The commonly held Marxist myth is that the capitalists exploit workers to enrich themselves. Therefore, they don’t want any government regulation to curtail this endeavor.

Both the myth and the conclusion can be challenged. My focus here is the latter, given that large corporations in particular often ask for more regulation, not for freer markets. A recent example is the AI industry leaders, such as Anthropic’s Dario Amodei, Open AI’s Sam Altman, and Elon Musk, asking for more government regulation of their industry and restricting the development of AI due to its perceived risks.

This is a feature of statism: the government has the power to prevent business from producing and trading freely – that is required for innovation, productivity, and wealth creation. Such power is based on the government bureaucrats presumably better understanding the risks of developing such complex, rapidly advancing technology as AI (or risks in any industry) and how to avoid them than the companies themselves.

Such power is highly questionable in the light of the damage caused by government attempts to control business through various regulations or by picking “winners”: financial losses, bankruptcies, unemployment, loss of livelihoods and even lives. A prime example in Canada is the National Energy Program, the federal government’s heavy-handed intervention (redistribution of oil revenues, fixing domestic oil prices below market levels, a 25% tax on oil production) that triggered an unprecedent wave of bankruptcies in Alberta, my home province in the 1980s. This caused a spike in suicides when people who had lost everything ended their lives. Many similar, albeit slightly less devastating examples, past and present, can be found also in the United States and elsewhere in the world.

Why then do corporate leaders ask for more regulation and not for freer markets?

Most have been raised in a statist system like a mixed economy and seem to take it for granted. After all, a mixed economy is the current reality, and a free-market alternative may seem alien or unreachable. Some business leaders may truly believe that without government oversight and control, business would cause harm (as in the doomsday scenario of AI killing all humans). They therefore ask for more regulation, in the name of “effective altruism.”

Most business leaders want to maximize profits as per their fiduciary duty to shareholders but many  are also pragmatists willing to rely on government coercion. Large corporations in particular can profit in the short term from regulations that make it harder for new competitors to enter the market because they lack resources to bear the cost of regulatory compliance. Large corporations are better able to withstand government-imposed bans or restrictions on AI development than smaller competitors or new entrants.

There could also be reputational benefits from asking for regulation. Companies that do so appear to be concerned about the presumed negative consequences of their operations, such as prolific AI development leading to job losses, long-term unemployment, or worse.

Business leaders also commonly express the view that statism is in their companies’ (and everyone else’s) self-interest. Many also seem to think that the free market is a Wild West without a government.  

Contrary to these views, a free market where everyone can achieve their self-interest requires a government. Not one with a regulatory bureaucracy but a government that regulates business through the legal system. A free market with such a government is the only system that ensures everyone’s freedom to achieve their self-interest. For business this means long-term profit maximization through creating and trading better products and services than the competition.

If everyone’s self-interest is the goal, differences between such a system and regulatory statism are worth understanding. To check my own understanding, I asked Google’s AI agent Gemini how statist economies differ from free-market economies in how business is regulated. This is what I learned (in my own words):

In statism, the government uses coercion proactively to restrict how companies operate. It requires approvals through licensing and permits for operating a business and working in various trades and professions, from hair braiding to selling real estate. Regulatory agencies set limits, quotas, and price controls (such as emission caps, production quotas on agricultural products, rent controls, etc.). The government also requires pre-market product testing and approvals, such as of medical drugs (delays of which are common and may cause not only financial losses and inconvenience but unnecessary suffering and death).

In proactively restricting companies’ operations, the statist government initiates physical force by punishing non-compliance with fines, loss of operating licenses, or prison sentences.

In free-market economies, the government regulates business through a legal system based on objective laws whose function is to protect individual rights against physical coercion and fraud. Such laws punish their violators and thus discourage violations. Companies are free to produce and trade but face civil or criminal liability if they make fraudulent claims or misrepresentations, or if their products cause harm. Courts strongly enforce contracts, punish breaches, and award damages. Property rights protection is the primary tool of pollution control. Product safety is ensured not only through legal liability but through private certification.

In doing the above, the government in a free-market economy does not initiate physical force and leaves individuals and businesses free to pursue their own interests. It merely retaliates against those who initiate force or fraud against others.

The government’s role in a free-market economy is limited to protection of individual rights to life, liberty, property, and pursuit of happiness, whereas in statism the government’s control of business is expansive and increasing.

The gap between the current regulatory mixed economy and a true free-market economy is wide and cannot be closed overnight. But if business leaders are truly interested in maximizing their companies’ long-term profitability and in promoting everyone’s self-interest, that (and not more regulation) should be the goal – achieved by transitioning from statism to a free-market system where the government protects individual rights (through the courts, the police, and the military).

The necessary first step in such a transition is to understand what a true free-market economy with a rights-protecting government is, and then to advocate for it whenever and however possible. Reading Ayn Rand’s collection of essays, Capitalism: The Unknown Ideal (1967), particularly the essays What is Capitalism?,

Mans’ Rights, and The Nature of Government, would be a useful way to start.

Photo by MacDonald Almeida on Unsplash

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