"John Broder of The New York Times has an interesting piece on Al Gore’s financial profit tied to his global warming alarmism and push for renewable energy. Gore’s venture capital firm invested in Silver Spring Networks, a company that makes hardware and software to improve efficiency in the...
Contemporary Quotes on Crony Capitalism
"In a free market, completely absent of government interference, it would be impossible to form the sorts of cartels briefly mentioned here. These cartels owe their existence to the coercive influence of government. It would be impossible to legally bar entrants from entering markets and to enforce set prices, for example, without the backing of government force.
Therefore, it is the free market advocate that represents the best interests of the masses. It is only the free market advocate who would do away with all forms of government-granted privilege and monopoly. Ironically, it is the advocate of government action that promotes the welfare of selected favored groups at the expense of the mass of people."
"The Founders understood that relatively free markets are the most effective form of social organization for promoting individual freedom. Indeed, capitalism is defined as a system wherein individuals are free to pursue their own interests, make voluntary exchanges, and hold private property rights in goods and services. Much of the original intent of the United States Constitution, as seen in the document itself and in the Federalist Papers that advocated its ratification, was to bring about a climate in which this kind of social organization could occur.
In a free society, most relationships should be voluntary, and involuntary exchange should be minimized. Widespread private control and ownership of property is consistent with this objective. Despite the size and alleged power of industrial giants like IBM, AT&T, and General Motors, in a free market they cannot get a dollar from me unless I volunteer to give it to them. Widespread government ownership and/or control of property is the antithesis of voluntary exchange. Government is the major source of forced exchanges, the most prominent of which is taxation."
"Concern #2: Government-controlled investment invites crony capitalism—industrial policy that allows politicians to control the economy indirectly by attempting to pick winners and losers.
The managers of private pension funds are legally obligated to make investments that are in the best interest of workers. In other words, they must try to get the highest possible return, adjusted for risk. Would such a standard apply under a system of government-controlled investment, and could it even be enforced? This is a significant concern because legislators sometimes believe that the marketplace is not producing the right results; they try to help or punish certain industries or companies through spending programs, tax breaks, and regulatory exemptions. They also can do this by providing special access to capital—another risk that would arise if politicians controlled how retirement funds were invested.
The downturn in Asia during the 1990s illustrates the danger of this approach. Decades of industrial policy, or crony capitalism, left these countries with debt-laden banking systems, inefficient industries, and companies that cannot compete. Unlike the Europeans, the Asians largely avoided direct government ownership, but widespread political manipulation of lending decisions and investment choices produced the same result. Ironically, many of the Americans who praised Japan’s industrial policies in the 1980s are the same people who argue in favor of government-controlled Social Security investment today."
"In the summer of 2003, shoppers in Southern California began getting a break on the price of milk.
A maverick dairyman named Hein Hettinga started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid system that has controlled U.S. milk production for almost 70 years. Soon the effects were rippling through the state, helping to hold down retail prices at supermarkets and warehouse stores.
That was when a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga's initiative. For three years, the milk lobby spent millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry M. Reid (D-Nev.).
Last March, Congress passed a law reshaping the Western milk market and essentially ending Hettinga's experiment -- all without a single congressional hearing.
'They wanted to make sure there would be no more Heins,' said Mary Keough Ledman, a dairy economist who observed the battle.
Hettinga, who ran a big business and was no political innocent, fought back with his own lobbyists and alliances with lawmakers. But he found he was no match for the dairy lobby.
'I had an awakening,' the 64-year-old Dutch-born dairyman said. 'It's not totally free enterprise in the United States.'"
“Calvin Coolidge once said that ‘the chief business of the American people is business,’ and indeed, it would be hard to find a country on earth that’s been more consistently hospitable to the logic of the marketplace. Our Constitution places the ownership of private property at the very heart of our system of liberty....
The result of this business culture has been a prosperity that's unmatched in human history.... Our greatest asset has been our system of social organization, a system that for generations has encouraged constant innovation, individual initiative and the efficient allocation of resources.
It should come as no surprise then that we have a tendency to take out free-market system as a given, to assume that it flows naturally from the laws of supply and demand and Adam Smith’s invisible hand. And from this assumption, it’s not much of a leap to assume that any government intrusion into the magical workings of the market -- whether through taxation, regulation, lawsuits, tariffs, labor protections, or spending on entitlements -- necessarily undermines private enterprise and inhibits economic growth. The bankruptcy of communism and socialism as alternative means of economic organization has only reinforced this assumption...
[A]lthough the benefits of our free-market system have mostly derived from the individual efforts of generations of men and women pursuing their own vision of happiness, in each and every period of great economic upheaval and transition we’ve depended on government action to open up opportunity, encourage competition, and make the market work better.”
"In the year since the investment bank Lehman Brothers collapsed, paralyzing global markets and triggering one of the biggest government forays into the economy in U.S. history, Wall Street has looked south to forge new business strategies, hew to new federal policies and find new talent.
'In the old days, Washington was refereeing from the sideline,' said Mohamed A. el-Erian, chief executive officer of Pimco. 'In the new world we're going toward, not only is Washington refereeing from the field, but it is also in some respects a player as well. . . . And that changes the dynamics significantly.'"
"As President Obama's push for a healthcare overhaul moves toward its final act, the oft-vilified health insurance industry is on the verge of seeing a plan enacted that largely protects its financial interests.
That achievement, should it stand up in the final legislation, would be the capstone of a sophisticated lobbying and strategic campaign that began even before Obama was elected president.
The specifics of the healthcare legislation are still being hashed out on Capitol Hill, and key details will evolve in the days ahead. Even so, there is broad agreement that the final plan will, for the first time, require Americans to buy health coverage, with taxpayer subsidies for millions who cannot afford it.
For the health insurance industry, that means millions of new paying customers. What's more, there are likely to be no limits on what insurers can charge, while at the same time the plan is expected to limit competition from any new national government insurance plan that lawmakers create.
These anticipated wins -- from an initiative that has at times been portrayed as doomsday for health insurers -- is the result of a strategy developed by one of Washington's savviest lobbyists, Karen Ignagni. Under Ignagni's leadership, the industry group America's Health Insurance Plans adopted the goal of universal coverage while setting out to shape it in a way that benefited insurers -- a crucial move that aligned their interests with those of other groups, including consumers and hospitals.
Insurers poured campaign donations into the coffers of key sympathetic members of the House and Senate, and loaded up on lobbyists. And when Obama and other Democrats began attacking the industry, insurers made a strategic choice not to walk away from the negotiating table."
"Capitalism is a profit and loss system. The profits encourage risk-taking. The losses encourage prudence. Is it a surprise that when the government takes the losses, instead of the investors, that investing gets less prudent? If you always bail out lenders, is it surprising that firms can borrow enormous amounts of money living on the edge of insolvency?
I’m mad at Wall Street. But I’m a lot madder at the people who gave them the keys to drive our economy off the cliff. I’m mad at the people who have taken hundreds of billions of taxpayer money and given it to some of the richest people in human history. I’m mad at Bush and Obama and Paulson and Geithner and Bernanake. And I’m mad at Congress. You made sure that risk-takers continue to expect that the rules that apply to the rest of us don’t apply to people with the right connections.
You have saved the system, but it’s not a system worth saving. It’s not capitalism but crony capitalism."
"Last month, for example, President Barack Obama announced $3.4 billion in government-stimulus grants for power-grid projects. About one-third of the recipients are GE customers. GE expects them to use a good chunk of that money to buy its equipment.
The government has taken on a giant role in the U.S. economy over the past year, penetrating further into the private sector than anytime since the 1930s. Some companies are treating the government’s growing reach — and ample purse — as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents."
"The actions taken at the height of the financial panic last fall, with credit markets frozen, succeeded in preventing a systemic--and catastrophic--collapse. Since bringing us back from the precipice however, the Troubled Asset Relief Program [TARP] has morphed into crony capitalism at its worst. Abandoning its original purpose providing targeted assistance to unlock credit markets, TARP has evolved into an ad hoc, opaque slush fund for large institutions that are able to influence the Treasury Department's investment decisions behind-the-scenes. No longer concerned with preserving overall financial market stability, Treasury's walking around money continues to be deployed to reward the market's Goliaths while letting its Davids suffer."
"We all stand to lose as crony capitalism drains the life from our economy; but we all stand to gain from the fruits that genuine, vigorous, free market competition provides."
"Congressional committees overseeing industries succumb to the allure of campaign contributions, the solicitations of industry lobbyists, and the siren song of experts whose livelihood is beholden to the industry. The interests of industry and government become intertwined and it is regulation that binds those interests together. Business succeeds by getting along with politicians and regulators. And vice-versa through the revolving door.
We call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith."
"Many of those familiar with the banking industry, overall, say that community banks bore little to no responsibility, on balance, for the financial meltdown that occurred in 2008. Nonetheless, an analysis of the Dodd bill indicates that if it passes, community banks will be subject to a whopping 27 new regulations that one individual who has worked with banks professionally and is closely tracking the legislation says 'could threaten to put many community bankers out of business, thus reducing competition in the banking sector overall, and diminishing consumer choices.'
That individual further asserts that while the bigger, Wall Street banks will likely be able to adapt to the bill (though their efficiency and ability to compete internationally could take a knock), the community banks will not—potentially making the system more risk-prone, also."
"Big business lobbying for more regulations that will crush smaller competitors is fairly common. Wal-Mart has endorsed higher minimum wage and an employer mandate on health-insurance. Mattel, the world’s largest toymaker, lobbied for the draconian Consumer Product Safety Improvement Act. Big food corporations have embraced stricter federal food regulations — both presently, and back in the 'Progressive Period.'"
"Stephen Ambrose and other historians have faulted private markets for lacking the capital or the imagination to build the transcontinental railroad. Certainly it was true that private entrepreneurs and financiers did not see the point of risking huge sums to build a railroad across a vast, empty, and sometimes mountainous terrain. Private entrepreneurs and financiers added value by developing the rail network bit by bit, supporting the expanding freight business. The process was gradual. Grandiose schemes like the transcontinental railroad drained resources from some regions to benefit special interests.
There was no money to be made from operating a railroad through a desolate wasteland, yet the federal government rewarded railroad contractors with big subsidies: a thirty-year loan at below market interest rates; twenty sections (12,800 acres) of government-owned land for every mile of track; and an additional subsidy of $48,000 for every mile of track laid in mountainous regions.
Thomas Durant, Oakes Ames, and other officers of the Union Pacific Railroad, which went a thousand miles west from Council Bluffs, Iowa, started the Credit Mobilier company in 1867 and retained it to do the construction. Credit Mobilier distributed to shareholders profits estimated at between $7 million and $23 million, depleting the Union Pacific’s resources. In an effort to stop congressional investigations, the officers bribed Speaker of the House James G. Blaine and other congressmen with Credit Mobilier stock. Seldom modest about their thievery, congressmen voted themselves a 50 percent pay raise. The Union Pacific Railroad fell deep into debt, without enough revenue from passengers or shippers, and went bankrupt in 1893."
"George Soros -- whom we're always told is not serving his own economic interests at all by promoting liberal politicians and big-government policies -- is launching a new investment fund that plans to profit off of the 'green energy' boom, which is entirely dependent on government subsidies supported by the groups Soros funds.
As the press release puts it, this fund will 'leverage technology and business model innovation to improve energy efficiency, reduce waste and emissions, harness renewable energy, and more efficiently use natural resources, among other applications.' As Soros puts it in the same release: 'Developing alternative sources of energy and achieving greater energy efficiency is both a significant global investment opportunity and an environmental imperative.' Cadie Thompson at CNBC's NetNet flagged this.
So, yeah. The big-government policies advanced by the liberal outfits he funds -- like Center for American Progress -- will enrich the companies in which Soros is investing."
"Dodd-Frank has largely severed the relationship between risk and return, which is the necessary discipline imposed by a free market. Now, the big banks get to keep the rewards, but American taxpayers bear the risk. If that sounds familiar, it should. That is precisely what happened in Greece, when the International Monetary Fund underwrote hundreds of billions of dollars in loans, leaving American and German taxpayers stuck with the bills. To add insult to injury, these financial institutions are sophisticated market players, with a wealth of resources at their disposal to assess risk. They don’t need any further protection, and certainly not at the expense of the ordinary taxpayer."
"But even if all income differences reflect luck, why are government-imposed 'corrections' fair? The fact that liberals assert this does not make it true, any more than assertions to the contrary make it false. Fairness is an ill-defined, infinitely malleable concept, readily tailored to suit the ends of those asserting fairness, independent of facts or reason.
Worse, if liberals can assert a right to the wealth of the rich, why cannot others assert the right to similar transfers, such as from blacks to whites, Catholics to Protestants, or Sunni to Shia? Government coercion based on one group's view of fairness is a first step toward arbitrary transfers of all kinds."
"Now consider the claim that income differences result from illegal, unethical, or otherwise inappropriate behavior. This claim has an element of truth: some wealth results from illegal acts, and policies that punish such acts are appropriate.
But most inappropriate wealth accumulations results from bad government policies: those that restrict competition, enable crony capitalism, and hand large tax breaks to politically connected interest groups. These differences in wealth are a social ill, but the right response is removing the policies that promote them, not targeting everyone with high income.
The claim that soaking the rich is fair, therefore, has no basis in logic or in generating desirable outcomes; instead, it represents envy and hatred."
"By picking winners and losers in the energy sector, the government-as-investor model distorts markets, weakens the rule of law, and fails to spur sustainable job creation. Instead of helping the economy, the story ends with taxpayers losing billions of dollars, successful companies losing their competitive advantage, and workers losing their jobs – in Solyndra’s case, 1,100 of them.
This is the ugly end of government’s adventures in crony capitalism."
"We cannot afford an economy full of Solyndras, where firms exist and prosper only because they have attained preferred status among the politically powerful. Crony capitalism flies in the face of our most deeply held principles, such as equal rights before the law, and it hurts our economy by weakening the connection between effort and reward."
"Lawrence Katz, a Harvard economist, adds that some inequality is necessary to create incentives in a capitalist economy but that 'too much inequality can harm the efficient operation of the economy.' In particular, he says, excessive inequality can have two perverse consequences: first, the very wealthy lobby for favors, contracts and bailouts that distort markets; and, second, growing inequality undermines the ability of the poorest to invest in their own education.
'These factors mean that high inequality can generate further high inequality and eventually poor economic growth,' Professor Katz said.
Does that ring a bell?
So, yes, we face a threat to our capitalist system. But it’s not coming from half-naked anarchists manning the barricades at Occupy Wall Street protests. Rather, it comes from pinstriped apologists for a financial system that glides along without enough of the discipline of failure and that produces soaring inequality, socialist bank bailouts and unaccountable executives.
It’s time to take the crony out of capitalism, right here at home."
"Embassies in countries from France to Indonesia decided that the American taxpayer would like to give away copies of Obama’s two books—Dreams from My Father and The Audacity of Hope—for the enlightenment of the locals. In Paris, they were still dishing out copies of the 16-year-old Dreams from My Father as recently as March of this year.
The State Department’s generosity with public funds to promote Obama’s literary efforts—at a time when it has been closing American libraries overseas to cut costs—was revealed last week by The Washington Times, which reported that State had bought more than $70,000 worth of the two books for Christmas 'gratuities' and stocking of 'key libraries' abroad.
A review of the expenditures in a federal database did not reveal any examples of State Department purchases of books by former Presidents George W. Bush or Bill Clinton, according to the Times."
"But there is no doubt that the deals are lucrative for the companies involved.
G.E., for example, lobbied Congress in 2009 to help expand the subsidy programs, and it now profits from every aspect of the boom in renewable-power plant construction.
It is also an investor in one solar and one wind project that have secured about $2 billion in federal loan guarantees and expects to collect nearly $1 billion in Treasury grants. The company has also won hundreds of millions of dollars in contracts to sell its turbines to wind plants built with public subsidies.
Mr. Katell said G.E. and other companies were simply 'playing ball' under the rules set by Congress and the Obama administration to promote the industry. 'It is good for the country, and good for our company,' he said.
Satya Kumar, an analyst at Credit Suisse who specializes in renewable energy companies, said there was no question the country would see real benefits from the surge in renewable energy projects.
'But the industry could have done a lot more solar for a lot less price, in terms of subsidy,' he said."
"Over the last year, the Obama administration has aggressively pushed a $433-million plan to buy an experimental smallpox drug, despite uncertainty over whether it is needed or will work.
Senior officials have taken unusual steps to secure the contract for New York-based Siga Technologies Inc., whose controlling shareholder is billionaire Ronald O. Perelman, one of the world's richest men and a longtime Democratic Party donor.
When Siga complained that contracting specialists at the Department of Health and Human Services were resisting the company's financial demands, senior officials replaced the government's lead negotiator for the deal, interviews and documents show.
When Siga was in danger of losing its grip on the contract a year ago, the officials blocked other firms from competing.
Siga was awarded the final contract in May through a 'sole-source' procurement in which it was the only company asked to submit a proposal. The contract calls for Siga to deliver 1.7 million doses of the drug for the nation's biodefense stockpile. The price of approximately $255 per dose is well above what the government's specialists had earlier said was reasonable, according to internal documents and interviews.
Once feared for its grotesque pustules and 30% death rate, smallpox was eradicated worldwide as of 1978 and is known to exist only in the locked freezers of a Russian scientific institute and the U.S. government. There is no credible evidence that any other country or a terrorist group possesses smallpox.
If there were an attack, the government could draw on $1 billion worth of smallpox vaccine it already owns to inoculate the entire U.S. population and quickly treat people exposed to the virus. The vaccine, which costs the government $3 per dose, can reliably prevent death when given within four days of exposure.
Siga's drug, an antiviral pill called ST-246, would be used to treat people who were diagnosed with smallpox too late for the vaccine to help. Yet the new drug cannot be tested for effectiveness in people because of ethical constraints — and no one knows whether animal testing could prove it would work in humans.
The government's pursuit of Siga's product raises the question: Should the U.S. buy an unproven drug for such a nebulous threat?"
"But the real scandal is the loan guarantee program itself. The United States needs alternatives to oil, for reasons ranging from climate change to national security. Shoveling taxpayer dollars into profit-seeking manufacturing companies is not the way to develop them.
You can call it crony capitalism or venture socialism — but by whatever name, the Energy Department’s loan guarantee program privatizes profits and socializes losses. It’s an especially risky approach in the alternative-energy space, where solar energy is many years from being cost-competitive with fossil fuels for most uses — and history is littered with failed government attempts to back the next big thing."
"It’s politically almost impossible to control runaway spending when people believe that government can continue making payments. As long as there’s any money in the lock box, political pressure will be overwhelming to spend it. The tens of millions of voters who receive government benefits – such as elderly pensioners, unionized government employees, solar panel hustlers and rich Wall Street bankers ‑ are likely to demonize courageous politicians who suggest the government can no longer afford to pay for everything. This is where we are now."