How Corporatism Works

This is how corporatism works.

You pass a nice sounding “safety” law and create a federal bureaucracy to implement regulations. The bureaucracy is staffed with lobbyists of big corporations who write the new regulations. The bureaucracy enacts regulations written by lobbyists. The regulations mandate onerous testing requirements and oversight on the products in the industry.

The cost of compliance with the new regulations is so high only the largest corporations, who benefit by economies of scale, can afford to pay the cost and remain profitable.

Small American owned businesses cannot pay for the high upfront cost to comply with regulations required before they may market and sell their products. The small business profit margin is destroyed. The small businesses are driven out of the industry.

The big corporations continue on. They laugh because they have eliminated small business competition. The corporations raise prices and make a lot of money. They also use their compliance with new safety regulations as a shield to defend against troublesome products liability actions brought by injured children hurt by their products, most of which are manufactured overseas.

In the long run, costs goes up, and safety go down. As collateral damage, unemployment goes up because small business in American is the true source of job creation.

The elected representatives in Congress are insulated from the damage to America. The elected representatives collect large campaign contributions for their work.

The cycle continues.

Small toy manufacturers are the latest example of small business industry being killed by corporatism. In August 2008, the United States enacted the Consumer Product Safety Improvement Act which does all of the things I just described above.

We should not get mad at Democrats that created the law that killed small toy manufacturers. The Democrats just happen to be the party in power. Corporatism like this has been going on for years, and a lot of the Republicans are as guilty as Democrats.

Here is a link to a New York Times article describing the most recent example of corporatism in modern America. See Leslie Wayne, Burden of Safety Law Imperils Small Toymakers, NY Times (Oct. 30, 2009.

We need to figure out which of the politicians are wedded to facilitating corporatism. We need to get rid of them.

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