Crony Capitalism defined by a libertarian

October 16, 2011 | By | 5 Replies More

At the Post-Dispatch DJmic, a libertarian, defines “crony capitalism”:

In crony capitalism, government hands out special favors and protections to politically well-connected businesses. The TARP bailouts, Solyndra, and the military-industrial complex are all facets of crony capitalism.
Libertarians love free markets and hate crony capitalism.

“Unfortunately, hypocritical Republican politicians have taught a lot of Americans to think that ‘free markets’ means freedom for government and big business to engage in crony capitalism.

“That’s not what free markets are. A free market is where the government leaves businesses alone, does not attempt to pick winners and losers, does not stifle competition, does not hand out corporate welfare, and does not absolve businesses of liability for their actions. Most of our economy today does not resemble a free market at all.

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Category: Corporatocracy

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (5)

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  1. Absolutely. I’m hammering on this one from now on. Everytime someone uses the term Free Market, tell them there is no such thing—what they’re talking about (like the Libertarian quoted in the post) is an Open Access Market, which is not quite the same thing, but closer in spirit and in practice than so-called Free Markets. Most people probably mean Open Access Markets. The people controlling the game, however, know that what they mean by Free Market is one where they control the shots, set the rules, and keep out whoever they can.

    The sticking point is this: if a market is going to be Open Access, somebody has to be a gatekeeper to make sure the schoolyard bullies don’t control who gets in. There has to be a monitoring entity, one with teeth to make sure the market stays open.

  2. Niklaus Pfirsig says:

    The libertarian free market is in essence no different from the capitalist free market.

    “A free market is where the government leaves businesses alone, does not attempt to pick winners and losers, does not stifle competition,”

    The closest thing to a free market in the US can be found at farmers markets and flea markets. Back in the 1980s, I attended the Huntsville ham-fest, and like most ham-fests there was a traders area featuring lots of new and surplus electronic goodies including computer items as well as the radio communication items. One of the vendors had a drawing for a color printer, which they cheerfully described as the crappiest printer around. Another vendor was using a Dutch auction technique, where the prices were reduced every 30 minutes. Several vendors were offering Hazeltine 1500 data terminals at really good prices. (Hazeltine 1500 terminals were popular with radio teletype enthusiasts.)

    One of the vendors bought out the Hazeltines from the other vendors. and having cornered the market, promptly tripled the prices. He sold fewer at the higher price, but still sold enough to make a small profit. The capitalist point of view holds that the vendor who cornered the market was the big winner. The vendors he bought out came in at second and third place because they sold all their terminals. So who were the losers? The consumers. The end result in an unregulated market is the formation of monopolies. The monopolies then effectively become the de facto government.

    On the larger scale, big money interests, including corporations, have super powers where government access is considered. Most of us ordinary citizen cannot pick up the phone and call our senators. most CEOs and multi millionaires can. How can a representative government work when 99 percent of the people have no voice?

    Without government, Open Access markets cease to be. The the government loses the power to regulate and enforce regulation, or to guarantee competition in a market by action as a limited competitor through social programs, It creates a vacuum that is quickly replaced, in our case, by corporate fascism.

    • Chili Dogg says:

      Niklaus, your story about the Ham-fest in Huntsville is interesting, but hardly evidence of your claim that “The end result in an unregulated market is the formation of monopolies.”

      For starters, the vendor you mentioned owns only a small number of the Hazeltine 1500 data terminals in a single market. No doubt, thousands or millions of other Hazeltine units exist around the country, so the vendor does NOT have a monopoly on the product. If Huntsville were the only market in the world, you might have a point; however, the product exists outside of Huntsville as well.

      No one is prohibited from buying from someone else. The vendor cannot force you to buy an expensive terminal from him rather than a less expensive one from someone else. Also, other companies make similar products that would work for the radio teletype enthusiasts, so they could purchase products from other companies (“substitutes” in economics lingo).

      You note that he sold fewer units because of the increased price. So what is he going to do when he has units that he can’t sell at the higher price? Is he just going to let them sit there collecting dust? No, he is likely to lower the price so he can sell them.

      Another result will be that when the other vendors see the high prices set by the “monopolist” vendor, they will buy other Hazeltine 1500 data terminals and bring them to the market the next week, and sell them at a lower price. That will bring the customers back to them, and leave the “monopolist” vendor with no one willing to pay the higher price for his products. Hence, he will have to lower the price. Your comments give no hint that it is possible for other vendors to bring in more supply.

      The bottom line is this: in a free market, there exist few if any monopolies. The monopolies that do exist in the US economy are largely those created by government: cable, utilities, cartels created by barriers to market entry created by the government, etc.

      A principle to keep in mind is that VOLUNTARY exchange is at the root of a free market. Value is subjective, so if someone values something at the asked price, and will buy it at the agreed-upon price, that is their business, not yours. What gives you the right to interfere with 2 parties who agree upon a transaction without force?

      As for businesses then controlling the government, there is half true at best. It is more like the businesses donating “protection money” to both sides to keep the government from harming them through taxes, regulation, etc, and favoring their competitors.

      If businesses have so much power, then why does the US have one of the highest corporate tax rates in the world? And why did Microsoft go through a huge anti-trust trial brought about by the government? The saying “money ruins politics” can be said in reverse: “politics ruins money”.

      I would recommend you read “Economics in One Lesson” by Henry Hazlitt for a better understanding of how a free market economy works, and the dangers to it.

  3. Tim Hogan says:

    Mark, I couldn’t agree more. The “free marketers” control the rhetoric hence the argument. If we rebut their false contentions with another more accurate characterization (Open Acess Market) and strictly define it as what is needed, there’s an opportunity to remake the context into one where the idea takes hold and controls the discussion.

    In personal injury law, the defendants all make requests for an Independent Medical Exam (IME) which was about as “independent” as markets are “free.” The defense lawyers tell jurors it’s an “IME”. We took on calling the beast what it was, a Defense Medical Exam and now file and have motions sustained to prevent it from being called “independent.”

  4. Karl says:

    We only chose to see the ills of government intrusion into our lives when see other people buying/getting influence for other’s collective, not our own. Influence peddling into governmental policies from all angles needs to be called what it is – bribery and racketeering. We kid ourselves when we say it the other guys ruining the system.

    Any one (or group) that says I will use my “influence” to buy (or in some other way) get the outcomes that favor one group over another have lost all sense of personal, and/or collective responsibility for their actions.

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