We’ve talked about this topic a lot – when Government gets too big to be honest and open, you can bet your bottom dollar (if Govt hasn’t taken it yet) that it has become too big for we citizens to adequately patrol it. Which means that it is just right for those who wish to “rent seek” (obtain an advantage be it money, power, influence, or govt sponsored advantage in its marketplace) using the force of government to protect it from the free marketplace. Here’s another definition from Praeger U:
“Capitalism is moral because it is premised on a voluntary exchange between independent parties – who agree to the deal only because it creates value for everybody. Crony capitalism is immoral because one of the parties—the government—has been bought off.”
As opposed to, for example, the insurance companies burrowing into Obamacare to capture an advantage. We’ve seen how politicians have ripped those same companies for being greedy. Let’s be clear, the politicians and the ideologically aligned bureaucrats are JUST as guilty – if not more. It is the latter that feathered the nest and then invited the insurance companies in – crony capitalism is not a one way street. The companies got money (or so they thought, given admissions of recent huge losses) but the politicians got their prize using their political power: socialized mandates.
The transcript continues:
This creates three problems. First, it is unfair. Politicians are spending the public’s money, but not for the public interest. Instead, they reward friends, supporters, or themselves. Our Constitution grants Congress the power to provide for the general welfare. Crony capitalism violates this sacred principle.
Second, it is incredibly wasteful. In our cereal example, the government overpaid by going with Ted instead of Steve. That’s obviously a waste of taxpayer money. In fact, it is really stealing from the taxpayer. Here’s more waste. Ted had to spend money to lobby the government to get the contract. So, he didn’t get all of that dollar out of the transaction. That’s money that could have been spent making a better product or used in some other constructive way. Economists call this deadweight loss. And it can be substantial.
Moreover, crony capitalism distorts the broader economy. In some industries—like healthcare, student loans, home mortgages, and aerospace—the government is one of the biggest purchasers of goods or services. So its politicized decisions can have wide-ranging and detrimental effects. An entire industry can become, in effect, a client of the government. When that happens its goal is not to build a better mousetrap, but to keep politicians happy. How much does crony capitalism cost society per year? It is hard to say precisely, but the number reaches into the tens of billions of dollars, maybe beyond.
Third, it tempts politicians to break the law. Once politicians feel free to spend the public’s money for their own political purposes, they are just a hop-skip-and-a-jump away from doing so to line their own pockets or pump up their campaign funds or both.
Politics inhabits EVERYWHERE and in every seam of life where politicians and bureaucrats touch – there is no getting around it. There really is no solution for it and it ISN’T racheting down companies with thousands more pages of law and regulations. Frankly, once something is written down to prohibit or permit some behavior, some bright wag will see the loophole that the politically addled self-assured incompetents will insert, often as an unseen, unknown, or unforeseen consequence of never knowing how to do the entire job the “right” way so as to always get the “desired” effect.
Instead, the only practical way (even as Progressives will yelp otherwise) is to lessen the available and ability to find those creases in which to practice Crony Capitalism. The only reason CC exists is that there is so much money to be made. When stakes are high, the effort will be made. Thus, lower the stakes (the money to be made from Government or using Government to distort the marketplace) and those trying to rent seek will go elsewhere as the ROI will no longer be there.
(H/T: Hot Air)
