Government Versus Business Ethics

  • October 10, 2016

The two political parties’ conventions offered an opportunity to compare business ethics with government ethics. I have told my students in business ethics classes that they should insist that government officials attain the same level of ethical behavior as most business people. The students often appear surprised by this suggestion.

The antitrust division within the Department of Justice usually views collusive agreements between ostensibly competing firms as unacceptable in the United States. Such agreements often raise prices above the market price level and concentrate power into the hands of a few. Consumers are made worse off. As an example of how business ethics differ across the world, during Germany’s industrialization, German legislators not only countenanced but actively encouraged cartels in heavy industry.

The two major political parties, however, epitomize cartel behavior. The Republicans and Democrats have a nifty duopoly (an industry dominated by two firms). These politicians bemoan monopoly power and laud the virtues of competition. Their actions—as with many business people—reveal that they view competition in a similar light as public mass transit; competition and public transit are good for the other person. People often plead that they need protection from competition as they are a special case.

Over the years, Republicans and Democrats have erected a political system that largely bars third parties, except for George Wallace, John Anderson, Ross Perot, and Ralph Nader. None of these candidates entered the White House, except as guests. The incumbents win a ridiculously high proportion of their re-election races; in the sports field, we would denote this as competitive imbalance. Decades ago, New York Representative Emanuel Celler chaired a Congressional committee on antitrust in professional team sports. At the time, the New York Yankees dominated baseball, even in the face of the reserve clause that tied a played to a particular team. Celler, however, had won twenty-plus re-election campaigns. Sports fans know how difficult it is for a sports team, even the Yankees, to win twenty consecutive contests even in the face of competitive imbalance. Celler did not note the irony.

People have been vociferous in this election cycle about their lousy choices; they yearn for new voices. Jill Stein and Gary Johnson, of the Green and Libertarian parties respectively, offer coherent alternatives to the two candidates. Voters complain about politicians, but they continue to return their local legislators to Washington, D.C. even though legislators typically fare worse than business people on surveys regarding trustworthiness. Why do voters keep returning the incumbents?

The parties use postal franking (free postage), seniority, and the ability to deliver goodies to their constituents in order to forestall new entrants. Seniority is a particularly pernicious institution. On the surface, it makes sense to have experienced legislators chair committees. But the practice means that longstanding legislators are almost immune to serious challenges. Iowans understand that ousting Chuck Grassley would mean a loss of clout on Capitol Hill; Grassley chairs the Judiciary Committee. Harry Reid, Nancy Pelosi, Mitch McConnell, and others are nearly invulernable.

The two parties set the rules for third-party candidates. They ensure that such candidates have little hope of gaining public funds or media attention for their campaigns. Allowing incumbent legislators to set the rules is akin to allowing rival grocery store chains in a town dictate the terms of entry for a new grocery chain.

The two parties denigrate potential entrants. They argue that voting for the Libertarian or Green candidate is “throwing your vote away,” or that doing so will let the worst (the opposing party’s) candidate win. The parties fear the possibility that one of the minor parties will get enough votes to foil the exclusionary requirements to participate in the debates and to receive federal funding.

Collusive agreements usually violate ethical norms. The two political parties rig the election process and concentrate power into the hands of the few. Demand that your legislators have to adhere to the same antitrust principles as business people!

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.

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