Economic Fundamentals: Crony Capitalism

It's a myth that business is opposed to government interference in the economy. It's not. Business leaders love government interference. They love regulations. They love tariffs. They love them as long as they benefit their companies and/or penalize their competitors.

There are business leaders who will always seek to win politically what they are unable to win in the free market. You can often spot them on television, providing cover for the politician who is introducing some new law that reduces liberty, weakens the free market, and provides a drag on the economy at large, but that helps the business leader's company.

The term for this behavior is "crony capitalism." It's hard to fault business leaders who try to game the system. They're simply choosing the easy path to maximize shareholder value. It's cheaper to buy politicians than to buy share in a free market.

It's up to principled politicians to resist the seductive embrace of the crony capitalist. Unfortunately, politicians too often serve their self-interest rather than the public interest. They distort the free market by tilting the playing field in the direction of a favored few.

As government increases in size and scope, its ability to influence business increases. Market competition takes a back seat to political connections.

Recently, John Stossel focused on crony capitalism. Watch the following videos...

Part 1



Part 2



Part 3



Part 4



Part 5



Part 6

Defending Capitalism

I can't recall a time when capitalism was under assault like today. The closest was when Nixon declared himself a Keynesian, instituted wage and price controls, responded to the OPEC oil price shock by rationing gas, launched affirmative action, and created the EPA, OSHA, and the EEOC. Yet, even during the days of Nixonian economic meddling almost everyone at least paid lip service to notion that capitalism was superior to socialism and communism (which are really just different shades of the same color). And this was before the Soviet Union collapsed and communism was spreading triumphantly in Africa, Asia, and Latin America.

Today, we can see the wreck socialism and communism has made of countries around the world. As Churchill said, "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery."

History shows socialism is a failure and capitalism is a success. Yet, collectively, we're not paying attention to the lessons of the last century. More and more people fail to see socialism and communism as rusty failures, believing instead that they are bright, shiny, beautiful new economic philosophies that are much more alluring than crass, crude capitalism.

It's now chic to wear t-shirts featuring the murderous thug Che Guevara. Newsweek proudly declares in a cover story, "We are all socialists now!" Oliver Stone makes loving documentaries about Castro and Chavez. Michael Moore, the living definition of hypocrisy, releases another propaganda piece where the leftist loon calls capitalism evil and declares that it must be replaced (though Moore's not offering to share his eight figure net worth).

Lots of people are throwing rocks at capitalism. Few defend it these days, which is dangerous. Out of ignorance, the public might just chunk it for socialism. According to a Rasmussen poll, one American in five prefers socialism to capitalism and another 27% aren't sure which system is better. Among adults under age 30, a third prefer socialism and another 30% aren't sure which is the better system. This is truly frightening.

Despite the presence of Ted Turner, one of the best defenses of capitalism, the pursuit of individual self interest, and the profit motive was the John Stossel special on greed. Stossel has been trying to get this shown in schools. After watching it, you might want to show it to your kids. It's in three parts and takes around 40 minutes.

Part 1

In The Classroom - Greed (Part 1of3)
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Part 2

In the Classroom - Greed (Part 2of3)
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Part 3

In The Classroom - Greed (Part 3of3)
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