Progressives’ Doublespeak on Regulatory Capture

“Wall Street and corporations have corrupted the political process,” says one Occupy Wall Street sign. It’s a common refrain from progressives, but their criticism is one-directional. The accusation is only leveled when Giant Corporations oppose government intervention. When big business supports the intervention, because it stands to reap windfall profits, industry reports are suddenly valid sources for information about the legislation. During the debate about the incandescent light bulb ban, this attitude was rampant, and still is. Consider this excerpt from a recent piece by Washington Times’ Blogger Catherine Poe. She writes:

[W]hile sitting on the Senate Energy and Natural Resources Committee, [Rand] Paul railed against government plans to transition from the incandescent light bulb to more energy saving light bulbs, citing Rand’s 1937 novel Anthem. The similarity, according to Paul, is that “individual choice is banned and the collective basically runs society.”Just for the record: The companies making light bulbs were all for this change. [Emphasis added]

Her closing comment is remarkable because it demonstrates complete deference to corporate interests on this issue. It’s not just Poe. The Washington Post editorialized in favor of the light bulb ban in July, citing a study by light bulb manufacturer Phillips that said the ban “would save a household $160 in energy costs over its life.” According to the Post, “The law has had an impressive effect: Light bulb manufacturers have invested heavily in developing new bulbs that use much less electricity, turn on immediately, work with dimmers and produce soft white light.” It’s like reading the back of a GE box.

At the time, I wrote, “With huge profits to be had from more expensive alternatives to traditional incandescent light bulbs… consumers should be suspicious of such self-serving conclusions. After California utilities poured $550 million into CFLs, their benefits turned out to be wildly overblown—actually 73% less than those projected.”

What progressives refuse to recognize–and free-market critics more generally–is that Giant Corporations like regulations because they kill off smaller competitors and increase profits by forcing consumers to purchase more expensive products they don’t want. It’s why Philips has led the prohibitionists’ lobbying efforts and why GE spent millions lobbying for the light bulb ban. Consider how the New York Times describesthe development of the LED bulb.

Philips created its L.E.D. bulb to compete for the L Prize, a government-sponsored award meant to encourage the development of a replacement for the 60-watt incandescent… But no amount of subsidy or “green” branding has managed to woo consumers away from Edison’s bulb…. So some years ago, Philips formed a coalition with environmental groups including the Natural Resources Defense Council to push for higher standards….

Philips told its environmental allies it was well positioned to capitalize on the transition to new technologies and wanted to get ahead of an efficiency movement that was gaining momentum abroad and in states like California. Other manufacturers were more wary, but they also understood the downside to selling a ubiquitous commodity: the profit margin on a bulb that sells for a quarter is negligible. After much negotiation, the industry and environmental groups agreed to endorse tightening efficiency by 25 to 30 percent. A bipartisan bill passed Congress with little notice in 2007.

This crony-capitalist story is carefully guarded by expressions like “well-positioned” to “capitalize” on the “transition.” In fact, light bulb manufacturers simply saw an opportunity to use green rhetoric to increase profits at consumers’ expense. The New York Times, Washington Post, and others who use industry support as a defense for new regulations ignore the incentives for business to use government to exploit consumers. Consumers–that is, all of us in society–benefit from free and open competition, not by more government mandates and regulations that benefit corporations.