It’s commonly supposed that big business dislikes regulation. Intuitively, the idea seems plausible enough. There’s only one problem: it’s wrong. Almost exactly wrong.
Big business can absorb pernicious regulation fairly easily: they have in-house legal departments, they have various economies of scale working in their favor, and the cost of compliance with regulation per unit of output is trivial when compared to what their smaller competitors suffer. Big businesses, all too often, love regulation. They especially love rules and restrictions that shaft their competition.
Different examples have different characteristics. Yesterday, I pointed to a Bootleggers and Baptists case here in New Zealand. The largest manufacturer of legal “party pills” is backing regulation which will hurt his competitors. Today, I have a cute little example of the idiocy of protectionism.
“Product dumping”—exporting stuff for less than what you sell it for domestically—is supposedly some big bad thing, presumably because it provides consumers with affordable goods while giving people in the developing world jobs: two truly horrible outcomes that no man with a genuine commitment to social justice can tolerate.
So, the powers that be became persuaded by vested interests—an unholy alliance of corporates and unions—to place levies on products so “dumped”.
Enter Michael McCormack, an artist in Wellington, New Zealand. He designs diaries adorned with Wellington scenes, has them printed in China, and sells them here. Everyone wins, right? He makes a bit of money to finance his passion, some printers in China get paid employment, and consumers get pretty diaries. Right?
Newtown After the Rain, Michael McCormack
Oh no. He gets slapped with an anti-dumping levy, because he doesn’t sell the diaries to all those people in China desperate to have scenes of Wellington life in their stationery.
But when he had another run made in China for 2009, he was surprised to find he could not pick them up until he paid a 53 per cent “anti-dumping” levy.
Talks with the Economic Development Ministry revealed that, with a few select items such as diaries, a levy has been enforced to deter countries selling items in New Zealand at cheaper prices than they do at home.
The ministry made no distinction between Kiwis who outsourced orders and other importers.
McCormack has got a wonderful attitude: instead of thrusting his hand out for free money, he turns his talents to making stuff that people want to buy. Even better, he accepts that there’s some commercial risk in doing so: not all his diaries sold this year, but “Mr McCormack said his bugbear was not the leftover stock, which was to be expected in the risky publishing game, but more about the levy and the opportunity lost to build a market.”
So this story has a hero. Where, you might ask, is the villain? Read on:
The diary duties were imposed after a complaint from the New Zealand industry, of which Croxley Stationery is the largest producer.
Of course. Some dude having two thousand diaries printed in China is obviously a threat to the local printing industry. So the industry calls in its mates at government to punish him.
Well done Croxley: you fail at capitalism. You’ve just been schooled by a struggling artist.
BK Drinkwater, once described as "really terrific albeit a bit unstable", is not a philosopher. He gleaned all he knows of the world from the business sections of New Zealand's newspapers, which he reads because that's where the crosswords are. He blogs at 
Great post. Thanks, bk!
Even if anti-dumping rules aren’t abused so transparently as in this case, they still represent a significant entry barrier which does far more to harm competition than augment it. Here’s a paper you might like. I’m too dim to understand all the math.
I just finished slogging through the math. While it’s nice to have some sort of theoretical backing for part of my argument, I think I still prefer sarcasm.
Nice work, BK. I even have trouble convincing confirmed news junkies and generally thoughtful people that regulations on business are exactly what the big, entrenched corporations want.
Well put.
So many already-big businesses have figured out, “Why commit an anti-competitive act yourself and draw fines and penalties, when you can manipulate the government into committing it for you without penalty?” It’s only when big business teams up with big government that people have reason to worry about it.
The real genius—the majesty—of this process is how it gets sold to the public. It’s about “saving our jobs” from “multinationals”. It makes me want to puke. Then stab. Them puke again.
“Big business” in Montana is somewhat smaller than elsewhere, but this week after being unable to purchase Port wine at a grocery store, I discovered this is exactly the reason why. Owners of bars and casinos basically have a stranglehold on the liquor situation here: The Politics of Drink. Some of the consequences:
1. You cannot get a new liquor license in Montana. The only way to sell hard alcohol is to buy an already existing license.
2. You cannot buy hard alcohol in a grocery store- only a state liquor store or at a bar (many of which sell bottles as well as shots or mixed drinks).
3. You cannot buy Port wine in a grocery store because the alcohol content is slightly too high per the law.
4. Craft brewers in Montana are restricted as to the alcohol content of the beer they brew. It was so ridiculously low that they did manage to get the legal limit bumped up a bit this year so their products could compete with out-of-state craft beers.
All of this is extra-super-uber-ridiculous in a state where public drinking (e.g. drinking an open beer out on the sidewalk) is extremely tolerated and even legal in some locations.
Let me see if I understand point (1) correctly: the great state of Montana enforces a hard-liquor cartel. Wow.
And then there’s the wonderfully rueful tone in the last sentence: “extremely tolerated and even legal in some locations”. In the small New Zealand town were I grew up, I wouldn’t say the public drinking was positively encouraged, but the local cop did always look at you funny if you were walking around without a bottle in your hand. He thought it was a sure sign you were up to no good. That said, I grew up in an unusual and much-mocked small town.
I regret to report that yes, you do understand point (1) correctly. Here’s the law regarding the quota for “all beverage” licenses in Montana which are the license that includes hard liquor. There are some other types of licenses for beer and wine only, other miscellaneous stuff, and I found out today that we even have a sacramental wine license.
It is quite ridiculous to look at the Montana Department of Revenue’s page on liquor distribution. See all that bullshit about state control of alcohol promoting moderate consumption and deterring alcohol abuse? Well as it turns out, Montana is one of the worst states in the United States for drunk driving on a per capita basis.
In my little town of about 900 residents here in Montana, you can get a to go cup for any beverage at any bar in town. Butte is infamous for the streets being filled with drunken revelers on St. Patrick’s Day like this.
Sacramental wind license?!? This just keeps getting better.