“Most people are ethical. If virtuous capitalists and entrepreneurs had higher social standing, there might be more of them, and fewer rent-seekers. In the long run, everyone would benefit.”
Every year, the federal government distributes more than $100 billion in corporate welfare. The handouts include thousands of subsidies, mandates, bailouts, and grants. Cronyism also includes favorable regulations to keep competitors out and many other types of other special treatment.
“Rent-seeking,” the term economists use to describe seeking these unethical government favors, is clearly a huge industry. But a major question remains: why isn’t there even more of it? I recently co-authored a paper with Fred Smith on this very topic.
The Tullock Paradox
Lobbying is a $3.5 billion industry resulting in $100 billion annually to its beneficiaries. That’s a 30-fold return.…
“Good profit can only result from creating value for the consumer. It is the manifestation of the entrepreneur’s respect for what the customer values.”
– Charles Koch, Good Profit (New York: Crown Business, 2015), p. 244.
In his previous book, The Science of Success, Charles Koch, classical-liberal CEO of Koch Industries, Inc., described heroic, moral capitalism as “maximizing long-term profitability for the business by creating real value in society while always acting lawfully and with integrity.” Real value to Koch comes from the economic means of consumer service, not the political means of special government favor (see here).
Part I yesterday shared some Koch quotations on cronyism from years past. Today, quotations from Koch’s just released book are presented that clearly spell out his views of cronyism in the mixed economy (what has been called political capitalism):
“Good profit comes from making a contribution in society–not from corporate welfare or other ways of taking advantage of people.”…
“Today, many governments give special treatment to a favored few businesses that eagerly accept those favors. This is the essence of cronyism…. One obvious example of this involves wind farms. Most cannot turn a profit without the costly subsidies the government provides.”
– Charles G. Koch, “The Importance of Economic Freedom.” August 17, 2012.
Classical-liberal entrepreneur Charles Koch, CEO of Koch Industries, Inc., valued at $100 billion, is one of the most intellectual business leaders in the United States, if not the world. He also takes the prize as the most trenchant critic of cronyism (rent-seeking) where business representatives lobby for special government favor.
Charles Koch’s views are based on his extensive study of the theory and practice of social cooperation for mutual gain–and prosperous societies. His verdict for private property, free markets, and the rule of law–and against government intervention–is long held.