It’s Not the Capitalists, It’s the Cronies — 17 October 2011

About a year ago, I was canvassing my neighborhood on behalf of my Republican candidate for Congress (he won, I’m happy to say).  One of the voters I encountered, while not instinctively inclined to vote his way, did want to engage on the issues.  “What about the corporations?” she asked.  The corporations?  “What does he want to do about corporate greed?”

That gut-level instinct – that evil, greedy corporations are at the heart of the economy’s troubles – lies behind much of the Occupy Wall Street (and other places) protests, that now, with the help of certain very wealthy friends, has lasted into its fifth or sixth week.   The narrative that has taken hold – with a lot of help from the President – is that corporate greed is what got us into the economic mess, and the protesters want to clamp down hard.

Corporations are not evil.  Even the ones people love to hate, and the President loves to excoriate, like Big Oil, Big Pharma, and Wall Street, are not evil.  Few on the left, for instance, credit oil companies with the enormous gains in prosperity that they have helped generate by producing the fuel that powers so much of it.  Similarly, millions of lives have been saved – including people closest to my heart – by the profit-motivated research undertaken by the big drug companies.  And as to Wall Street, I believe they have been unfairly tagged as the perpetrators of the real estate bubble and its aftermath.  Willing participants, yes, but if you want an even-handed portrayal of whose misdeeds led us to this pass, I suggest you read Russ Wiles’ splendid summary in the Arizona Republic from a few years ago.  Hint – everybody from regulators to buyers to homebuilders to bankers had a hand in the disaster.

Yet, there is a broad-based sense that the system is rigged, that ordinary people do not have a fair shot at making it in today’s economy.  In this, the OWS protesters have a very valid point – but they are directing their ire in the wrong direction.  It is not in the machinations of the corporate board room that the system gets rigged, it is in the connection between corporations and government.

It is one of the great ironies of American politics.  Liberals, instinctively mistrustful of the profit motive, put great store in the responsibility and the ability of government to control private enterprise and to channel its efforts to the betterment of society.  But the more they do so, the more intimate the links become between the two.  And from that intimacy grows mutual dependency.

Take the most straightforward connection – regulation.  The more the government determines to control economic behavior through regulation, the more it behooves the targets of that regulation to try to influence the outcome favorably.  Progressives decry the lobbyists that do this, as if it were entirely appropriate that corporate managers should simply stand still while the government turns their pockets inside out.  It is a constitutional right to petition the government, and a company’s responsibility to do so.  Just ask Microsoft.  Fifteen years ago, they didn’t have an in-house lobbying office, preferring to concentrate on making great software.  Then came the antitrust charges, and they realized how important it is to have friends.  By 2008, their lobbying bill reached over $8 million.

Regulators need lobbyists, too, because the people from industry know far more about their fields than the government lawyers trying to pass the regulations.  Assuming the regulators have an interest in passing reasonable rules, the best way to do so is to involve industry representatives.  Of course, in doing so, the industry folks do their best to shape the regulations in a way that favors them – or at least disfavors competitors.

This is one of the secrets of the government-managed economy – the big players design the rules so upstart competitors have difficulty breaking in.  The huge settlement with the tobacco companies from years ago turned out to be a decent deal for Phillip Morris and other big companies because the ban on advertising meant that only established brands were going to compete.

The Obama administration has passed so many new rules and regulations that the opportunity for intimacy has increased many fold.  But that’s not the only connection, or even the most important.  The prodigious spending undertaken by this government has enriched many whose most valuable asset may be their friendship with key players in Washington.  Certainly, Solyndra had more going for it in its DC sponsorship than in its cost structure.

Liberals entertain the notion that companies are motivated by slimy profits but that government is dedicated to the Public Good, and therefore they wear the white hats.   But government involvement doesn’t mean the good guys win.  Far too often it means higher costs for consumers that far outweigh the potential benefits.  This applies to regulation as well as misdirected spending.

By definition, government spending initiatives go to things that economically would not attract funding on their own.  Some of these things, such as infrastructure, are worthy; but far too often the money goes to projects that favor the well-connected friend of this Congressman or that.  Think only of the famous “bridge to nowhere,” or the John Murtha airport, or the hundreds of buildings and installations in West Virginia that bear Robert Byrd’s name.

If you’ve got the connection, you don’t have to compete.  An economy built on that model will not thrive.  This government is building that model, and this is what the Occupy Wall Street folks – and my interested voter – should really be concerned about.

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