WHEN we think of government-sanctioned crony capitalism, companies such as Solyndra, Beacon Power, Range Fuels and Ener1 spring to mind. These are firms that got hundreds of millions in loan guarantees and financial support from the federal government before going bankrupt.
We've criticized policies that funnel taxpayer dollars to favored businesses, but note that other forms of government favoritism exist. A new report by The Heritage Foundation identifies several. The report, “America's Opportunity for All,” is worth reviewing in part because it also undermines the claims of left-wing critics who portray policy debates as crony capitalism while defending regulations that actually perpetuate it.
Heritage cites the use of “regulatory exemptions granted to privileged players or, more perniciously, the enactment of costly regulations that drive out competition, since only the biggest companies can afford compliance.” This is a strategy commonly employed to improperly benefit favored companies.
K-12 education is a prime example of how government regulation can stifle competition to the detriment of customers (students and their families). If a school district chronically underperforms — or if a child faces daily threats of physical harm — current regulations largely force the child's family to buy/rent a home in another district or transfer to an expensive private school to get a quality education in a safe environment. For the poor, those options are seldom viable.
“Lack of competition,” Heritage notes, “means that public schools have little incentive to improve, which contributes to lackluster academic performance across the country.” One reform that's changing this dynamic is online learning. Yet critics imply that virtual education vendors are engaged in a “pay to play” scam for backing groups that promote online learning.
The key question isn't whether those policies ultimately will allow some companies to make a profit, but whether those reforms will benefit students. Obviously, businesses want to expand markets and increase income. But policies that inject greater competition into the education system (and other areas of government) also increase taxpayer benefit through improved service and lower prices.
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