David Cay Johnston has written a book on a very important topic, the corporate welfare that occurs on a massive scale. Unfortunately, Mr. Johnston takes a very important topic and shoots it so full of populist sensationalism that it is hard to take him seriously. One of the main building blocks of his hype building is the grossly flawed study by Pickety-Saez, which attempts to use income tax data to prove radical changes in the distribution of income, but instead proves that people respond to changes in the tax laws.
The core of the book is the corporate-government partnership, where greed and malice on the part of business people siphons off mountains of money from taxpayers in the form of subsidies and protection for favored businesses and industries. Very surely, that modern day mercantilism is one of the primary problems in most modern societies. Mr. Johnston, however, puts on very thick blinders to the fact that the mercantilist partnership involves two sides. Government is the other partner, and for sure, the more egregious offender.
Business people are in business for profit. It is not all that unexpected that people will try to use whatever tools are available to increase that profit. Politicians and bureaucrats, on the other hand, are elected and hired as servants of the people. The primary legitimate role of government is to protect the rights of the individuals in society. They operate under the expectation that government is there to protect the members of society. Thus, when a politician or bureaucrat aids business at the expense of the individual citizens and taxpayers, they are forsaking their fundamental reason for being, they are worse than the businessman seeking handouts.
The book was hard to read, in spite of the fact that Johnston has a great, easy-to-read writing style. So many times throughout the book, a sentence would stand out as pithy, straightforward and true. Then, a few sentences later, he would make conclusions that didn’t follow or somehow destroyed the credibility that he may have built up. Quotations from Adam Smith are generously sprinkled throughout the book, and made to sound as though the champion of free markets would have supported Johnston’s proposals for big government and heavy regulation of business.
According to Johnston’s analysis, the problems that modern America faces are due to alleged “deregulation”. The author summarizes his confusion early on when he says “In the past quarter century or so our government has enacted new rules that have created not only free markets, but rigged ones.” If the markets are “rigged”, they are not free in any sense. The regulators rig the market and make it un-free. It shouldn’t be that hard to make the connection. The regulation that he longs for has always been written by the regulated, to the detriment of competitors, taxpayers and the buying public.
His conclusion is that people should bring pressure on elected officials, to enact regulation necessary to bring us back to the good old days. That conclusion invites the fox to guard even more henhouses. He plays into the hands of the very people he seeks to control. Economic freedom is the source of progress and prosperity, and limitation of government is the only possible way to limit the power of mercantilists to rip us off. Without government enablers, bad businesses would be punished, either by the market or, if they actually used force, fraud or violence, by government, using its limited power to protect people against those obvious violations of individual rights.
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