No one can doubt Adam Smith' belief in free markets. His admiration was as big as his suspicion for their absence, even if this absence is created by business practices. He wrote in The Wealth of Nations
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”
This “conspiracy against the public” is not only about prices. In an fascinating chapter of his book 'Republic Lost', Harvard Law professor Lawrence Lessig describes how political influence of big corporations contribute to diabetes ans obesity increase in United States.
“In 1980 humans had never tasted high-fructose corn (HFC) syrup. In 1985 it accounted for 35 percent of sugar consumption. In 2006 that number had risen to over 41 percent». Why? Price is the answer, but it is not the price of free market. «Sugar in the United States is two to three times as expensive as in other countries. That’s because the U.S. government protects the domestic sugar manufacturers with tariffs... That tariff gives those manufacturers about $1 billion in extra profits a year. It costs the overall economy (through increased prices and inefficiency) about $3 billion (…) This protectionism does, however, help at least one group beyond the sugar barons: corn producers. For the higher the cost of sugar, the safer the market for sugar substitutes such as HFC. Which explains why one of the biggest supporters of sugar tariffs is a company that doesn’t produce any natural sugar: Archer Daniels Midland (ADM) ... a conglomerate of companies with revenues exceeding $69 billion in 2009.”
Corn processing is a primary activity for ADM: 76,000 metric tons every day. On the other hand Lessing notes that
“Corn in the United States is cheap relative to other nations because we subsidize its production. In the fifteen years between 1995 and 2009, the government spent $73.8 billion to ensure that farmers produced more corn than the market would otherwise bear. That corn then got used to produce lots of high-fructose corn syrup, at an increasingly low price”
This is good for business. According to a Policy Analysis of the libertarian think tank Cato that “at least 43 percent of ADM’s annual profits are from products heavily subsidized or protected by the American government”.
And why American government distorts in such degree the market contributing to obesity-related diseases that costs the medical system $147 billion annually? The former ADM chairman Dwayne Orville Andreas is legendary for his political campaign donations in US having contributed millions of dollars to Democratic and Republican candidates alike.
This is not the only sector that taxpayers money are used for corporate welfare, or laws are passed to secure corporate profits. A common joke in media industry is that you can expect the next copyright extension act when a Disney character is near to become public domain. The last Copyright Term Extension Act, a law also known as Mickey Mouse Protection Act, was passed 1998 six years before the copyright protection of this character was expiring. Walt Disney Co is one of the biggest donors to election campaigns. According to Center Responsive Politics it spent 18,7 million dollars in contributions (since 1990) and 74,5 millions (since 1998) in lobbying.
The problem is that for the protection of Mickey Mouse character millions pieces of intellectual work are buried under Copyright, stifling the creativity of younger generations.
So we should paraphrase the Adam Smith's quote to something like “People of any trade seldom meet with politicians, even for merriment and diversion, but the conversation ends in a conspiracy against the public and against Democracy” because Democracy demands that the House or Representatives, as Alexander Hamilton or James Madison wrote, “ought to be dependent on the people alone” (Federalist Papers No. 52) With 753,816,457 dollars raised in 2015-2016 for all House candidates, or 3,8 billion dollars spent in Congregational races in 2014, the political process is not “dependent on the people alone”. It is more dependent on special interests, which promote legislations about corn, sugar, steel, banks, copyright etc. The biggest, by far, spender of all is the Financial Sector with $677,271,964 in 2015-2016.
There is a huge elephant in the middle of the room and on the face of democratic process. It is the 6,3 billion dollars in 2012 congressional and presidential election costs in US alone (we don't have world statistics). And this is not the only cost. “ADM's finagling in Washington may have cost taxpayers and consumers more than $40 billion since 1980, counting the cost of the sugar program ($3 billion in higher prices each year), the ethanol program, and federal food giveaways and export subsidies” (James Bovard, Cato Institute Policy Analysis No. 241: Archer Daniels Midland: A Case Study in Corporate Welfare).
And the cost is not only for taxpayers' wallet or the chocking of economic progress from established companies. We have to add the exclusion of politicians that can offer.
Over the past two years, I sought the Democratic nomination for governor of New York. I traveled to virtually every county in the state. I won the support of the Democratic Rural Conference. I placed well at the state convention and mounted a successful statewide petition drive to get on the Democratic primary ballot (…) Editorials, including one in The New York Times, said I was a good candidate. My demographics were great -- Vietnam combat veteran, suburban, moderate. By all accounts, I did very well in the debates. I liked campaigning, particularly the face-to-face stuff at the county fairs, on the streets and in the clubhouses and V.F.W. Halls (...) But I raised the least amount of money of any of the candidates. I couldn't buy advertising on television. I lost. (James L. Larocca, Priced Out Of Politics, New York Times November 27, 1998)
Published in "Greece is Democracy" September 2016