As a dedicated believer in the free market, I can say that one of the hardest things to explain to people is that a capitalist isn't necessarily pro-business. A business aims to look after it's bottom-line, and occasionally these alleged supporters of the free market team up with the state to reach their own short-term goals. The newest example of this involves Nike and Apple.
It was pretty big news in many circles when these companies recently resigned from the U.S. Chamber of Commerce. The Huffington Post and others were thrilled, apparently believing this to be over those firms' new-found belief in climate change and their support for cap and tax legislation.
The Chamber needs "a more progressive stance" on climate change, declared Apple Vice President Catherine Novelli in a letter of resignation to the business lobby on Oct. 5.
Nike echoed those sentiments when it resigned from the group Sept. 30.
But major corporations don't make these decisions without considering their own interests, and you can bet your bottom dollar that these companies wouldn't support legislation unless it helped their profits. So what's the real story?
Companies supporting legislation that would appear (on the surface) to be against their best interests is nothing new. Three big examples come from some of the world's largest companies; the tobacco giant Philip Morris, the world's largest soda-maker, Coca-Cola and Wal-Mart.
Just a few months ago, Philip Morris teamed up with the Obama administration and supported a bill that would allow the Food and Drug Administration to regulate tobacco. In late September, Coca-Cola announced a "world-wide commitment" to support putting energy information on all products. And Wal-Mart has consistently favored legislation in support of a higher minimum wage.
Is this all done out of the goodness of their hearts? Is this just capitalism becoming more socially conscious? Of course not; all three companies know that supporting these regulations would increase their bottom-line by locking out competition. Tobacco legislation hurts Lorillard more than Philip Morris. Small bottling plants have less to spend on packaging than Coke, and Wal-Mart already pays an average wage much higher than the federal minimum. Such regulations significantly hurt the smaller mom and pop shops while only denting these major conglomerates.
And that is exactly what Nike and Apple are doing now.
According to The Wall St. Journal, "Both companies may figure they can afford a U.S. carbon tax because most of their manufacturing is done outside the U.S. Apple has an enormous 'carbon footprint' of some 10 million annual tons of emissions to make and use its power-hungry gadgets. But nearly all of those products are made in China and other Asian countries where there are no carbon limits and aren't likely to be any time soon, if ever." If these operations were done in the United States, the pending cap-and-tax legislation would cost Apple between $43 and $100 million per year.
Meanwhile, most of Nike's operations are in Southeast Asia. Does anyone think South Korea and Vietnam will sign up in support of carbon-cutting regulations anytime soon?
Leaving the Chamber over a single dispute is silly and childish of these companies. As The Wall Street Journal notes, "The Chamber's job isn't to favor one company's agenda over another but to stand broadly for free trade, low taxes and limited regulation — principles that help U.S. business as a whole."
One of the Mackinac Center's Seven Principles of Sound Public Policy "requires that we consider long-run effects and all people, not simply short-run effects and a few people." Most companies believe these things — but only as long as it helps their profit margin.
Jarrett Skorup is a 2009 graduate of Grove City College with a dual major in history and political science. He is a research intern at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.