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The real reason the economy is ‘rigged’

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Vox recently published an article claiming that Charles Koch is right and Bernie Sanders is wrong about how the economy is rigged. Both agree that there are laws that unfairly favor some financially over others. Sanders often claimed during his campaign that the rich have used their money to lobby for laws that favor their interests over those of everyone else.  Meanwhile, Charles Koch has condemned excessive regulation and restrictions on economic freedom that allow the few to bend laws in their financial favor against the many. In looking at the real problem in the economy, Charles Koch’s analysis of the problem comes closer to the truth.

In Koch’s analysis, “the few” does not mean the 1%. In fact, this particular group includes a large portion of the populace from vastly different economic backgrounds. Will Wilkinson, writing for Vox, explains:

The economy is the sum of this incomprehensibly complex ecosystem of human exchange, and is far too variegated and decentralized to “rig” all at once. So it gets rigged little by little, one market and one jurisdiction at a time.

The story of how the economy gets rigged is therefore a bunch of homely little stories of people with nice watches screwing over people with less-nice watches. But it’s not class war. It’s not the mega rich against the rest of us. It’s insiders seeking and then protecting special privileges that give them a leg up.

Examples of such rigging include instances where dentists, cosmetologists, cab drivers, and massage therapists have all successfully restricted the market and successfully lobbied for regulations in their favor, often in the name of the “common good” or “public safety.” Such regulations may take the form of occupational licensing, “environmental protection” or “consumer protection” measures, or any other array of laws or bureaucratic rules. The practice of lobbying for such regulations is called “transfer-seeking,” and successful endeavors constitute “regulatory capture.”

These kinds of practices harm the total economy, but may affect the poor the most:

Many of these economic regulations seem trivial in isolation … But when you add up all the things you can’t do for money without meeting costly, unjustifiable requirements, you get a dense web of restriction that acts as a suffocating structural barrier to economic opportunity, mobility, and equality.

The blame for such a tangled “web” of unfair regulations falls, says Wilkinson, on the weakness of economic liberty in the United States. Wilkinson claims:

American law does not consider economic liberties to be ‘fundamental’ …so regulations of economic life aren’t required, as matter of law, to have any practical relationship to the goals they are supposed to achieve.

Wilkinson implores people of all political leanings to come together to find and dissolve unnecessary and unfair laws or regulations that facilitate this rigging. The quote above would suggest strengthening economic liberties under law would also improve the situation. Whatever the solution, the idea that the government should not facilitate economic benefit for a small group at the expense of the general population is one that garners bipartisan support. It might even be the issue that can bring the two parties together in an increasingly partisan country.

Read the entire article here. For a more in-depth analysis, check out journalist Jonathan Rauch’s book Government’s End: Why Washington Stopped Working, which examines how transfer-seeking and regulatory webs impair our democracy.

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Mimi Teixeira

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