Editor note: This post follows Part I’s Crony Capitalism: Principles. On Tuesday, Robert Bradley will post on cronyism in the U.S. energy industry.
Cronyism differs from industry to industry. That variation depends on the extent to which a field is regulated, on how much those regulations are subject to interpretation, and, especially, on whether government is a major payer (as in medical and hospital care) or can give or withhold the permission literally to exist (as in mining or energy production).
Today, a Wall Street firm will contribute millions to the election of Democrats and Republicans, because it dares not risk lacking “access” to the White House and Congress. The firm’s “investment” has nothing to do with innovation, production, or meeting demands of customers. It may be buying protection against political power in exactly the way a restaurant owner in Brooklyn must buy “protection” when the mob comes seeking a cut of his profits.…
Continue ReadingEditor note: This post will be followed tomorrow by Part II: Crony Capitalism: Practice. On Tuesday, Robert Bradley will post on cronyism in the U.S. energy industry.
To the great economists of free trade and free markets, capitalism meant laissez faire: “Let us compete free of government help or hindrance.” To Adam Smith and David Ricardo, to Ludwig von Mises and Milton Friedman, laissez faire in the phrase “laissez faire capitalism” was redundant.
But today, opponents of capitalism such as leftist MIT Professor Noam Chomsky and sociologist Jane Jacobs believe that “crony capitalism” is the redundant phrase. They believe that capitalism by its nature involves corruption of the political process to favor one enterprise over another.
What about the American public? Earlier this year, a poll by the Rasmussen firm revealed that 39 percent of those responding consider ours to be a system of “crony capitalism.”…
Continue ReadingJosiah Neeley
Economists are famous for disagreeing among themselves. Yet on the subject of free trade, economic opinion speaks almost with one voice. In a recent survey, 87.5 percent of PhD members of the American Economic Association agreed that “the U.S. should eliminate remaining tariffs and other barriers to trade.”
As Paul Krugman (not exactly a proponent of laissez-faire) has stated, “if there were an Economist’s Creed, it would surely contain the affirmations ‘I understand the Principle of Comparative Advantage’ and ‘I advocate Free Trade’.”
Indeed. Since the days of Adam Smith and David Ricardo, economists have been tireless in demonstrating the role free trade plays in promoting prosperity and harmony for all nations.
Yet the economic consensus in favor of free trade has not always been heeded.…
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