Wednesday, August 6, 2014

How Laissez-Faire is Texas?

Texas is often described as a limited government, pro-business heaven. But looking at the evidence of the government's hand in the economy reveals that Texas is not as Laissez-Faire as it would like to seem and I think that continually praising Texas' pro-business efforts have made it harder to see this and have a real, free-market economy.

A major component of a capitalist economy is the drastic separation between the State and Economics, that is, the government and business. However, Texas politics and legislation have had their hands in the economy from its earliest beginnings. In fact, in 1889 Texas was the second state in the union, Kansas being the first, to create Antitrust legislation, i.e. legislation that prevents large corporate mergers and "anti-competitive" actions. Antitrust laws seek to dismantle "monopolies", an over-generalized term that applies to any business or company that has a "large market share." Texans created these laws in order, they believed, to protect business interests in the state as well as enshrine competition. But by trying to "promote competition" they took away what really makes a competitive market, freedom to act and protection of individual rights. Now the person who could have been making the best product at the cheapest price, or the two businesses that wanted to merge, are now restricted by law from doing so because these actions are labeled as "monopolistic."

As Erica Grieder states in her book, Big, Hot, Cheap and Right, which was summarized in the article we read, Texas is not so much "pro-business", rather its actions have been "pro-Texas-business." This idea is enumerated in the Texas Politics online textbook in chapter 9, Section 2, The Politics of Political Economy, where it cites the Texas Enterprise Fund and the "rhetorical nods to the preeminence of markets and competition." Apparently, shortly after the Rainy Day Fund was established, Texas used around 100 million dollars to create an incentive for tech businesses to do come do their thing in the lone star state. This was followed by the 200 million dollar Emerging Technology Fund, "designed to encourage the development of high tech public-private partnerships." Now, I don't know about you, but if that's the often lauded free-market capitalism in action, then call me a Bolshevik.

It was put succinctly by Carine Martinez-Gouhier in this post on Economic incentives in Texas. Gouhier states that a handful of tech companies denied the monetary incentives by the City of Austin, claiming the regulations that would follow from accepting such an incentive is antithetical to promoting their business. Yet many, like Dropbox, said they still wanted to continue to expand into Texas precisely because of its greater economic freedom and that the "short-term" benefit of incentive funds cannot be the deciding factor for long term business. 

My whole point here is not to criticize Texas' efforts to create a firm, limited government and a positive business climate. Instead, my hope is to bring to light that we are not as capitalistic as we may seem; we are much more entrenched in a mixed economy, like the rest of the union, than I believe we'd like to think. The first step to creating a more Laissez-Faire environment is to assess what we are doing now, be honest with what is going on, and try to reel back regulation and incentives on business, offering, instead, a free-market as incentive enough for growing Texas business.

No comments:

Post a Comment