THE BLOG
01/28/2016 09:13 am ET Updated Jan 28, 2017

The Candidate Big Business Fears the Most

U.S. Senators Rand Paul (R-KY) and Bernie Sanders (I-VT) seem to have very little in common. They are in different generations, running for the nominations of different parties, and seem to be on the exact opposite of the ideological spectrum. Besides being white men, these two should have very little they can agree upon.

However they seem to have a similar message when it comes to the disproportionate power of big business. I was recently in Boston, just a couple of weeks before the New Hampshire primary and I was deluged by the many commercials being blasted into the Granite State from both political parties. The one advertisement that kept grabbing my attention was for the Bernie Sanders campaign in which he tells an audience, "the federal government does not regulate business, business regulates the government. This would change under a Sanders administration."

What Sanders is alluding to is a concept known as "regulatory capture," which is a form of political corruption that happens when a regulatory agency, created ostensibly to act in the public interest, instead advances the objectives of the actual companies they are suppose to regulate.

There are many examples of this throughout U.S. business history. A great example was the Americans with Disabilities Act (ADA), which passed and became law under the George H. W. Bush administration. By the time this bill became law, the vast majority of Americans -- included those in business -- wanted to make sure people with legitimate handicaps were able to get the service they wanted or needed without obstructions at the places they do business.

The law, when it was passed, had detailed and expensive regulatory requirements for implementation that literally put many small companies out of business. Who pushed for requirements that would put small businesses on the ropes? Mega corporations and their lobbyists who had already implemented those type of policies in their own companies and were actually pushing for the federal government to require them on businesses of all sizes. In a way, it is form of protectionism for the largest companies that can easily comply, but could put smaller businesses into bankruptcy. Calls by groups such as the National Federation of Independent Businesses (NFIB) for a reasonable approach that called for objectives rather than tactics (allowing companies instead of the government to determine the way the law was implemented), fell on deaf ears both in the Bush administration and the Democrats that held majorities in both Houses of Congress. Politicians argued that such a bill was pro-business because organizations representing companies were advocating for them. They did not seem to get that it was only big businesses advocating for such. Regulatory capture is a powerful tool used by corporations to avoid rules that would harm their bottom line or to punish companies they see as competition. This is not the type of regulatory capture that Sanders says he is concerned about. I doubt seriously if he worries about the fate of small businesses under such onerous laws. He seems only concerned about businesses not being regulated "enough."

Rand Paul also argues against regulatory capture, particularly the type described above. The type that cripples a small business and gives a leg up to mega corporations.

How would Sanders reduce regulatory capture? Basically by continually consolidating the power of the federal government and giving it more authority. He would make these laws uniform nationwide and shrink the power of the states in fighting this battle in a more competitive way in which the best approaches to regulation would rise to the top. Because he would continue to put the power in the federal government, Sanders would also make it easy for big business to lobby in order to get the regulations they can live with and use DC as a tool to hamper its small business competition. Back to my question, how would Sanders reduce regulatory capture? He would not, it would be, surprisingly, business as usual.

How would Rand Paul reduce regulatory capture? From day one he would wage a systematic war on the current Federal Register of Regulations and would put particular focus on those that favor big business at the expense of small ones (which, arguably, is the vast majority of them). He would shift as many logical regulations as possible to the states' responsibility, which would provide a "divide and conquer" approach in dealing with big business and its propensity towards regulatory capture. Clearly the big business lobby would prefer dealing with the federal government with its "one size fits all" approach than being required to go to 50 states to get its agenda passed. This attitude to government would also address another problem millions of Americans are concerned about -- too much money in federal political campaigns. Reduce the federal government's influence and watch the power of big business fade.

What would Rand Paul do about regulatory capture? Unlike Bernie Sanders, plenty.