KILLING SUCCESS
A new law targeting business rewards waste and punishes efficiency
BY LEW ROCKWELL

The state of Maryland will force all companies with more then 10,000 employees to spend at least 8 percent of their payroll on health insurance. Lots of companies have that many employees, but only one falls under the 8 percent threshold, which is Wal-Mart. It is only the latest legislative blow dealt against the company that is finally accomplishing what everyone throughout all of human history dreamed of: plentiful food and goods available to all people in all places at low prices. What's to complain about? This is the mystery that cries out for investigation.

Companies with whom Wal-Mart competes are only too happy in the short term to see the company get hammered for undercutting them on price. If you have been trying to fob off products for high prices for years - and these are essential to your profit margins - it must be torture to see Wal-Mart doing so well selling at a fraction of the old market price.

Herein lies not only the origin of antitrust but of vast numbers of business regulations. They are advocated by dominant firms that seek to impose harmful costs on smaller competitors (such as when Wal-Mart itself was pushing for a higher minimum wage) or by smaller firms that hope to impose punishing costs on more successful firms. 

The notion that these regulations are designed to benefit the public is just ideological junk-food fed to Congressional committees and the general public.

The way to address this problem is for the state to cease to offer business the chance to unfairly compete in this way. If there were no regulations and no antitrust laws, businesses would not face the near-occasion of sin to use government as a way to clobber its enemies. They would face no choice but to innovate, cut costs, and serve consumers better than the other guy.

But does it not come at the expense of the labor force? Of course all workers want raises in all forms, just as all consumers want products and services to be available at the lowest price. These are conflicting demands. At some point in the scale of wages and prices, the tradeoff between the two demands finds a clearing point. What that point is cannot be worked out by a central planner. It has to be discovered by the market.

This law is not going to be good for Maryland. Fewer Wal-Marts will start up in that state than otherwise would be the case. A hostile legal climate will deter future businesses from locating there. Some businesses may leave. Also, a less competitive environment for business will mean higher prices and less consumer choice. And why? So that Wal-Mart's competition can thrive on an inefficient business model. This law, then, rewards waste and punishes efficiency.

Now, there is a further complication in this case. A main complaint against Wal-Mart's wage policies is that its employees were draining too much from the state's Medicaid budget. This is an interesting point. Is it possible that Wal-Mart was, in effect, free riding off the taxpayers? Would it then be better just to roll those costs onto the back of the company itself? There is a superficial logic at work here, but it is the logic that leads to all-out business regimentation.

It is doubtful that in a truly free-market businesses would normally provide any health benefits at all, any more than they provide you shoes, movie tickets or scotch delivered to your door. These are things that you buy on your own. Medical benefits tied to employment originated as a scheme to get around government wage controls.

If the Medicaid free ride is a problem, there is a more direct solution. Get rid of this program too. What we need are Wal-Marts in the medical industry, firms that provide great services at low prices. But they won't come about until we rid ourselves of the subsidies attached to public provision. LW

Lew Rockwell is a paleolibertarian political commentator and economist in the United States. Rockwell is the founder and President of the Ludwig von Mises Institute in Auburn, Alabama and Vice President of the Center for Libertarian Studies.