Regulation, by adding to overhead, tends to fall disproportionately on small businesses, often thereby benefitting big businesses as smaller competitors are crushed and new entrants are kept out.
So Big Business often lobbies for and profits from regulation, even while politicians and media talk as if regulation is the way to curb the power of Big Business. Today’s example of “The Overhead Smash,” as I call it, is federal trucking regulations.
The big trucking lobby embraces these regulations while smaller competitors oppose them:
The Environmental Protection Agency is ordering large trucks and buses to reduce greenhouse gas emissions by up to 20 percent and overhaul engine design starting with models built in 2014. Most operators will need to spend thousands upgrading their rigs or buying new vehicles, with prices starting at $50,000 and going up from there, depending on the model.
Even so, the regulations have the support of the large and powerful American Trucking Association.
"We have never been inclined to be supportive of federal involvement and regulations in our industry," said Bill Graves, president and CEO of the ATA. "But our experience in this case is one where we have to admit that the federal government did a really fine job of working collaboratively with all partners in this, to come up with what we think is a reasonable and fair rule."
Smaller owner-operators like Sacramento trucker Robert McClernon argue the opposite.
"With the cost of the new equipment that they're requiring, and the oversight of the government in every part of my business, I can't afford to be in business," he claimed.
Graves was a Republican Governor, but despite his I’m usually all for the free-market talk, he has a record of using big government to protect his industry. In 2007, he pushed a federal law to block states from leasing out their toll roads – a move that would have opened the door for truck tolls that more clearly reflected the market rate, as opposed to our current system where trucking (like most shipping) is subsidized.
Here’s how Graves defends the law:
The ATA's Bill Graves denies that's the case, and argues the new regulations will lead to a major goal for the transportation industry -- lower fuel costs.
"The rule is about being more fuel efficient. Over the long haul, this has got to be positive for anybody in the trucking industry," he says.
This is the same bizarre argument used by proponents of the light-bulb law: well, it lowers costs, so there’s no downside!
But just as nobody is stopping anyone from buying or selling more expensive and energy-efficient light bulbs, nobody is stopping Graves’ members from making the large capital investments they have to make in order to have more fuel-efficient trucks. The companies who pay the former Governor are free to be as fuel-efficient as they can be. Graves, though, wants to force the smaller guys to try to have the same capital-intensive business plan his clients have.