It's good to be king - and it always has been. Ever since the first government formed, there has been the idea that there are things a government can do that are illegal when done by private citizens. This power also extends into the world of commerce and business, where the government allows itself powers and latitude that private citizens and corporations simply do not get. Whether one wishes to argue that the government must do some of these things simply to keep the whole system running, it does not change the fact that the government does engage in behaviors that would be illegal for anyone else.
TUTORIAL: The Federal Reserve
Taxes - Involuntary Commerce?
Governments are unique in their power to levy taxes; in fact, it is one of the defining traits of a government. Even allowing that citizens do get something back for their taxes (roads, police, courts, etc.), the fact remains that it is not a voluntary transaction. There is no company out there that can similarly compel financial transactions - a homeowner can choose to turn off the power if that is their choice (though perhaps the new health care law in the U.S. will make health insurance inescapable). (For more, see How To Owe Nothing On Your Federal Tax Return.)
If a company somehow manages to rise to the top of its industry and operate so well that it effectively pushes out its competitors, it runs the risk of the government cracking down on its operation. Whether it was Standard Oil long ago, the original AT&T or Microsoft (Nasdaq:MSFT), the government has taken it upon itself to protect the public from the formation and operation of monopolies.
That is, of course, unless the government actually wants that monopoly in operation and gives specific permission for its ongoing operation. The postal service is one example; while living in a weird grey area between government and private, the postal service operates as an explicit monopoly. It is illegal, for instance, for a would-be rival like UPS (NYSE:UPS) or FedEx (NYSE:FDX) to deliver to mail boxes.
Many states also operate their own monopolies. In a few states, for instance, liquor can be legally sold only at state-owned stores (often called ABC stores). Likewise, many municipalities give exclusive contracts for services like waste removal or residential natural gas delivery. (For more, see A History Of U.S. Monopolies.)
With few exceptions, businesses are not allowed to interfere with the normal price-setting mechanisms of the free market. There are, for instance, a variety of laws on the books against predatory pricing, as well as laws that forbid companies from discussing coordinated pricing in a market.
The government, though, can and does interfere with normal price mechanisms. More than once in the last 100 years, the U.S. government has resorted to wage and/or price controls in an attempt to control inflation. Elsewhere, the government continues to pay billions in farm subsidies and subsidies to ethanol refiners and blenders. Along similar lines, the U.S. has a specific program in place to keep sugar prices higher than they otherwise would by restricting imports, and the government likewise has exceptionally high tariffs on ethanol imports. (For more, see The Biofuels Debate Heats Up.)
In everyday life, someone cannot take your belongings against your will - that is called theft. Even if the robber leaves a $100 bill on your table, he or she is not allowed to come in and take your belongings without your permission. When it is the government doing the taking, though, sometimes it can be called "eminent domain" and made legal.
Most cases of eminent domain involve the building of roads, pipelines and utility facilities, but that is not always the case. The government has sometimes resorted to eminent domain in the interests of public safety (like the case of Centralia, Pennsylvania) or military security, but there are cases in the books of the government seizing property and then later handing it over to developers for commercial development.
While the government is obligated to pay a "fair" rate of compensation, and courts have often forced governments to increase their financial compensation, the fact remains that eminent domain undermines a fundamental principle of capitalism - the idea that people have the right to buy or sell if they want to do so, and the right to refuse to buy or sell no matter the price on offer. (For more, see Valuing A Real Estate Investment Property.)
Ponzi Schemes and "Creative" Accounting
Government critics love to trot out the tired and over-used notion that government programs like Social Security and Medicare/Medicaid are gigantic government-run Ponzi schemes. In that respect, then, it is only the sovereign power of government that separates them from Bernie Madoff.
Even though a Social Security can only be called a Ponzi scheme by completely misunderstanding the definition and operation of a Ponzi scheme, the notion persists. And even though Social Security is not a Ponzi scheme, it is hard to imagine a corporation that would be legally allowed to run its retirement or pension plan in such an irresponsible way and with such dubious accounting.
Going a step beyond that, the SEC (and to a lesser extent, the Depart of Justice) has prosecuted numerous companies over the years for deficient, misleading and otherwise creative accounting. Yet looking at how the government has tinkered with the unemployment, inflation and public debt calculations over the years, it would certainly seem to be a case of "do as I say, not as I do." (For more, see What Is A Pyramid Scheme?)
TUTORIAL: Personal Income Tax Guide
The Bottom Line
Governments have different goals, responsibilities and limitations than the private sector, so it is not entirely fair to expect the government to operate by the same rules as private citizens and corporations. The power to tax, for instance, is essential to the survival of a state and there are credible arguments that eminent domain serves a useful purpose when not abused. That said, it is a slippery slope and is difficult for a government to maintain the respect of its citizenry if it routinely engages in practices that would be illegal among the governed. (For more, see Government Regulations: Do They Help Businesses?)
InsuranceMedicare is the United States’ health insurance program for those over age 65. Medicare has four parts, but you might not need them all.
ProfessionalsLearn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
EconomicsFind out why China bothers Donald Trump so much, and why the 2016 Republican presidential candidate argues for a return to protectionist trade policies.
EconomicsFind out when, or if, Russian President Vladimir Putin will ever relinquish control over the Russian government, and whether it matters.
EconomicsNow that China has eliminated its one-child policy, how will the new policy impact businesses?
MarketsLast Friday's attacks in Paris are transforming the migrant crisis into an EU security threat, which could undermine the European Union dream.
InsuranceIf you don't have health insurance, act NOW or you could owe penalties on your 2016 taxes, in addition to this year's.
Investing BasicsLearn how poor management, frauds, scandals or mergers wiped out some of the most recognizable brands in the finance industry in the United States.
BudgetingThe 2016 race to the White House will largely be determined by who can spend the most money. Here is a look at how much it will cost to win the presidency.
EconomicsThe Philippines offers more long-term growth potential than most economies around the world. Here's how to play it.
A borrower can obtain Federal Housing Administration (FHA) loans to finance the purchase of a condominium as long as the ... Read Full Answer >>
Medicare does not offer dental insurance that will cover dental care and medical supplies, such as cleanings, sealants, extractions, ... Read Full Answer >>
An eligible individual who is 55 years or older at the end of his tax year can make additional catch-up contributions to ... Read Full Answer >>
Many major U.S. banks, including Well Fargo & Company, U.S. Bancorp, Bank of America and Flagstar Bancorp, offer Federal ... Read Full Answer >>
Unclaimed property refers to personal accounts in financial institutions or companies that have had no activity and whose ... Read Full Answer >>
The process for reclaiming unclaimed or escheated property varies by state, as the federal government does not have a central ... Read Full Answer >>