23 Things they don't tell you about Capitalism

Free-market economists typically argue that if something is good for business, it is also good for the broader economy and that governments should therefore give businesses maximum freedom and leeway instead of making it difficult for them to operate. Pointing to the history of companies such as General Motors (GM), which used its success as a manufacturer of military supplies during World War II as a stepping stone to postwar success, these economists suggest that any regulations on such companies would only stifle beneficial growth.

Chang counters that some regulations can actually help businesses. He returns to the story of GM, this time chronicling the company’s decline. As overseas competitors began to produce superior vehicles, GM appealed to the government for protection rather than refining its products, even as it turned its attention from manufacturing to finance. The company’s decline continued until, in 2009, the US government took over the company to keep it from failing, costing taxpayers nearly $60 billion. Clearly, GM’s shortsighted decisions were not in the national interest.

Pointing to countries in East Asia where rapid growth occurred in a heavily regulated environment, Chang identifies several ways in which regulations can help businesses. Some regulations, such as those protecting natural resources, can keep businesses from sacrificing long-term viability for short-term profit. In other cases, regulations can help businesses invest in areas like employee training, which may not pay off in the short term but raise collective productivity over time.