NCPA - National Center for Policy Analysis

Big Business Benefits From Regulation

March 27, 2002

In covering Enron, journalists assumed that big businesses hate government regulation because it prevents them from making large profits. Enron is a big business that gave campaign contributions to the Republican Party. Therefore, Republicans were responsible for its collapse because they oppose government regulation.

  • Thus, when Republicans resisted imposition of price controls on energy last summer, the media implied this was only because Enron gave them campaign funds.
  • Most reporters never seriously considered the idea that Republicans might oppose price controls because of their unbroken record of failure.
  • By contrast, a new report from the Institute for Policy Studies, a left-wing think tank, found some 21 different agencies put more than $7 billion into Enron's pockets through loan guarantees and regulations during the Clinton years.
  • Furthermore, the New York Times reports the Clinton Administration gave Enron approval to set up the offshore partnerships that hid its vast debt from outside accountants and shareholders.

The media think big businesses like free markets, when historically, it has been Big Business, not consumers or progressives, who have been primarily responsible for creating most government regulatory agencies.

Regulation actually helps businesses in many different ways.

  • For one thing, regulation acts as a kind of overhead cost that bigger businesses can spread over a larger sales base, while imposing higher costs per sales dollar on small businesses, making it harder for them to compete.
  • Moreover, federal regulation with one regulatory standard is easier for businesses than 50 different state standards (some of which might be higher than federal standards).
  • Regulation can also create business for many companies, and of course there are multitudes of law and lobbying firms that exist solely to help business navigate the thicket of federal regulation.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 27, 2002; "Enron's Pawns: How Public Institutions Bankrolled Enron's Globalization Game," March 22, 2002, Institute for Policy Studies.

For IPS study

http://www.ips-dc.org

 

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