Although the occupiers of Wall Street are for the most part, incoherent in their message one phrase has been repeated often enough to be recognized as a particular grievance of the participants, “crony capitalism.”
Cronyism has generally been understood to mean the hiring or promotion of one’s friends into positions of authority or responsibility. If it takes place in the private realm of a private company this may not seem to be of any concern to anyone, except perhaps the shareholders of the company. If the person hired is incompetent then the decision may be a bad business move but there is certainly nothing illegal about it, nor should there be.
However, today crony capitalism is meant to refer to the cozy relationship the captains of industry, banking and finance have with those in government.
The TARP bailout of the Bank of America and Citigroup, the bailout of the auto industry, the revolving door between personnel in the US government and Goldman Sachs, these are just some of the examples of cronyism of a kind that that should be properly labeled government cronyism and not crony capitalism.
Crony capitalism of the kind the Occupiers complain about could not exist without a government which has squandered trillions of dollars in bailouts and favoritism. Without the assistance of successive US governments from Nixon’s bailout of Penn Central Railroad to Obama’s bailout of General Motors crony capitalism, as it is called, could not exist. So rather than protesting on Wall Street the Occupiers should be camped out in Washington. Of course this will not occur since in any equation involving government and business it is always business which will be the target of left-wing protest.
This use of hyphenated capitalism is not new. We’ve had libertarians promote something called anarcho-capitalism. Then there is “free market capitalism,” “mercantile capitalism,” “industrial capitalism,” “financial capitalism,” and “welfare capitalism.”
All of these variant forms of what is supposed to be capitalism are just examples of government involvement in the economy, in a word, fascism.
These hyphenated types of capitalism can be broken down into two groups. One group requires the intrusion of the state into the economy; the other requires that there be no government at all. Both are abominations of the noble ideal of capitalism.
As an aside there is one other hyphenated form of capitalism, “laissez faire” capitalism, which when understood properly simply means capitalism. This is why you rarely hear me speak of capitalism as laissez faire since use of the term is redundant.
When the state favours one company over another as in cronyism or bailouts, or when the state creates marketing boards, anti-trust laws, or competition bureaus we are not seeing capitalism at work we are witnessing the misuse of government power to rig the economy. We are witnessing a properly hyphenated form of socialism called fascist-socialism: the existence of private property yet controlled by government.
When libertarians speak of anarcho-capitalism, unfettered capitalism or naked capitalism they are speaking of anarchy, plain and simple. And capitalism cannot exist in anarchy.
In order for capitalism, real unhyphenated capitalism, to exist the individual capitalists must live in a country where their individual rights to their lives, their liberty and the property are protected by a government which is founded on reason and administers laws which are objective and play no favourites.
In a truly capitalist society the government is the referee, not a player. In a capitalist economy there are no bailouts, no subsidies, no preferential treatment, or marketing boards. A truly capitalist society is one where the government and the economy are truly separate. The government does not own the banks, does not issue charters for banks, and does not issue a fiat currency or print money. A capitalist society would not see tariffs on trade, corporate taxes, restrictions on CEO salaries, or government departments deciding whether or not one company can buy-out another. The government in a capitalist society would not restrict trade nor promote it. It would not invest in job-creation schemes nor set minimum wages. In fact a capitalist society would see the government restricted to protecting people’s individual rights. That is it. It would do this through the enforcement of laws objectively derived at.
Such a society would not be utopian but its government would be acting morally. The ills which plaque us, violence, theft, indolence, poverty would still exist but they would not be as a result of deliberate government programs and interference in our lives. The government would play an important role in our lives, however. It would enforce our contracts, it would catch and incarcerate criminals, it would defend our borders, it would make sure that our rights are protected and not restricted.
It must be obvious that we do not live in a truly capitalist society. In this respect, anyone protesting crony capitalism, as it is misnamed, are justified in their desire to see the separation of the government and the economy.
Some of the protesters at the occupation of Wall Street have been properly speaking out against such intrusions into the economy. You will hear them complain of the fractional reserve system of banking, government bailouts, stimulus spending, fiat currency, and inflation policies. These protestors are few and are often shouted down by the more numerous left-wing protestors who are there to malign business, capitalism, consumerism and wealth.
My advice to such honest protesters is to go home. Occupy Wall Street is a protest created by the left. By people who hate business, capitalism, and freedom. To use their venue to promote a proper restraining of government is only going to weaken your argument. Let’s leave these kooks alone to blow off their steam and when the dust settles the more rational among us can promote a proper government by writing, lecturing and taking our legislators to task whenever they do wrong and by congratulating them when they get it right. Let the left alone to do what they do well, scream and yell.
(Originally broadcast on Just Right #222, October 20, 2011.)