The death of Apple cofounder Steve Jobs, who was well and justly eulogized in the national media, offers perspective on the meaning of the free market. Jobs became an icon of the free market by creating products that people bought because they wanted them.
But many of today’s most attractive opportunities to get rich are not in the free market at all, and this is noteworthy in the national debate on the future of tax policy and the economy.
It’s argued that taxes on the wealthy should not be increased because if they keep their money, they will, through the free market, create the jobs. Since that is obviously not working, we are told that they are keeping their money parked on the sidelines only because because the regulatory environment is too uncertain to allow them to invest. Both major political parties are responsible for that.
But much of today’s wealth creation is not coming from the free market.
This is true in New Mexico more than in most states, with our national laboratories and military bases, and the industries that serve them, underpinning so much of our economy. But that’s just the beginning.
Are you as sick as I am of those obnoxious TV ads for auto insurance? That looks like vigorous free market competition, except that the market exists only because state law requires all drivers to buy the insurance. Even if the law is unevenly enforced (yes, we know!), this market was made by government.
Several lines of insurance are like that. Companies may be competing with each other, but they are selling to consumers who have little or no choice but to buy the product, and the product itself is highly regulated. (I have previously written about New Mexico title insurance.)
The recent “pay to play” scandal, involving several billion dollars in public investment funds, reminded us of how a few investment experts get rich advising government on investing taxpayer money. Millions of dollars were paid to agents and marketers to steer New Mexico’s state investment funds to favored firms. Aside from the scandal, the industry regards the size of the fees as legitimate reward for handling that much money – and that much money is commonly found in government funds or other regulated institutional funds.
An oil man recently told me about an underreported aspect of New Mexico’s notorious “pit rule.” The rule imposes new standards for how the “pits” created by oil drilling must be cleaned up. Did you think the controversy was between the oil industry and environmentalists? Not quite, says my oil man friend. The oil industry’s cost is the disposal industry’s profit. Somebody’s making money from that regulation.
And we learned a few weeks ago that the company with the contract for Albuquerque’s “red light camera” program was also funding the publicity campaign to continue the program.
Professional athletes, admired national symbols of individual achievement, play in taxpayer-funded fields and stadiums, with team owners forcing cities to compete for the most lucrative deals, in leagues protected from competition by anti-trust exemptions. New Mexico’s investments in film industry infrastructure are threatened by more generous subsidies from other states. Much of what is done in America these days in the name of entrepreneurism involves devising clever new ways to make money from opportunities created by government programs, government spending, or government regulations, from school milk programs to highway construction, scientific research and industrial safety. Not exactly the Steve Jobs model.
This is not to denigrate the many business people who work hard to provide quality, cost-effectiveness products and services to government or to citizens because of government – or the value of those services themselves. But I wish that when we talk about tax and economic policy, we’d restrain the pious platitudes about the virtues of the free market.
Triple Spaced Again, © New Mexico News Services 2011