“Robin” Hood (as he is known here in my home state) was referring to State Farm Insurance. Hearing him utter such inanities was not that shocking to me, however, since he has made similar statements repeatedly. Following the lead of Mike Moore, his predecessor in the A.G.’s office, Hood gets a lot of air time by painting big business as evil and dastardly. What Mike Moore did to Big Tobacco, “Robin” Hood hopes to do to State Farm and the insurance industry.
And they are not alone.
“Anti-trust laws—shouldn’t every company in America have to comply with those?” demanded former Mississippi Senator Trent Lott at a congressional hearing early last year, where he testified as a leadoff witness. Like the Democratic Hood, Republican Lott was referring to those terrible “robber baron” insurance companies. Joined by Democratic Senator Mary Landrieu of Louisiana (she of Katrina fame), Lott called for placing the property/casualty insurance industry under the control of the Federal Trade Commission.
Here you have the then-leading Republican in the U.S. Senate joining with liberal Democrats in a bipartisan demand that the federal government wield its most pernicious anti-business bludgeon: the antitrust laws. That a prominent figure in the GOP would call for more federal intrusion into the marketplace, ostensibly to insure greater “fairness,” underscores a complete ignorance of economics and a total betrayal of the limited-government principles that his party (and the right generally) claim to uphold. Sadly, the men now jockeying to replace Lott in the Senate (he resigned recently) demonstrate no essential disagreement with him on this issue.
It’s a story we see everywhere in our political life: Expediency and appeals to emotion now trump reason, logic, and sound economics. From the unjustified hysteria over global warming to the shrieks for socialized medicine to the cries for more use of antitrust laws, facts are routinely ignored or dismissed as irrelevant—especially when the perceived culprit behind an alleged evil is profit-seeking business.
Industrial civilization is facing a crisis such as we have never seen. Rule of law, free trade, individual rights, medical and technological progress—in fact, progress as such—are all under vicious assault. That’s because the source of all productive achievement—man’s reasoning mind—is dismissed by today’s intellectuals as being flawed, culturally biased, untrustworthy, illusory.
Politicians like Hood and Lott are not philosophers. Yet their statements echo the bad philosophy that is generated by our universities and that now seeps like sewage into our daily lives. This bad philosophy is also largely responsible for the general indifference to sound economics—especially among our political leaders, in Mississippi and everywhere else.
Take the term “monopoly,” which is what antitrust laws are supposedly meant to prevent. The simple economic fact is this: A coercive monopoly, one in which competition is banished from the marketplace, can arise and exist only through government subsidies or legislation. Period. In a free economy, private companies like State Farm cannot prevent competitors from entering their markets. Only the government can do that; the U.S. Postal Service is an ugly example. Another example of a coercive monopoly upheld by the government is a utility company. The government typically grants a utility firm a franchise for an exclusive territory, and, by law, no other company is allowed to compete in providing that service in that territory. By contrast, private businesses such as State Farm and Microsoft cannot logically become coercive monopolies because they cannot exclude competitors or set prices and production policies independent of market demand.
The ultimate and only real regulator of competition in a free economy is the capital market. So long as capital is free to flow, it will seek those areas and companies where the rate of return is highest. And high rates of return are generated only when companies serve their customers. Under capitalism, if a company manages to gain more than a fifty-percent share of a given market, it does so solely by giving consumers what they want. Such a company deserves praise and the rewards of success for customer service—not the threat of antitrust punishment.
Yet legislators and bureaucrats would use government edicts to override the decisions of consumers and investors—and to compel businesses to act instead in ways that they consider to be “fair.”
Most educated people in Mississippi dismiss the behavior of Jim “Robin” Hood as that of a typical politician looking for photo-ops as a crusading populist out to save the little guy from big business. Trent Lott, however, was a different story. Given his party affiliation, he was misperceived as a friend of business, and thus his anti-industry statements carried more weight.
If implemented, the ideas of such politicians will only hurt the consumer. An inhospitable regulatory environment will only prompt State Farm and other firms doing business in the state to leave Mississippi, while other companies looking to expand will know enough to stay away. Fewer products will be offered and at higher prices. Then, to remedy the problems that they caused, politicians and regulators will hold more demagogic hearings about the evils of business and about how we need more laws to force companies to better care for their customers.
In Mississippi, it’s become a vicious cycle, and as a resident, I’m depressed that prominent officials are so eager to keep it going. But all is not lost. Perhaps my state can usefully serve the rest of the country as a bad example.