Critics of free markets tend to mistakenly conflate a “pro-business” position with a pro-market one. In fact, the two positions are quite different. Many who claim to support free markets are “pro-business” advocates whose positions work against the market and restrict the economic freedom on which our prosperity depends. When compared side-by-side, it’s clear that “pro-business” positions conflict with pro-market ones:
Because businesses provide jobs and make other positive contributions to communities, both sides agree that government should promote business. Where they differ, though, is in how they think this ought to be accomplished.
Pro-business advocates believe the government should directly assist specific businesses or industries through subsidies, tax breaks, or other advantages.
Pro-market supporters reject this, advocating for the government to only ensure a level playing field for competition.
Whether well-intentioned or not, the intervention in the marketplace that pro-business supporters advocate tends to harm everyone except those directly receiving the benefits. Making matters worse is that when the consumer is no longer the deciding factor in whether a business succeeds or fails, businesses direct more and more of their resources toward securing government favors rather than pleasing customers. This often results in corruption and cronyism, and it’s always the taxpayers who end up having to pay for it all.
On the “pro-business” side, there are several ways that government officials can favor certain businesses or industries over others. These include imposing tariffs, granting special tax provisions for specific industries, dispensing grants to individual businesses, and providing loans to businesses that are unable to secure them in the private sector.
Furthermore, the “pro-business” position often advocates for regulations, like occupational licensing, that corrode entrepreneurship and make it difficult, or even impossible, for other businesses to compete. All of these are counter to the pro-market position, which advocates for truly free markets.
Understanding the difference between being “pro-business” and being pro-market is important to the study of economic freedom. To further understand the effects of cronyism and corporate welfare, the Charles Koch Foundation is requesting proposals for research on this topic.
A version of this blog originally appeared on EconomicFreedom.org, a project of the Charles Koch Institute. The Institute republished it here on July 31, 2015 and updated it on March 18, 2016.