Why American Businesses Should Understand Nullification

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“After all, the chief business of the American people is business. They are profoundly concerned with buying, selling, investing and prospering in the world.”, Calvin Coolidge

This excerpt from Coolidge’s 1925 address to the American Society of Newspaper Editors still rings true today.  During the course of my life time, however, the American government has made the chief business of the American people progressively more difficult.  Every year, we see new mandates, new prohibitions, new regulations, and new taxes.  More and more, the business of the American people is becoming compliance.  Compliance is an anchor that takes away from growth, weighs on the economy, and limits our prosperity.  De Tocqueville wrote about this phenomenon, in Democracy in America, saying,

“It is certain that despotism ruins individuals by preventing them from producing wealth much more than by depriving them of what they have already produced; it dries up the source of riches, while it usually respects acquired property. Freedom, on the contrary, produces far more goods than it destroys; and the nations which are favored by free institutions invariably find that their resources increase even more rapidly than their taxes.”

Yes, there are times when regulations about fraud and safety and the like are appropriate, but with the exception of regulating interstate commerce, there is no reason that these regulations need to be imposed by Washington.  In fact, we’re far more likely to find an ideal solution by experimenting in 50 states, building upon the successes and abandoning the failures, than by imposing a one size fits all policy on everyone in the country.

If you go by any of the published indices on freedom, America still has a relatively good ranking in the world for economic freedom but it is falling precipitously.  If something doesn’t change, our children are going to see the source of our riches dried up by despotism.  The power to reverse that trend is in our hands.  It is our responsibility to make use of it.  As John Dickinson noted,

“Honor, justice, and humanity, call upon us to hold, and to transmit to our posterity, that liberty which we received from our ancestors. It is not our duty to leave wealth to our children, but it is our duty to leave liberty to them.”

And ironically, by leaving liberty to our children, we also give them their best chance at prosperity.

It must be observed that in today’s world, there are two ways for American businesses to succeed.  One path to success is to identify a need, offer a solution and trade that solution for money.  The businesses who provide the best value at the lowest cost succeed, those who overcharge for the product or produce inferior quality fail.  In a biological system, this form of exchange would be referred to as mutualism:

Mutualism is the way two organisms of different species exist in a relationship in which each individual benefits.

The consumer and the producer both get more than they give in perceived value – else, they would not engage in it.  This is business at it’s best, business solving social problems, business contributing to society and to overall prosperity.  It is healthy and free of coercion.  As Walter Williams noted, when business is conducted in this fashion, a dollar is a “certificate of performance“.

A second path to success in business is through the use of the state to impair competition.  This is where the phrase, “Bootleggers and Baptists” came from.  During the prohibition era, Baptists supported prohibition on moral grounds and bootleggers supported it because it eliminated competition, which enabled them to raise their prices.

In the 21st century, top tier American businesses have become quite adept at profiting through the use of the second path.  A 2012 NPR article put the return on investment for lobbying at 22,000 percent.  This means that for every dollar spent on lobbying, corporations get $220 in return.

Here’s the thing, though.  Benefits to business which are received from government come at the expense of the consumer, at the expense of the tax payer, and at the expense of competitors.  This is business at its worst.  The consumer is harmed because the transaction allows costs to be kept artificially high.  The tax payers are harmed because they are footing the bill for what should be a standard cost of doing business, and the competition is harmed because they have to compete with a company with artificial and unearned wealth.  This path to business success is coercive.  Dollars earned through this method, rather than being certificates of performance, are symbols of greed.

In biology, this sort of relationship would be described as parasitism.

Parasitism is a non-mutual relationship between organisms where one organism, the parasite, benefits at the expense of the other, the host.

The traditional way for smaller businesses to respond to this sort of regulatory parasitism from larger competitors has been to try to fight the legal battle in Washington.  Obviously, as we can see by the 22,000% return on investment from lobbying, this tactic is not working.  The large companies have better access and more influence in Washington.  Smaller businesses need a different approach.

Smaller businesses who are being fenced out of markets by their larger competitors need to embrace the Tenth Amendment:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

For a large business to get access to the legislature in each state is 50 times more expensive.  Large businesses want a “single neck tie to yank”.  Don’t let them have it.  They want to take advantage of economies of scale through the use of centralization.  Don’t let them do it.  Make them take their argument to each of fifty states.  Make them explain why an out of state competitor should be able to use the law to fence in-state businesses out of the market.  Brain storming, sectors where the Tenth Amendment may be especially relevant include retail, energy, and agriculture.

Do you know a business in your state which is being fenced out of local markets by its large, national, competitors?  Do you work for one?  These businesses could form alliances with similar businesses in other states and simultaneously attack Washington’s regulatory overreach through each of their own state capitals.  This would completely reverse the economic dynamic which favors the large businesses who prefer to funnel all legal business into Washington.

If you know a business like this, perhaps that business could benefit from your knowledge.  Let them know about nullification and the Tenth Amendment Center.

Steve Palmer is the State Chapter Coordinator for the Pennsylvania Tenth Amendment Center.

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One Response to “Why American Businesses Should Understand Nullification”

  1. […] This article was originally published at the Pennsylvania Tenth Amendment Center. […]

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