Bootleggers and Baptist

Sometimes moralists align with monopolists to protect their markets.

A few years ago, Mississippi was a “dry” state. Every so often someone would propose that they go “wet” and allow people to buy liquor at the store. At that time, preachers would rail against the evils of alcoholism, aided and abetted by moonshiners and bootleggers. Those folks had a vested interest in keeping whiskey out of the stores and in their `stills. Monopolists always want higher barriers to entry.

We can see the same principles at work today. Cigarette companies align with health groups to oppose e-cigarettes. Large banks team up with Treasury officials to support proposals to regulate systemic risk. Energy companies support a carbon tax or cap-and-trade regulation.

In many cases, people with a moral cause ally themselves with vested interests to support anti-competitive measures. But we should be wary in these cases. Because competition keeps us strong. And moral arguments should be judged on their own merits. And eventually, Mississippi went “wet.”

Douglas R. Tengdin, CFA
Chief Investment Officer
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