Banking Cartel “Consumer Protection”

Since her appointment to run the President’s new Consumer Financial Protection Bureau (CFPB) — assembled in response to the Panic of ’08 — Elizabeth Warren’s name has been all over the news. And as The New Yorker’s James Surowiecki notes, Warren may “be the most hated person in Washington” — as well as, he says, “the most popular.”

The duality of opinions about Warren that Surowiecki points out registers the great American myth that he buys into: That corporate powerhouses and Washington are engaged in some kind of contest for power, both with the desire to be the dominant feature in the country’s social life.

According to the New Yorker piece, “[t]he banking lobby sees her as its nemesis,” as an “anti-capitalist radical” and an enemy of business. Ironically, even while he misunderstands the underlying feature of the business/government interconnection, Surowiecki says that “an empowered CFPB could actually be a boon to business.”

It shouldn’t surprise us that further regulation would represent a “boon to business,” though that causal link probably seems counterintuitive to most Americans. The truth is that, despite its constant alleluias to “American free enterprise,” Big Business has no use for anything like a real free market. Indeed, it typically does everything it can to avoid being forced to compete.

When the state seems to “tighten the screws” on commercial power, limiting its range of motion on (supposed) behalf of the consumer, the outcome is to reduce the field of competitors. Only the savviest, richest and most well-connected business players can afford compliance with the state’s largely arbitrary rules, so only small businesses — those without K Street suits hovering about Congress — end up losing.

It’s true that regulations cost Big Business money, but all of those added costs are more than recouped through the monopoly prices huge corporations are able to charge as a result of state intervention. At bottom, the state has never been anything but a money machine for economic elites, erecting barriers and tolls throughout our commercial interactions to make sure that the “free” part of “free enterprise” never actually reaches the people it would help most.

If resources, from labor hours to capital goods, were truly allowed to flow freely without state interference, it would flatten the corporate cartels and their ability to pen in industry. Apostles of genuine free markets from Adam Smith and David Ricardo to William Godwin and Benjamin Tucker harbored none of today’s delusions about the relationship between Big Business and Big Government, and never saw that relationship as antagonistic.

While the details of that relationship — its marginal contours — have changed with the times, never has its fundamental character. As historian Gabriel Kolko once observed of the flood of regulations during the Progressive Era, “Business reliance on the federal government may have been variable in its emphasis, but it was consistent in its use.”

It is that use that market anarchists assail when we oppose the state altogether, that contamination and destruction of free markets for the ruling class. The incentive that Surowiecki discusses — “to make sure that potential customers were able to distinguish between ripoffs and good deals” — is, as we have seen, ill-served by constraining competition, but it’s built into a real free market.

Free and voluntary exchange in a commercial environment liberated from the grasp of Big Business elites is the way to true consumer protection. To achieve that kind of market, however, we have to terminate its chief obstacle — the state itself.

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