The true cost of regulation is providing companies incentive to move overseas where they can operate profitably leaving American workers behind. Trade deals may make the situation worse but pale in comparison as a reason manufacturing has fled the country.
Burdensome regulations are not just one cause, high tax rates combine to explain the reason that almost everything on the shelves of Home Depot and Lowes is made in China. Add to that high labor costs and you understand why almost all clothing, linens, and shoes are made elsewhere.
Lobbyists also work to get politicians and bureaucrats to enact restrictive regulations to limit competition and new entries into the market. It’s called rent seeking to get taxpayers to subsidize favored corporations. It’s also called the Washington Cartel. The word corruption comes to mind. The Donald calls it the swamp.
The end result is economic distortion, market concentration, and a stagnant economy.
“Regulation can increase monopoly power by raising barriers to entry. If a new startup has to wade through oceans of red tape, pay millions of dollars in compliance costs and develop a whole regulatory compliance infrastructure just to start to be able to compete in a market, it gives the big established players a huge and enduring advantage.”
Monopolies Are Worse Than We Thought
From Bloomberg: By Noah Smith, FEB 15, 2017
Economists are increasingly turning their attention to the problem of monopoly. This doesn’t mean literal monopoly, like when one utility company provides all the power in a city. It refers to market concentration in general — when an industry goes from having 20 players to having only 10, or when the four biggest companies in an industry start taking a bigger and bigger share of sales. This sort of creeping oligopoly acts much like a literal monopoly — it raises prices, limits market size and tends to make the economy less efficient.
There’s now evidence that market concentration could also be hurting workers, by decreasing the share of national income that they receive. It’s probably making inequality worse. I also suspect that creeping monopoly will prove to be one of the main reasons for decreasing business dynamism. And it could even be a contributor to slow productivity growth. In other words, many of the diseases in our economy can probably be traced, at least in part, to the problem of market concentration. And it’s getting worse: