“Too Big to Fail” became the well-known phrase dating back to the time of the Great Recession from 2007-2009. This phrase referred to the government bailing out big financial institutions or companies that were deemed too important to the economy to let fail. In contrast, there is another phrase used for companies that are “Too Big to Succeed.” In a Foundation for Economic Freedom (FEE) article called Too Big to Fail, Too Big to Succeed, and the Foolish Crusade to Break Up Big Tech by Anne Bradley, she applies this phrase in connection with US government views of big tech companies like Amazon, Google, Apple, etc. being monopolies in the market. Thus government must intervene in order to curb such monopolistic occurrences, using methods like splitting up the companies. Yet she clarifies that such notions / actions are big mistakes on the government’s part, just like when government dealt with the companies that were “Too Big to Fail” years earlier. Altogether, government interference in the market ends up impeding economic freedom and growth along with creating faulty conclusions to justify their actions by disregarding the Rule of Law and the entrepreneurial role in the market discovery process.
First, the government interfering in the market without following the Rule of Law impedes economic freedom and economic growth. The Rule of Law refers to a collection of rules or laws that are fixed and established beforehand that governments are supposed to follow without any risk of arbitrary decisions. In terms of the US government dealing with the big tech companies, Bradley states, “The decision to regulate or break up big tech firms will be arbitrary, as all government decisions are. Regulation in this sense faces the same problems central economic planning does: chief among them, the mistaken assumption that somehow, bureaucrats know what size firms should be, or that they even know how to make markets more competitive through legislation.” This example shows that despite the U.S. not being a centrally planned economy, government actions on behalf of consumers to correct economical detriments based on arbitrary decisions definitely impede on economic freedom. Consumers will no longer have the option of choosing for themselves what they wish to buy or what goods meet their demands. Rather they are at the whim of the government to decide such things, which reduce competition and innovation. Thus, the government simultaneously reduces economic freedom and growth by not following the Rule of Law when interfering in the market.
Similar to ignoring the Rule of Law, government interference while disregarding the entrepreneurial role in the market discovery process leads it to justify its actions based on misconceptions. Taken from an economist of the Austrian School of Economics named Ludwig von Mises, the entrepreneurial role involves figuring out the cheapest and best possible way to provide goods or services that meet consumer demands. Entrepreneurs attempt to fill this role through trial and error, which adds to the market discovery process first mentioned by Friedrich Hayek, another economist of the Austrian School of Economics. When referencing the big tech companies, they take on this same kind of role. For example, the author mentions how people “don’t have to shop on Amazon; [they] have many alternatives, which helps keep entrepreneurs in check. It’s not that Amazon or Google don’t each have a desire to increase their power, it’s that they have no natural course to obtain it. Economic profit does not equal coercive power.” In this example, it is the consumers who have the power over these companies and not the other way around. Consumers are the ones that decide if the goods / services being offered to them meet their needs affordably and efficiently. If so, then they buy the good or service. If not, then the company can either come up with ways that meet consumer demands or eventually shut down, allowing for other entrepreneurs to replace them after discovering the reason(s) why these former entrepreneurs failed. Yet by ignoring these facts, the result is forming misconceptions like companies having power over consumers. As such, the government uses these misconceptions to justify its actions for intervening in the market without taking the entrepreneurial role in the market discovery process into account.
Therefore, government interference in the market impedes economic freedom and growth along with forming faulty misconceptions by disregarding the Rule of Law and the entrepreneurial role in the market discovery process. First, by not following the Rule of Law when making decisions pertaining to the market, the government is stripping people of their economic freedom of choice as well as reducing economic growth from lack of competition and innovation. Likewise, government interference without factoring in the entrepreneurial role in the market discovery process leads to misconceptions such as companies having power over what consumers buy as the reasons for interfering in the market. Overall, by following the Rule of Law and accepting the role of entrepreneurs in the market discovery process, the government minimizes the risk of another financial crisis forming.
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