A Political Comedy of Errors

Hollywood has always taken a very dim view of the enterprise system—with all its waste, corruption, and excess—that Hollywood itself epitomizes. It's a Wonderful Life, after all, was about Jimmy Stewart's moral triumph over rapacious capitalism. So that is nothing new. But anti-capitalist sentiment cycles up and down, and, post-Enron, it has been distinctly on the rise—in the movies, notably, but not just in the movies. Tinsel Town, the mainstream media, Lou Dobbs, and (oddly enough) the ingratiating CEOs of many major corporations are all pulling together. They hate the way corporate America is downsizing, outsourcing, raping the planet, and putting profits before people. This time, it's personal.

It's also political. With Democrats controlling Congress and the party's sights set firmly on the White House, anti-business rhetoric suddenly has a new salience. This week's wobble in global stock markets might cool the ardor a little. It might remind Democrats that they cannot crank things up too far without the risk of getting themselves accused of precipitating a Wall Street crash. Meanwhile, though, the theme of corporate irresponsibility and the need to check it is getting pretty well established.

If a Democrat is elected president and the party retains control of Congress, the anti-business mood is likely to gain traction in several areas. Health care reform is one. In fact, in this case, politicians of both parties want businesses to carry more of the burden. New health care proposals in Massachusetts and California, both courtesy of Republican governors, defray part of the cost of expanded access by requiring businesses to do more. Higher corporate taxes will most likely move up the agenda (even though America's are already high by international standards). Tighter regulation for environmental protection and workers' health and safety will also advance. So too might rules for disclosure and accountability on top executives' pay, and other financial matters.

Case by case, the merit in these proposals varies from substantial (executive pay) to less than none (taxing profits), but put the merits of the individual policies aside. What they have in common is a fallacious premise—namely, that the cost of a new fiscal or regulatory burden stays where you first put it, with the companies concerned. The idea is very appealing: If businesses are told to give their workers more-generous benefits, or to pay higher taxes, or to use alternative fuels that reduce their greenhouse-gas emissions, or whatever it might be, the rest of us—workers and consumers—get that benefit at no cost.

But that is rarely, if ever, true. In the end, the costs of those policies, as well as the benefits, mostly find their way back to voters at large as higher prices or lower wages (and this is to say nothing of the dynamic effects on incentives to grow and innovate). In short, business is not a separate segment of society that can be squeezed to advance the interests of the other segments. Economies are not built that way.

Hollywood's conviction, endlessly restated, that business is the bad guy (either front and center in a starring role, or, more usually, standing to one side in a black hat with the other extras) affirms and maybe encourages this great reigning misconception. I think I object to that even more than I object to the idea that anybody in a senior business role is either ethically illiterate or heading for a grisly fate at the hands of dark corporate powers. That idea, after all, is just an insult to one's intelligence, whereas the underlying economic misconception promotes bad policies with real consequences.

There you have it: What an awful film starring Robin Williams has to do with America's economic prospects.