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September 27, 2014

OT Thread - In Defense of Crony Capitalism [WeirdDave]

Well, that's a title that ought to generate a few raised eyebrows at least. To be fair, this is not a defense of crony capitalism, but rather an attempt to take a closer look at the phenomenon and understand it a little better.

First, we need to look at the language we're using. I despise the term crony capitalism, because it's inaccurate. There is nothing capitalistic at all about a business model that depends on government handouts or contracts or regulation to succeed (and all three are different, as we shall see). The reason that it's popularly called crony capitalism is to discredit capitalism. We need to call it what it is, which is corporatism, or, to be more bluntly accurate, fascism (I would recommend avoiding this term unless you have about an hour to explain the difference between fascism as practiced by Nazi Germany from that of Italy in the 20s and progressive America's Bête noire of the same time period. If you want to learn more about this I recommend reading- no joke- Jonah Goldberg's Liberal Fascism).

There are three main types of corporatism:


Handouts: Companies that depend on government handouts to survive. Solindra is the classic case. There was nothing of value there, it was just a scheme to funnel tax money to favored people.

Contracts: This may or may not be considered corporatism, depending on how broad a definition one cares to use. No one can deny that even a government functioning withing it's proper, limited, enumerated powers needs to buy stuff. Defense is an enumerated power, and soldiers need equipment to fight. Since we are far beyond the point where a militia is all that's needed for defense (not that many people are going to be able to bring their own F-22s when called out, for example), the government has a role in procuring equipment for the armed forces. It's a very fine line, one that is crossed very easily, to go from that necessity to pure corporatism, however. When contracts are awarded not to efficiently procure said equipment but instead to shovel pork to favored districts, well, then you're in the realm of corporatism.

Regulation: Using the regulatory power of government to either gain an advantage over compensator or to retard their ability to compete. A few years back when one kid got sick because of lead paint from a Chinese toy, big toy manufactures were all in behind new regulations requiring lead screening to be done on site at toy factories. They could afford such facilities, but smaller, independent companies couldn't. These regulations effectively put the little guys out of business, leaving a lot less competition for consumer's toy buying buck.

As conservatives, we theoretically oppose all types of corporatism because it distorts the free market (I say theoretically because so many supposed "conservatives" forget the principle once they are elected and they can use Uncle Sam's purse to their personal benefit). Almost all of us, at some time or another, have railed against such and so corporation sucking off of the political tit, but there's one big elephant in the room that nobody ever talks about, and that's really the heart of this post.

Look, the first one, handouts, is easy. That's pure graft, corruption, theft, whatever you want to call it. Forget that one, there is no argument in favor of handouts from a,limited government POV. (Outside that POV, the argument goes like this: Handouts either serve the purpose of guiding social change (Solindra) or jump starting technological advances (Tesla). I reject the first as an improper function of government and the second as unnecessary in a functioning free market).

I contend that the other two forms of corporatism, however, are legitimate free market responses to an environment of high regulation and/or profligate government spending. The one and only job of a corporation is to generate a profit for it's shareholders. There is nothing wrong with that at all. It's the grease that makes the whole economy move. As we've discussed, the idea of government contracts is legitimate, a plant that makes jet fighters has to sell those to someone, and government is the only option. Regulation is needed as well, a company could probably turn a profit dumping waste oil into the Chesapeake Bay, but I live here and I don't want wade through that kind of pollution when I go to the beach, it's not like we're Cleveland for God's sake! The problem arises when the government spends too much money and it becomes more profitable for corporations to spend their time and resources chasing that money rather than competing on the open market. It's the same with over regulation. When regulations stop simply leveling the playing field and instead start to shape it, if I'm a corporation I'm going to do my damnedest to make sure that shape is to my advantage. Both reactions are completely logical, and completely in line with free market principles.

Look, it's easy to bitch when a company turns to corporatism instead of competition. I do it too. However, as conservatives, it is important to keep in mind the root cause, and that's something that we as conservatives also believe strongly. Corporatism is a symptom of a deeper problem, and that problem is a government operating waaaaaay outside it's proper boundaries. The cure for corporatism is limited constitutional government. We always need to remember that our ultimate goal is to remove the cause, and not to waste all of our time treating the symptoms. That's bad in medicine, and it's bad in politics too.

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posted by Open Blogger at 10:45 AM

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