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Crony capitalism

By Col. Stan Gudmundson

Fri, Sep 14th, 2012
Posted in All Commentary

Crony capitalism, what is it really? A simple explanation is that crony capitalism is corrupt collusion between government and business that causes things to be more expensive for consumers and taxpayers. It’s been around a long time but has gotten to be extraordinarily pernicious under the Obama administration.

Businesses really don’t like competition very much and will often use the powers of government to minimize or eliminate it if they can. But it is just a little more complex than that. There are other reasons as well. though space precludes covering all of them.

For example, politicians shake businesses down for their own nefarious demands. Businesses don’t really want to be a part of this but participate to survive.

If politicians aren’t seeing “skin in the game” in their campaigns, they’ll manage to find ways to coerce businesses to “get involved.” At one time, two notable companies had little use for politics and politicians. One was Microsoft and the other Walmart.

Early on Microsoft had exactly one half-time lobbyist in Washington. A competitor sued them and funny how it was allowed to progress. Now Microsoft has a big presence in Washington as does Walmart. And gee, both now contribute much more to political campaigns.

Another kind of crony capitalism is that created by fantasyland ideological agendas that have no place in the marketplace as ideologues try to force the market to behave in a way in which it just won’t. Green energy is a perfect example. Solyndra and its failure is just the tip of the iceberg. There many more “government sponsored” bankrupt and failed green energy companies. They include “Abound Solar, Beacon Power, Enerl, Energy Conversion Devices, Evergreen Solar Inc., Mountain Plaza Inc., Olsen’s and Olsen’s Mills Acquisition Co., Range Fuels, Raser Technologies, Spectra Watt, and Thompson River Power LLC.” Billions down the rat hole for Obama’s crony capitalism. This is criminal.

Another crony capitalistic practice is what can only be defined as the “Washington-Wall Street Revolving Door.” Have you noticed how many of the current and previous bunch of Washington officials come from big Wall Street firms? Think Goldman Sachs here. Do you suppose they might be protecting the interests of their more than a little well-off friends and former (and future) employers?

Starting with Clinton, taxpayers have bailed out Citigroup six times since the meltdown of the Mexican peso a few years back. And somehow the taxpayers continue to bail out Wall Street financial firms in spite of their bad investments. And it costs us how much? This stinks.

We now find that some businesses are too big to fail. Given that the taxpayer is on the hook for government rescuing (colluding with) failing business this too, has to be defined as crony capitalism. Moreover, if it is too big to fail, it is too big.

Then there the GSEs like Fannie Mae and Freddie Mac. University of Chicago economist Luigi Zingales says they are “private monopolies which use their political connections to make money at the expense of taxpayers.” Unfortunately these two still exist and are conducting business in the same way that got us into the current economic mess. Crony capitalism is wickedly detrimental but GSEs are in a separate category of thieves all by themselves.

Get in bed with government and the regulators. That is another category of crony capitalism. One of the problems with regulating industries is that the regulators are often coopted by the industry they are supposed to regulate. One can examine the history of the railroad industry to see how it happens. Today, the big health insurance companies end up pushing Obamacare because if everyone has to buy insurance, they profit big-time.

There is also the plain old ordinary everyday kind of corruption epitomized by companies like Archer Daniels Midlands (ADM). “There isn’t one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians. People who are not in the Midwest do not understand that this is a socialist country” asserted ADM’s Dwayne Andreas. ADM constantly pushes for “rent seeking” as the economists describe it, from government. Through government and politicians ADM has found shady ways to loot the pocket books of taxpayers.

ADM has made billions based on what is none other than crony capitalism on products like ethanol and cane-sugar. The Cato Institute estimated that “at least 43 percent of ADM’s annual profits were...heavily subsidized or protected by the American government.” Keep in mind that ADM has been accused five times of price-fixing of everything “from bakery flour to monosodium glutamate.”

The size and scope of the crony capitalism iceberg is reflected by something called the Corruption Perceptions Index scored by an outfit called Transparency International. “The index measures how corrupt government officials are perceived to be.”

The U.S. isn’t even close to the top. New Zealand and Denmark are one and two and we rank 24. Writer F.H. Buckley adds that “A similar measure of corruption by the World Justice Project ranks the US tenth out of 12 peer countries in North America and Europe.”

Is there any hope that we can get back to all playing by the same rules where government doesn’t play favorites or pick and choose who will win and who won’t? F.H. Buckley doesn’t think so for three reasons.

“First, the size of the American government has greatly increased, and with it the opportunities for...corruption As the state gets bigger...it’s easier to hide the plunder in obscure regulations... Second, the crony capitalism of the Obama administration has taken Chicago-style politics national and raised corruption to an entirely new level...third...is the absence of monitoring or oversight by...media and watchdog groups.” This is the road to serfdom.

The mainstream media, who should be exposing the downright criminality of crony capitalism, are instead focused on “same-sex marriage, the war on women, and justice for illegal aliens.” And getting Obama reelected.

By the way, crony capitalism is not substantively different from German and Italian corporatism of the 30s. Corporatism was fascist and therefore leftist. You can look it up.

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