Chamber of Corporatism

by Ryan McMaken
Mar. 20, 2012

US Chamber of Commerce building Recently, the US Chamber of Commerce claimed through its spokesman that it supports candidates who support "free enterprise policies that will fuel America's economic recovery." The US Chamber of Commerce has a rather idiosyncratic definition of free-enterprise policies.

The chamber was a major supporter of SOPA, which gives governments the ability to seize private property without any due process whatsoever, and it supported the Troubled Asset Relief Program, which stole about a trillion dollars from the taxpayers so that the US government could buy up huge portions of the financial sector.

It also supported No Child Left Behind, Obama's "stimulus" program, and the auto bailouts.

And yet the chamber still claims with a straight face to support free-enterprise policies, and specifically, to support candidates who support free enterprise. But on this issue as well, the chamber's standard for what counts as free enterprise appears to be somewhat divorced from reality.

For example, as Timothy Carney noted in 2010,

The US Chamber of Commerce has issued its 2009 congressional scorecard, and once again, Rep. Ron Paul, R-Tex. — certainly one of the two most free-market politicians in Washington — gets the lowest score of any Republican.

Paul was one of a handful of GOP lawmakers not to win the Chamber's "Sprit of Enterprise Award." He scored only a 67%, bucking the Chamber on four votes, including:

Paul opposed the "Solar Technology Roadmap Act," which boosted subsidies for unprofitable solar energy technology.

Paul opposed the "Travel Promotion Act," which subsidizes the tourism industry with a new fee on international visitors.

Paul opposed the largest spending bill in history, Obama's $787 billion stimulus bill.

As of 2010, Paul has a cumulative scorecard of 63 percent, putting him behind such free-market stalwarts as Mary Landrieu of Louisiana (69 percent) and Arlen Specter of Pennsylvania (64 percent).

It doesn't take a tremendous amount of insight to see that "free enterprise" is for the Chamber of Commerce nothing more than a talking point for press conferences.

One might even be tempted to forgive the chamber for its aggressive support of massive government spending, subsidies, and redistribution of wealth if it simply admitted that it does little more than advocate for handouts for its members. The fact that it continues to maintain that it is some sort of defender of free enterprise, however, only contributes to the myth that big business and government are necessarily adversaries, or the even bigger myth that big business is "America's persecuted minority."

If the US Chamber of Commerce were some kind of rogue player in the chamber-of-commerce game, that would be one thing, but unfortunately, chambers of commerce across America, and other lobbying arms of the so-called business community are in the business of lobbying ceaselessly for more government spending, for more subsidies, and for more state power in the name of "business-friendly" policies that often amount to little more than subsidy programs.

At the local level as well, chambers have become major advocates of tax increases and more government spending.

In 2005 in Colorado, for example, the Denver Chamber of Commerce was the largest single supporter of Referendum C, a state referendum that would increase government spending by more than $3.5 billion. The referendum would eliminate refunds that would have gone to the taxpayers in favor of more state spending on nonspecific projects. The effect was a net increase of the tax burden on the state's citizens and more spending. The referendum had to be approved by a statewide vote, and the proponents spent $8 million to convince the taxpayers to approve the spending scheme, with the Chamber of Commerce footing more than $700,000 of the total bill.

In 2010, numerous chambers of commerce in Kansas came out against what they described as "drastic" and "devastating" spending cuts in the state. Bernie Koch, executive of the state's association of local chambers, opined in the Kansas City Star that supporting "new revenue" is the correct solution, and he quoted a statement from a group of chambers of commerce stating that "if revenues must be enhanced for basic government services our chambers can support rational state revenue enhancements."

In other words, the chambers wanted tax increases.

There's nothing shocking here, of course. From time immemorial, business interests have attempted to use the power of government to enhance their own profitability and to limit the freedom of competitors. In modern times we call this rent seeking, and the chambers of commerce excel at it.

Chambers and other lobbying arms of the business community are in the game of socializing their costs and privatizing their profits. Naturally, these groups will seek to lower taxes on their profits, for example, but they will often enthusiastically support statewide income taxes or sales taxes that will cost the larger population plenty, but will disproportionately benefit business groups.

Take, for example, taxpayer-funded convention centers. The business lobbyists claim that these meeting centers benefit everyone, using the tried and untrue argument that what's good for General Motors is good for America.

It would be far more accurate to describe new tax-funded convention centers as subsidies for the business community. They provide meeting and exhibition space for business groups while adding prestige for business lobbyists and local politicians who can then attend junkets and brag about their new buildings constructed at the public's expense.

The same is true of course about other prestige projects like sports stadiums, Olympic villages, and public-transportation projects like light rail. They are all constructed at massive public expense yet often provide little to nothing in the way of advancing the standard of living of local residents. Studies proving that sports stadiums add nothing to regional wealth, for example, have become so numerous as to be almost cliché.

Less obvious is how businesses also attempt to socialize costs through advocacy for education, roads, and affordable housing. Chambers and business-lobbying groups, as in the case of Referendum C, can virtually always be counted on to support increases in government spending for more money to be spent on roads, schools, and housing subsidies.

Government roads cut shipping costs and housing subsidies allow businesses in high-rent areas to access a larger labor force that otherwise might not be able to live in the area. This in turn allows businesses to pay lower wages.

Business lobbyists also push for more spending on education, and especially on higher education. Colleges provide a useful means of using taxpayer dollars to train future employees while providing a convenient mechanism for culling the work force through the requirement that employees possess college degrees.

One can certainly argue that private citizens who receive a subsidized college education also benefit from the public's largesse, and it is also true of motorists who drive many miles on public roads. The other side of the coin, however, is that people who don't have a college education or who don't use the interstates simply get nothing from the taxes they are forced to pay thanks to the lobbying of the chambers. Those who do use these amenities receive a benefit, but is that benefit equal to the tax burden they are forced to adopt? That's rarely proven.

Arguing that all taxpayers receive some kind of indirect or psychic benefit from the mere existence of a new convention center or sports team is economic witchcraft and amounts to little more than an assertion that the beneficiaries of goods should not be the ones who pay for those goods.

The fundamental position behind the chambers' lobbying drive to put ever more private dollars into the public purse is that the taxpayers simply cannot be trusted to spend their money in the "correct" ways.

If the money were not taxed, it would be left in the hands of private citizens to be spent on what the private citizens have concluded it should be spent on. Some might invest the money, and some might spend those funds on groceries, some on education, some on automobiles, and so on in a nearly infinite number of possible combinations. Each transaction of voluntary exchange would in turn increase the wealth of each participant in the exchange.

On the other hand, if the money were taxed and spent on the correct things (as defined by those who are politically well connected), there would be no net increase in wealth above and beyond what would have occurred in the private market. In fact, the net wealth would go down, because the government would have to take its cut for administering the funds while producing nothing. All that has occurred is a transfer of wealth from one place to another.

The chambers, however, seem to believe that in these cases, the mere act of taxing money and taking it by force, somehow magically adds more wealth to the economy than if those funds were simply left in the hands of the private sector.

The conceit behind thinking that private money can be best spent once turned into government money relies upon one of the fallacies explored by French economist Frédéric Bastiat in "That Which Is Seen, and That Which Is Not Seen."

The resources spent by private citizens are what is unseen. It's spent and invested in a myriad of entrepreneurial and creative ways, and in decentralized ways that suit families, local communities, and individuals. Because the chambers and other business cartels can't see it, and apparently can't see how it benefits them, they call for that money to be taxed and for that prerogative in spending and investment to be transferred to a safer location: the government treasury.

The money can then be spent safely on what is seen: government roads, government schools, public works, and outright subsidies for businesses. Because this can be seen, it must be superior in the minds of the business community.

This is a facile and unsophisticated view of the economy, of course. What this vulgar reallocation of wealth away from the taxpayers does is nothing other than crush innovation, entrepreneurship, and investment that would have taken place in the absence of the chamber's intervention.

The assumption again is that the private sector will employ resources poorly while the government will employ them well. On what standard is this assumption based? Certainly not on economic science; as the Austrian economists have proven time and again, economies are made efficient by individuals responding to price signals and by the voluntary market decisions of millions of actors in those markets.

Yet the chambers wish to remove those price signals and to transfer the decision making to the state.

The end result is inefficiency and misallocation. It is also the opposite of free enterprise, the unconvincing claims of the chambers to the contrary notwithstanding.

Who can say what innovations, what economic growth, and what capital will be sacrificed in the name of the chambers' agendas? The chambers certainly can't say, because they can't see what is not seen.

It is significant that while a lopsided majority of Americans opposed the TARP bailouts of billionaires who had so inefficiently run their enterprises into the ground, the US Chamber of Commerce supported TARP as just the latest massive corporate-welfare program designed to subsidize its members.

The chamber is welcome to exercise its free speech by calling for the taxation of citizens to subsidize business costs. Let's just not pretend that it has anything to do with free enterprise.
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Ryan W. McMaken teaches political science at Arapahoe Community College. Send him mail. See Ryan McMaken's article archives.