Friday, March 2, 2012
Crony Capitalism is Capitalism
There's a lot of talk from both liberals and libertarians that the problem isn't capitalism but "crony capitalism". Crony capitalism is an incredibly loose term that has increasingly been used to protect capitalism. The two definitions that are most helpful and most pervasive are: 1) The extreme libertarian view that any government interference with the marketplace helps favored industries and companies thus giving them an advantage and 2) when businesses are bailed out or are otherwise assisted because of previous and future lobbying efforts.
Liberals point to the recent financial meltdown and subsequent bailouts, through TARP and Quantitative Easing, as an example of the second definition. Evidence of this attitude can be seen here and elsewhere. Investment banks, insurance giants, mortgage lenders, bond funds, and many other financial enterprises were able to exert influence on Congress and the White House in order to be bailed out. Many liberals talk of socialism for the banks and capitalism for the rest of us and that there has been no concentrated effort to help homeowners and workers affected by the financial meltdown.
Those on the right primarily focus on the crony capitalism demonstrated under the Obama Administration. They point to the bailouts of General Motors and Chrysler, to Solyndra and green energy, and other similar instances of government interference. The only time TARP and other financial bailouts are talked about is in reference to how they have somehow stifled a recovery that would have otherwise magically happened had we entered another Great Depression.
look nothing like the late 19th century. To the rabid free marketer, capitalism is a pure and perfect system that crony capitalism has tarnished.
It is easy to see how both liberals and libertarians point to crony capitalism as the problem. This perspective lacks a clear understanding of what capitalism is and how it actually works. Crony capitalism is capitalism.
This distinction between crony capitalism and capitalism is such a false and ridiculous one that it is baffling how both liberals and free marketers buy into it. Capitalism is about nothing more than profit and turning preexisting capital into profit. Can anyone imagine a world in which businesses would not use every lever of power and influence to maximize their profit? Are we to expect that when a business fails that they would simply close up shop without doing anything they could to keep going?
I understand where these liberals come from. They associate many good things to capitalism, but they want to restrain its excesses. This is a terribly naive perspective but I understand where it comes from. Libertarians have this tendency to overstate how powerful government influence is so that they can better protect the capitalist system from the damage it causes.
Libertarians saw SOPA as government overreach. They rarely phrased the argument as being about crony capitalism, instead choosing to say that it was another instance where government was attempting to limit freedoms. Instead of pointing to all of the businesses and industries that peddled influence to get SOPA, they instead focused on how big and evil the government was for trying to pass it.
They always believe that the tail wags the dog. Libertarians see crony capitalism as the government arbitrarily choosing winners and losers, instead of seeing it as a direct result of influence peddling. This cognitive dissonance becomes even more appalling once you realize that Libertarians advocate for the removal of all campaign finance laws and supported the Citizens United decision.
They have, for far too long, wanted it both ways. When the economy was going well, it was because of capitalism. When it was going poorly, it was because of government overreach. When government favors one industry or business, it was because of "crony capitalism". When a business or industry wants to exert influence on government, it is just free speech.
This false distinction of crony capitalism and capitalism has allowed Libertarians to better hide the evils of capitalism while giving liberals cover for being capitalists. It is far past time we actually talk about capitalism and better understand what it does and why. Allowing the laissez-faire capitalists to control the conversation has only empowered capitalism's ability to seek profit at the expense of everything else we hold dear.