The belief that if one is a strong capitalist that that necessarily implies one has to be pro-business is one of the most common misunderstandings I get when I tell someone my economic beliefs. It also comes in the form of the person listing all the evils corporations have done throughout the world (however, all the good corporations have also done throughout the world are rarely mentioned, but that´s a different story). Here to dispel these two myths are Bruce Bartlett and Radley Balko of the Cato Institute.

Bruce Bartlett, in a dated article titled “Free market doesn’t mean pro-business” writes:

Principled conservatives believe in the free market. While this may seem to equate with a pro-business viewpoint, in fact it often does not. The last thing most businessmen want is a free market, where they must compete, slash prices, continuously innovate, suffer narrow profit margins and live constantly on the edge of bankruptcy. They would much rather have assured profits, monopoly positions, price supports, trade protection and the other trappings of a corporate welfare state.

The great economist Milton Friedman explains that the dichotomy results from the fact that the business community necessarily is made up of existing businesses. By definition, therefore, it does not include those that have yet to be formed. Moreover, the business community is comprised of large businesses with significant political clout and many times more small businesses that individually have no political influence whatsoever.

Big businesses are much more inclined to support governmental solutions to the problems they face because they have the muscle to get them. Government bailouts and trade protection are seldom, if ever, granted to small businesses, only to big ones with high profiles and many employees. It is doubtful that the Bush administration would impose tariffs, as it did for the steel industry, on an industry comprised of many small firms instead of a few large ones.

Consequently, those who expect big businesses to support the free market are constantly betrayed. Big businesses are even known to support tax and regulatory policies that harm their own industries — provided that they could get some loophole for themselves so that their competitors are hurt worse. That gives them a relative advantage, which allows them to increase their market share.

Therefore, those who support the free market and truly want to help consumers often must labor alone and battle big corporate interests. In the words of Friedman: “We cannot expect existing businesses to promote legislation that would harm them. It is up to the rest of us to promote the public interest by fostering competition across the board and to recognize that being pro-free enterprise may sometimes require that we be anti-existing business.”

Radley Balko of the Cato Institute writes:

There’s a difference, of course, though opponents of both fail to recognize it. Free markets, peaceful commerce and capitalism consist of voluntary, mutually beneficial exchange. They create wealth. They enable people to live, to live better, and to live more comfortably.

Corporations, on the other hand, are government-created entities that act in their own interest. As such, they often use government to better their advantage, most always to the detriment of free enterprise. When I defend markets and the machinery of markets, I’m not defending corporations.

As far as the evil corporations goes, he writes:

My point was only to say that those of us who believe in free markets are often accused of supporting nearly everything corporations do, and that’s simply not the case. Corporations fairly regularly behave in ways that are anti-market. They regularly invoke government to stifle competitors, and they regularly lobby for handouts, tax breaks, and welfare from politicians. Other businesses do these things too, but corporations have quite a bit more money, clout, and power. So they do them more effectively. Drawing a distincition between support for markets and support for sole propieterships would have been a bit of a non-starter…

Yes, corporations, businesses, and parternships are the essential machinery of free markets. But they don’t deserve unconditional support from free marketeers. The moment they start rent seeking, begging for corporate welfare, capturing and abusing regulatory agencies, and otherwise invoking the state to tilt the playing field, then yeah, they deserve some scorn.