The Outstater: Business Groups on the Make

December 1, 2015

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” — Adam Smith

by Craig Ladwig

Our foundation’s seminar this week focused on Indiana’s expanding business leagues, the various Chambers of Commerce, economic-development departments, regional partnerships and amalgamations thereof whose members maneuver for government grant and favor.

The seminar leader, an economist, expertly deconstructed the incentives of these groups, arguing that they may be pro-business but only if the businesses are big and well connected, not the small hometown shops that create most new local jobs.

As an off-program example, at the back of the room was circulating the 2015-16 legislative agenda for one such group, Greater Fort Wayne Inc. It included support for a 10 percent local income-tax increase, a 14 percent state sales-tax increase and a lengthy list of “public-private” civic projects that would require tax-secured bonding services — all this, please know, from a group that fancies itself a conservative, Republican voice.

It brought to mind a favorite New Yorker cartoon in which a businessman at a meeting is pointing to a chart that matches the garish pattern on his suit. That appears to be the state of business representation in Indiana today, a representation tailored to fit specific clients with specific tastes. The truth is that the director of your local business league will represent free markets and the general business climate no better than a yellow-page lawyer represents the principles of the U.S. Constitution — that is, only narrowly and incidentally.

Several years ago, our foundation asked an expert on the topic, Fred McCarthy, to write the cover article for one of our quarterly journals on why that is so — or, more importantly, whether it must remain so. McCarthy’s life’s work has been representing business interests, including building statewide relationships for the Indiana Chamber of Commerce.

He offered encouragement in that Indiana has a historic model that would restore the state to commercial leadership, i.e., the legislative committees of hometown chambers of commerce, which until recently were a standard for the nation. These committees, usually on a Saturday morning, would grill the local senators and representatives on legislation that local business thought were intrusive or otherwise burdensome to the overall business climate.

Again, what passes for business representation today is more likely to be merely the furtherance of certain private-public partnerships (crony capitalism might be too strong a term, but it’s the way to think about it). That earlier example, the Fort Wayne group, in lobbying for higher taxes and bigger tax-funded projects, apparently has accepted government as its senior partner and is pouring its energies into one public-private partnership scheme after another.

It is not alone. Many Indiana business groups aspire only to be the middlemen, smoothing the government licensing, subsidizing and regulating processes. These groups — incredulously to our mind — no longer see their raison d’être as the promotion of commerce. Here is McCarthy on that point:

“Too many of these groups, in the ill-conceived idea that it is their responsibility to form coalitions for community activity, have become a sort of community club in which all sectors of the community have a voice in policy-making. That leaves us without a voice to defend or restore the principles that would return the Indiana economy to greatness.”

Listening to the seminar discussion this week, one wondered how different Indiana’s situation might be if every Saturday our legislators had to face the gimlet-eyed members of McCarthy’s hometown committees — whatever the pattern of their suits.

Craig Ladwig is editor of the quarterly Indiana Policy Review.

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