Tuesday, February 16, 2010

Giving capitalism a bad name. Cronyism by government.

Government is giving capitalism a bad name. In a story by Michael Barone, he talks about "crony capitalism".

He points out what happens when big government gets together with big business.
Lobbyists, reports the Center for Responsive Politics, had a record 2009 in Barack Obama's Washington. Despite candidate Obama's promises to shun them, they raked in $3,470,000,000. Somewhere up there, Tommy Corcoran is chuckling.

Last week, amid Washington's blizzards, Obama was asked about the $17 million bonus awarded to JPMorgan Chase CEO Jamie Dimon and the $9 million bonus for Goldman Sachs CEO Lloyd Blankfein.

"I know both these guys; they are very savvy businessmen," he said. "I, like most of the American people, don't begrudge people success or wealth." So much for campaign-trail denunciations of "fat cat" bankers and bloated bonuses.

From what I know, Dimon and Blankfein are in fact first-rate CEOs, as able in their way as Henry J. Kaiser. Their banks soured on mortgage-backed securities before most of their competitors and started unloading them early or, in Goldman's case, getting them insured by AIG (and getting the government to pay 100 cents on the dollar for them, thanks to Treasury Secretary Timothy Geithner, then head of the New York Fed). They paid their TARP money back as fast as they could, with interest.

But the savviness that Obama handsomely acknowledged has been evident not only in their business judgment but in their politics. Goldman employee contributions to Democrats in 2008 ranked second only to those employed by the University of California. JPMorgan Chase's employees ranked No. 7. The stereotype of Wall Street being Republican is decades out of date.

Crony capitalism is now the order of the day in the United States. The government and the United Auto Workers own General Motors and Chrysler, which aren't likely to pay back their billions in TARP money anytime soon, if ever. Meanwhile, the government tells Americans to stop driving Toyotas.

The government was going to remake the health care sector, and so Billy Tauzin and other health care industry lobbyists were busy in the White House cutting deals to keep their clients above water. The government was going to remake the energy sector, and utility CEOs and lobbyists have been busy flaunting their green credentials.

As my Washington Examiner colleague Timothy Carney has been documenting, Big Business has been busy lobbying Big Government for "reforms" that serve big companies' interests. Wal-Mart backs a health care mandate, Philip Morris shapes tobacco regulation, General Electric is setting up a joint venture to trade carbon offsets (wasn't that Enron's line of work back in the day?).

The picture is not pretty. Government's pets -- or, in the president's words, "savvy businessmen" -- use government to get policies that will give them competitive advantages and stifle smaller competitors. Pleasing their masters in government is now absorbing the psychic energy of CEOs who used to concentrate on meeting consumers' needs in order to make profits.

Back in the 1940s, there was an excuse for crony capitalism -- there was a war on. And FDR had a gift for picking people who, like Kaiser, delivered the goods. Today, that excuse is not available, and it's far from apparent that Obama has that gift.

What's interesting about its current manifestation is it's happening under the Obama Administration in a massive way - the supposed guardian of the man in the street.

I've seen this happen here in Minnesota when state government got together with the health care industry in the 1990s to carve up the health care industry and consolidate it down to a few companies.

The problem isn't capitalism but the failure to government to fulfill its proper role as a referee of the market, enforcing the rule of law, insuring a level playing field. Not picking winners and losers.

1 comment:

Elaine said...

crony capitalism???

this coming from the group that is in the pocket of pawlenty?

please this is hilarious.

How the hell can you look at yoursevles in the mirror? How can your congregation be so brainwashed?