Thursday, October 2, 2008

Democrats, the Party of Greed

Ed Morrissey finds it shocking that some companies prefer the Democratic Party: will be shocked to see Obama... leads in what Al Franken calls “Wall Street” money — Securities/Investments and Commercial Banks. In the former, Democrats enjoy almost a 2-1 advantage over Republicans.

It should not be shocking. Ed Morrissey and others who share his shock probably assume that companies want free markets. Companies do in principle want free markets, but even more than free markets, they want competitive advantages. The Democratic party creates competitve advantages for the Securities/Investments and Commercial Banks, and are rewarded with donations for doing so.

These competitive advantages result from laws that create market inefficiencies. These inefficiencies create short term fluctuations as the market attempts to return to equilibrium. These fluctuations provide ample profit opportunity for smart investors who understand the cause and effect relationship between the laws and the market inefficiencies.

Most investors are long term investors, and do not care about these short term fluctuations. Securities/Investments and Commercial Banks, on the other hand, do care. Furthermore, they have the resources available to identify and understand the cause and effect relationship of market distorting laws. This creates a competitive advantage which allows Securities/Investment and Commercial Banks to profit from long term investors' indifference to short term fluctuations in the market. Hence, they donate to the Democratic Party so that they will continue to write these profit creating market distorting laws.

Additionally, monopolistic corporations also tend to donate more money to the Democratic party than most people would expect. The behavior should not be surprising since monopolistic corporations also gain competitive advantages from market distorting laws.

Market distorting laws produce government endowed economies of scale. Economies of Scale mean that the larger the company is the more efficiently it can create its product. The way the government endows economies of scale is by taxing, subsidizing, and regulating companies.

To respond to these market interferences, companies must hire accountants, tax advisers, lawyers, and human resource personnel to be compliant with all applicable laws, taxes, and regulations. All of the above mentioned personnel are overhead and non productive employees (i.e., they are not engaged in producing the products or services that the companies' revenues are derived from). Hence, the cost of such employees has to be spread across the productive employees. The more employees the company has, the smaller this cost will be per employee. Hence, economies of scale result and all companies are given a competitive advantage if they can grow in size. Consequently, monopolistic corporations reward the Democratic party for taxing, subsidizing and regulating the American economy.