Which is more preferable:  A market with many suppliers competing with one another, or a market with a few large suppliers who sell highly similar products?

Americans are naturally mistrustful of monopolies or oligopolies.  The leftists of the Occupy Wall Street (OWS) Movement seem particularly upset at the dominance of a small group of big banks.  Unfortunately they relate oligopolies with capitalism, right-wing politics, and fascism.  They are wrong on all three counts.  Not only that, OWS solutions would only increase the domination of the mega-banks and corporations  It is not government that will break the influence of big business, only competition can do that.

First, the dominance of a small group of corporations or suppliers in a market is an oligopoly.  Free market advocates believe this can be an unhealthy situation.  They propose encouraging competition and making it easier for new competitors to enter the marketplace.  Oligopolies are also not “right-wing” or the result of conservative policies.  In fact history demonstrates liberal-socialist parties prefer oligopolies, which make it easier for government to regulate economic sectors.  Finally, the dominance of corporations is not fascistic.  Fascism is a term that applies to government, not business.

Unfortunately OWS is short on political, economic, and historical knowledge.

OWS proposes similar policies as most liberals and populists.  They think corporations should be reined in with greater government regulation and oversight.  They also believe they should be taxed at higher rates and criminally prosecuted when their decisions adversely affect the economy.  To stop them from getting government bailouts, corporate speech should be curtailed with bans on campaign donations from corporations.  Finally, corporations should be forced to adopt socially and environmentally responsible business practices regardless of its impact on “the bottom line.”

Ironically half of these proposals are highly similar to fascist policies.  They should read Liberal Fascism by Jonah Goldberg and learn more about the nature of fascism, socialism, and what policies they promote.

All of these ideas can be summed up in one word: punishment.  They believe America will be better off if big business, big banks, and others are punished for being greedy and socially irresponsible.  But how?  How does taking away from corporations and the wealthiest 1 percent make everyone better off?  Is wealth redistribution really the answer?

Since 2009, President Obama and Democrats in Congress have sought to increase government involvement in the economy in order to go after those hurting America.  They passed the Dodd-Frank act to go after bad banks, reckless financial companies, and predatory mortgage lenders.  They passed the Health Care Reform law to rein in those sinister health insurance companies and greedy doctors.  Finally, they proposed increasing taxes on the top income earners.

Has it worked?  Are those big banks and corporations being punished?  No.

According to the New York Times, the reform act has accelerated the closing of small medical practices in favor of larger operations.  Large insurance companies are becoming more dominant as smaller ones collapse under the overwhelming new regulatory burden.  As for the banks, the largest institutions are now even more dominant than before.  It seems liberal policies are making all the greedy capitalists even wealthier.

The reason is big corporations and banks don’t fear new government regulations.  In fact they welcome it in some cases.  Hefty compliance costs from new regulations are easily absorbed by larger corporations while smaller ones cannot absorb them.  The result is less competition and more dominance by the large institutions.  Those that are “too big to fail” get bigger.  In terms of taxes, large corporations don’t mind as long as everyone is taxed at the same rate.   They can also lobby Congress to install loopholes, allowing them to avoid paying the new higher rates.  This is precisely how an enormous company like GE can avoid paying corporate taxes altogether.

As long as all of their competitors have to obey the same rules, they don’t mind new rules.  The big losers are the customers and the economy as a whole.  There is nothing to stop businesses from passing compliance costs to their customers.  With less competition, they can raise prices without fear of losing customers.

The big business-government alliance is sometimes referred to as “corporatism.”  In this system, corporations and property remain in private hands, so long as they take direction from the government through heavy-handed regulatory policy.  In response, businesses organize into cooperative units, guilds, and associations and negotiate/cooperate with the government.

OWS is right when they attack the unholy alliance of big business and big government.  The problem is their solutions only make it worse.  They inadvertently are demanding the relationship be tighter.

The Tea Party and free market advocates recognized the problem nearly three years before OWS.  They also take a dramatically different approach to the problem.  They do not seek to punish one side or the other.  They want to break the bonds in between the federal bureaucracy and big corporations.  Those bonds are the hefty regulatory regime and the unfair tax code.

First, economic policy should not be driven by a desire to punish the wealthy.  Punishment does not create wealth or lead to economic growth.  Instead, take away the tools that have allowed the dominant corporations to smother competition.  This means de-regulation, eliminating unfair tax loopholes, and lowering the compliance burden on everyone.

A truly free market makes it impossible for corporations to dominate through influencing government.  In addition, breaking up the heavy hand of government in the economy eliminates the reason businesses to lobby in the first place.  For example, in 2000 Wal-Mart was the 771st largest direct contributor to federal politicians.  It saw little reason to spend money lobbying Congress when it wouldn’t benefit them financially.  In the years that followed there were public outcries from unions and bureaucrats over the unfair labor practices of Wal-Mart.  With profits at stake, Wal-Mart got active.  By 2004 they were the largest corporate political action committee in the United States.  Since then, their commercial dominance has only grown.

Republicans and Democrats in Congress have both showed a willingness to work with big business.  However, the two parties tend to favor certain sectors or companies over another based on personal preferences.  For example, Democrats were outraged at the preferential treatment of Halliburton in obtaining government contracts.  A few years later Republicans were aghast when it was discovered Solyndra received highly favorable (and illegal) loan repayment terms from the Dept. of Energy.

For Tea Partiers, it is not about moving government policy back to favoring their preferred business sectors.  They want the federal government to stop picking winners and losers.  This means ending subsidies to big oil AND troubled solar companies.  It means ending farm subsidies, which generally benefit large companies anyway.  It also means substantially reining in economic regulations that give large corporations an unfair advantage in the marketplace.  Finally, it means eliminating the loopholes in the corporate tax code and ensuring all businesses pay the same rate.