out of the labor market. I’ve spoken and 
written on this issue probably 2,000 times in my career without once having 
uttered any concern that legislated minimum wages reduce firms’ profits.

Likewise with “price-gouging” regulations. I — along with people far smarter 
than me, such as Milton Friedman and Walter Williams — do oppose such 
regulations. But we oppose them because they prevent consumers most in need of 
essential goods and services from being able to get them. We oppose such 
regulations because they give people with political and social connections — 
that is, mostly rich people — an unjustified advantage over ordinary folks at 
securing goods and services in short supply.

We oppose such regulations because they reduce the incentives of suppliers to 
work their tails off in difficult circumstances to rush critically needed goods 
and services to regions devastated by natural disasters. This opposition to 
”price-gouging” regulations has absolutely nothing to do with any affection for 
businesses.

Many people suppose that to advocate free markets is to be “pro-business” and 
”anti-consumer” and “anti-worker.” This supposition rests on the naive 
assumption that businesses profit only by harming consumers and workers.

In fact, firms producing shoddy products lose market share to firms producing 
products that consumers want. Firms charging excessively high prices lose 
customers to competitors charging lower prices. Firms mistreating their workers 
lose employees to firms treating their workers fairly.

Because free markets rest squarely on private property, no one in a market is 
forced to buy, to sell, or to work. Therefore, all parties to exchanges in 
markets generally are made better off by these exchanges. The only way GE can 
lawfully increase its profits is to find better ways to please consumers.

Of course, if GE succeeds on this front its rivals have a tougher time. Some 
may even go bankrupt. That’s what competition is about. Note, though, that 
firms don’t compete against consumers and workers; they compete against each 
other — a fact that renders silly the claim that those of us who endorse free 
markets are champions of businesses and enemies of consumers and workers.

Yes, yes, there are a few fraudulent business people just as there are 
fraudulent politicians. And these bad actors do indeed hurt consumers and 
workers (and, by the way, shareholders). But firms that defraud, cheat and 
steal violate the rules of private property and contract. Such firms should be 
penalized.

It’s one of the great benefits of markets that such antisocial behavior is 
typically exposed and punished quickly. As my Nobel Prize-winning colleague 
Vernon Smith points out, Enron’s fraud was uncovered not by regulators but by 
private investors. These investors immediately punished Enron by driving it 
into bankruptcy.

Of course, as with most criminal behavior, much damage done by the bad guys 
cannot be undone. But just as the latest damaging political scandal is no 
argument for dismantling government, no business scandal is an argument for 
turning against the market. Don’t forget that for every Enron and WorldCom, 
there are tens of thousands of legitimate, productive private firms — firms 
that prosper only by pleasing consumers and workers.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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