Thoughts on Crony Capitalism
by Gary Jason | Posted October 09, 2011
The Obama regime has become synonymous with the kind of crony capitalism that characterizes, say, Russia. Crony capitalism is a sort of faux capitalism found in a society where many citizens desire socialism but don’t want to embrace it openly, because of the disrepute into which socialism has fallen. The 20th century was the century of socialism, and it cost the lives of perhaps 150 million people and brought unrelieved poverty to the nations that succumbed to its siren call of “equality.”
Crony capitalism characterizes regimes, such as Vladimir Putin’s, that follow the collapse of overtly socialistic economic systems (which invariably die, sooner or later, whenever — as Dame Thatcher famously observed — they run out of other people’s money). It also characterizes regimes such as Obama’s that occur in countries where the elites want socialism but realize that they can’t openly sell it to the public in its naked form.
A crony capitalist regime is sustained by favorable economic feedback loops between the regime’s leaders and key, corrupt leaders in the “private” sector (such as business and labor organizations). The regime’s leaders award these favored business and labor leaders (the “cronies”) sweetheart contracts for governmental projects; arrange financing from the public purse or banks that are funded by the public but controlled by the regime; use regulatory and tax policies to reward their supporters and punish their competitors; and so on. The regime’s players are paid back by the corrupt private sector players in various ways: by cushy jobs given to the bureaucrats when they “retire” from “public service;” by favorable deals for buying homes or business franchises; by monetary bribes (campaign “contributions,” or — especially when the regime is located in a third-world cesspool, such as Uganda or Chicago — in cash). The regime thus increases its power, and is able to pay off more corrupt businesses.
It is all very convenient for the players, however inconvenient it may be for the ripped-off taxpayers and the honest businesspeople who are denied a level playing field.
The crony capitalism of the Obama regime comes in several major flavors — that is, the many industries it has corrupted or hijacked. Lately on display is its crony green capitalism. The regime has received massive financial support from various wealthy investors in so-called “green” energy technologies and from the major environmentalist groups. It has repaid them by doing its best to block domestic drilling for oil and gas, even as it pushes grotesquely inefficient wind and solar technologies. The crony green capitalism has been exposed to the light of public notice in the Solyndra case and others.
But we must not forget the regime’s crony car capitalism. It created Government Motors in a colossally corrupt bankruptcy that stiffed secured creditors and stockholders alike in favor of the UAW, a lavish supporter of the regime. This led to the waste of billions in taxpayer dollars, a huge tax preference given to GM and Chrysler to the disadvantage of Ford, the UAW being given obscenely unjust stakes in the new companies, and later to the singling out, by the regime’s secretary of transportation, of a competitor of Government Motors (Toyota) for harassment.
Crony capitalism is a sort of faux capitalism found in a society where many citizens desire socialism but don’t want to embrace it openly.
As a result, the UAW — which should have been decertified by its members for destroying the companies for which they worked — was given new life. Lately it has been portraying itself as a trustworthy companion to automakers, existing only to help improve worker morale. It has gotten some traction, amazingly, with a German automaker, Volkswagen.
The latest interesting wrinkle is that Ford felt compelled to pull a highly effective ad that implicitly criticized its American competitors for taking part in the corrupt bankruptcy deal.
Ford ran a series of ads that had actual customers telling what made them buy a Ford. What caused a flap was the testimony from a man named Chris McDaniel, who said:
I wasn’t going to buy another car that was bailed out by our government. I was going to buy from a manufacturer that’s standing on its own: win, lose, or draw. That’s what America is about is [sic] taking the chance to succeed and understanding when you fail that you gotta pick yourself up and go back to work. Ford is that company for me.
Not only does Chris McDaniel feel that way, but others do too. A Rasmussen poll recently revealed that nearly one in five Ford buyers chose Ford because they resented the government-manipulated bailout of its competitors. Nevertheless, the ad aroused fury in the sycophant media. Some even accused Ford of hypocrisy, because it had in the past accepted loans from the government and lobbied the government for support.
But that doesn’t pass the laugh test. The fact stands that Ford didn’t collude with the feds and the UAW to screw its creditors in a jury-rigged bankruptcy, while GM and Chrysler surely did.
Also noteworthy is the fact that the same critics of Ford’s alleged hypocrisy were conspicuously silent when GM ran ads in the wake of the Toyota brake hysteria, saying that GM cars were safer — thus hypocritically ignoring its own sorry record of recalls. These critics were also silent about GM’s attempt to get a class-action lawsuit dismissed, a suit by owners of Chevy Impalas wanting GM to honor its warranties. Considering the number of people crippled and killed over the decades by its own defective vehicles, GM was being hyper-hypocritical.
After Ford pulled its ad, Chris McDaniel honorably stuck to his guns. As he later put it,
I still stand by what I said, and that is, as Americans, we need to decide if we’re going to be run by a government or if we’re going to be run by free enterprise. That’s really the debate we are facing today. So I applaud Ford, still, to this day, for having the courage to put that ad on the TV and spur the debate.
Now, an interesting theory has been aired by no less a writer than Daniel Howes, associate business editor for the Detroit News. He has suggested that Ford pulled its apt, accurate, and reasonable ad after a phone call from the White House expressing, well, discontent. Howes noted that the White House later denied the story. But we have a right to be skeptical.
After all, this is the most mendacious regime in recent history, Nixon notwithstanding. In a short time, it has lied and deceived about more major matters than any others.
Some of this has come to the attention of Rep. Darrell Issa (R-CA), chair of the House Oversight Committee, who sent a letter to Ford asking whether it removed the ad under White House or other pressure. Ford responded on Facebook and Twitter that it hadn’t removed the ad permanently, but Issa wants a response in writing.
I suggest that what Issa really needs to do is to hold hearings on the whole affair: the crony bankruptcy, the UAW funding of Democrats over the period leading up to the crooked affair, the subsequent federal actions devoted to running GM and hurting GM’s competitors, etc. Let’s see all the internal memos, emails, and other documents, and let’s question everyone involved — under oath before the House Committee. Turn over this rock, and shine a light on the roaches underneath. Then we will all understand the nature of crony capitalism better, and in more detail.
Gary Jason is a philosopher and senior editor of Liberty, and the author of Dangerous Thoughts.
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