Bruce Barlett has a very interesting piece on how the prescription drug-bill is an example of cronyism over the free market. He explains:
In The Wealth of Nations, [Adam] Smith wrote that the interests of businessmen and the public were almost always in conflict. The former wants to limit competition, while the latter benefits from an increase in it. "To narrow competition," Smith said, "can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow citizens."
Sometimes businessmen will try to limit competition by conspiring among themselves. "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," Smith observed.
However, such conspiracies were far less dangerous to the free market than government-sanctioned restraints on competition. Without government enforcement, private cartels naturally fall apart after a time. But when government imposes trade protection and other limitations on competition, it can go on indefinitely. For this reason, governments should be extremely wary of enacting such policies, especially when urged by businesses to do so.
Indeed, this is a critical distinction. What’s good for the free market may not be the same as what is good for individual businesses. The President’s policy on steel tariffs is a good example – it benefitted certain members of the US steel community at the expense of world trade and more competition. Protectionism does not help free enterprise, but harms it, which is why free market theory eschews government protectionism. However, Bartlett finds that the prescription drug benefit is more protectionism for certain drug companies:
A good example of how businesses manipulate government for their own benefit is the prescription drug subsidy bill now before Congress. Although marketed as a benefit for seniors, the true beneficiaries are big businesses that would be able to greatly reduce the cost of their retiree health programs. According to a July 2 report in The New York Times, Ford Motor Co. alone would save $50 million per year.
The Times notes that the biggest companies are mainly those that still offer drug benefits to their retired workers and would save the most. In the aggregate, they would save billions of dollars per year if the federal government takes over a big chunk of their retiree health expenses by paying for prescription drugs. That is why they are lobbying very heavily for passage of the legislation.
Again, rather than making a real free-market reform like enacting a larger-scale version of the Federal Employee’s Health Benefits Plan, Congress and the President are crafting legislation that adds an expensive new benefit on Medicare without concern as to how it will be paid for. Such legislation would be irresponsible at any time, but given that we are in wartime and are running significant deficits, it is illogical to create a program that has no chance of running on budget and will create a drag on economic growth.
In short, to increase their profits, many of our nation’s largest corporations are pushing a budget-busting government spending program that eventually will lead to higher taxes on all Americans. Sadly, the Bush administration often supports policies that benefit big businesses at the expense of average people, as it did with steel tariffs and agriculture subsidies.
This is why I argue for less government intervention. The less government can do by law, the less opportunity there is to use government as a shield for certain industries. The free market is based on the idea that business is entirely self-interested. It assumes that there will be people who want to use government to their advantage. It also realizes that government is no less self-interested, and possesses far more power than any corporation. The combination of the two is exceedingly dangerous, and only underscores the need for limited and responsible government to limit the kind of corruption that harms the free market in the name of political expediency.