Blaming Capitalism for the Effects of Cronyism

By Tom Rhodes 2/22/2012

Capitalism is under constant attack from those on the left, who have adopted socialistic views. Capitalism is the economic system that saw the greatest increase in the quality of life for the most people in the worlds history, yet profit is now seen as evil, and success is seen as oppression, and protecting the politically connected is seen as capitalism.

From Dictionary.com cap*i*tal*ism noun - an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

Basically capitalism is acceptance of the right to private property. The owners of private property, capital, get to judge how best to use it, and can draw on the foresight and creative ideas of entrepreneurs and innovative thinkers. If you succeed then you profit, if you fail you not only don't profit, but suffer losses. Under capitalism, businesses exist only as long as free individuals willingly purchased their goods - and go out of business quickly otherwise. This system of individual liberty and responsibility allows little capacity for government to influence economic decision-making. Because true capitalism does not allow the government to pick winners and losers, nor direct what type of car, or other widget that the government thinks people should buy, and doesn't allow ruling elite to determine what the masses have access to purchase, is exactly why statists, progressives, liberals, socialists, etc., don't like it and only pay lip service to capitalism.

In the 1800's capitalism proved it was superior to every other previously attempted socio-economic system the world had ever seen. Capitalism developed capabilities for endemic innovation and individual happiness. Societies that adopted capitalism saw unrivaled prosperity, widespread job satisfaction, achieved productivity growth that the world had never seen. Capitalism was and is the socio-economic system that ended mass privation for those societies that adopted it. Those that didn't, and still don't, still suffer mass privation.

What we have in the USA today is not capitalism; it's some corrupt blend of fascism, socialism, despotism, with a smattering of permission to profit for the well connected. Statists have assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. This statist control is not capitalism!! Rather it is a socio-economic order that more resembles Bismarck in the late nineteenth century or Mussolini in the twentieth. Call it what it is Cronyism, or to be more polite corporatism, but it is not free enterprise.

Cronyism chokes off the dynamic drive and vitality that make for engaging work, quick economic growth, and more opportunity and inclusiveness. Cronyism maintains sluggish, wasteful, unproductive, and well-connected firms at the expense of dynamic beginners and outsiders. It favors declared goals such as industrialization, economic development, and national greatness over individuals' economic freedom and responsibility. Think of all the industries that are "to big to fail" like; airlines, auto manufacturers, agricultural companies, media, investment banks, hedge funds, and even schools. Statists have at some point been deemed these enterprises too important to endure the forces of capitalism, receiving a helping hand from government in the name of the "public good."

The costs of cronyism are visible all around us: dysfunctional corporations like GM that survive even though their gross inability to serve their customers. Explain why they developed a $40,000 electric car that nobody wants to buy even with nearly $10,000 in government incentives to buyers. We have twisted, deformed, and failing economies with slow output growth, a dearth of engaging work, few opportunities for the young people; entire governments bankrupted by their efforts to palliate these problems; and ever increasing concentration of wealth in the hands of those cronies on the right side of the corporatist deal.

In the past, automobile companies like Hudson, Tucker, Stutz, Studebaker, Oldsmobile, Rambler, Nash, Pierce, Stanley, Detroit Electric Car Company, American Motors Corp.(there are many more but you get the picture), all were allowed to fail because people voluntarily choose not to purchase their cars, because the quality, price, style, and performance failed to meet what their competitors produced. As both technology and buyers tastes changed those car companies that didn't change failed. GM and Chrysler should have been allowed to fail. Although Willys-Overland, Kaiser, and AMC, are all gone, the venerable Jeep is still being produced, today by Chrysler. If Chrysler had gone under, some other company would have purchased the Jeep assets and continued its production. Those products that GM produces which have a market would still be produced, but by somebody else. How did becoming too big to be profitable get to mean too big to fail? Cronyism, they have the connections in the WallStreet-Washington Cabal to use the full force of government to protect them from the forces of competition, bad management, and changing demands.

This is a huge shift in power from owners and innovators to government officials are the exact opposite of capitalism. Yet cronies and statists have the impudence to blame failures on "reckless capitalism" and "lack of regulation." When in reality, it is over regulation and government interference in the free market that is the cause. Statists then argue for even more oversight and regulation, which in reality means more cronyism. This can be most easily seen in "waivers" to regulations to the politically connected; think Obamacare wavers for unions and favored businesses. Cronyism is synonymous with unequal treatment under the law, and royal favoritism.

The crony/corporatist model is unsustainable, unfair, unequal, and makes no sense whatsoever, especially to younger generations who grew up using the Internet. The Internet is by far the world's freest market for goods and ideas. When was the last time you used MySpace or Friendster? When was the last time you used FaceBook? Social networking Web sites are a prime example of success and failure of free markets. They rise and fall more or less instantaneously, based on their ability to serve their customers.

MySpace and Friendster are almost gone because they chose fast quick extra profit by selling the privacy of their users; Their users almost instantly bitch-slapped them, deserting them faster than you can double-click on share button for Twitter, Facebook, or LinkedIn. The Government didn't have to do anything, we needed no regulation; voluntarily people took their business elsewhere. If the statists were in charge, they would be limiting entry into social media by startups with excessive regulations, bailing out MySpace with taxpayer dollars, and using MySpace's failed morals as rationale to add more regulations on MySpace's customers, all while promoting big bonus checks for the new lawyer-in-charge at MySpace; it's founder having long since been pushed aside.

Statists want control of the Internet, as a largely free marketplace for ideas. The internet has not treated corporatism kindly. We now have a generation or more of people who grew up with its decentralization and free competition of ideas and products, who must find alien the very idea of state support for large firms and industries. Many in the traditional media repeat the old line "What's good for GM is good for America," but it that entire idea is not likely to be received well or get traction on Twitter. One size determined by government does not fit all.

Crony-corporatism is not capitalism. The core to capitalism, free enterprise, and happiness, is individual property rights. Without those and equal protection of those rights, all other rights are non-existent. Any so-called right which violates individual property rights are not rights, but excuses to grant some ruling elite control at the expense of the individual. Capitalism as a socio-economic system has proven to provide the best overall quality of life for more people than any other system in history. Yes some will suffer under true capitalism, but overall more people will be happier and have a higher stand of living than if we allow some ruling elite, who don't trust people with the right, nor want to allow them the right to decide what is best for themselves, and benefit or suffer based on their life decisions.

The actual and perceived authority of cronyism is eroding; the legitimacy of crony states and corporatism is coming under question; just look at the fiscal health of governments that have relied on it. Since Greek politicians couldn't repeal cronyism, it is being repealed for them. They don't even get to elect their own chief executive anymore. Here in the USA if politicians don't repeal our current crony-corporate statist policies, the entire crony state it will bury itself in debt, then default and fail. With any luck, a capitalist system will re-emerge from the ashes of the crony-corporatist ruins. Then enterprise will again be free and "capitalism" might work again by its true meaning, rather than the radical misnomer now attributed to it by statists seeking to hide behind it and socialists wanting to disparage it.