Thursday, March 3, 2016

Crony Capitalism and Socialism

This is really just me thinking 'out loud' as it were, as I try to work out where we're really going.

Is there a difference between Crony Capitalism and Socialism? Yes, the system we have in the United States today is a someone confusing mix of socialism, crony capitalism, and capitalism.  There is very little in the way of an actual free market, except for the underground economy, which has been mostly barter, but may eventually move to a more efficient crypto-currency.  Government bailouts are the beginnings of a socialist economy, as are government mandates.  Regulations, while not actually socialist tend to push the economy in that direction, but are often used by corporations for their own benefit. They are also used by bureaucrats to enhance their empires. It's critical to understand that a government employee is a walking, talking socialist, even if they think socialism is a bad idea. Their jobs exist only because of government. There is no means of production because regulations do not create production, they discourage it - we have a State owned, State run monopoly on the creation of regulatory obstruction of economic growth. At least when a business is nationalized, there may still be a chance of some production (how ever inefficient), with regulators there is none.

Looking at crony capitalism, which is what most people are talking about when they complain about the failure of capitalism, we can see that it leads in two possible directions. If it continues, not only unchecked by supported by the government, then eventually we will achieve a full blown Corporate Oligarchy, where a few huge multinationals will actually control multiple governments. We're getting closer to this every year. But the government is growing so fast that it is holding the line.  The competing trend is toward full blown socialism. This trend is supported by larger and large central government, more and more regulations, and the spawning of new government bureaucracies.  If the central government grows faster than the corporations - which seems most likely at this point, eventually they will, through a series of laws, regulations and bailouts, own the means of production bringing about full blown socialism.  If successfully checked by the big multinational corporations, usually by employing capital flight, regulatory capture, and vote buying, and thereby reducing the ability of a single government to restrict behavior and capture taxes, this battle may continue for a long time. At least until the clash as destroyed the economy, which I think is the most likely result.

Crony capitalism starts through four mechanisms:
  • Cronyism is the directing of favors such as, contracts, jobs, etc., directed by a politician or government bureaucrat.  Usually in return for immediate benefits, such as real estate, travel and actions, insider information for stock trades, or even cash. Sometimes, the benefit comes in the form of private sector jobs that pay significantly more than the job is worth.  This is relationship building between the public and private sectors, the backroom dealing making.
  • Direct funding such as Solyndra or the bailout of AIG, which are essentially a direct transfer of wealth from the taxpayer to corporations.  The funding is provided under any number of excuses, but it's almost always either favors to friends, an attempt to buy votes, or as payment for votes already received.  Too big to fail is a perfect example of this. 
  • Regulatory Capture is typically done through the efforts of lobbing by a corporation. The lobbyist suggests, or in some cases actually writes a bill for a congressman.  The bill will create some direct benefit for the corporation, typically a subsidy or by creating a barrier to entry, and thus allowing the corporation to achieve higher profit margins before the competition becomes viable.  Over time, regulations and laws are created that block competition, create tax benefits, and establish economic rents such as the corn subsidies tied to ethanol production. 
  • False information. In this case, corporations will create fear of some future failure and demand that the government step in to prevent it. Net Neutrality fits this fairly well.  This sets the stage for regulatory capture. 
All four methods may result in what's called the revolving door, where government employees are given jobs when they leave the public sector, and private sector employees gain positions, sometimes as the heads of government departments, and even cabinet positions.  This process continues as long as it benefits the parties involved and continues to siphon money from tax payers and transfers it to the players.

Socialism comes in two parts, culture and economy.  Direct economic socialism has failed every time it's been tried, but those failures never seem to stop others from trying.  Most likely it's either because of the short term lust for power, not caring what happens beyond the lifetime of those in power, or it's a factor of extreme arrogance and the belief that somehow they will manage to succeed where everyone else has failed. If the agent of socialism is a believer, then they either do not understand the basic impossibility of the task, or their arrogance exceeds their intellect and allows them to believe that "I will figure out how to make it work."  Most believers simply have failed to think through the consequences of the policies they "feel" good about. Minimum wage hikes, rent control, welfare programs, public schools, etc.   Especially popular are programs that allow the believer to disassociate themselves from consequence. Abortion, the feminist battle to destroy the traditional  family, the glorification of the single mother as some sort of hero.  These are all documented tactics of Social Marxism to destabilize a country and allow the growth of communism.

Corporate Oligarchy eventually leads to serfdom to the corporation - or private ownership of slave labor.   Socialism (and Communism) is nothing more than self imposed serfdom.  In the case of Socialism, society votes itself into chains, while in the case of communism, chains are affixed by government thugs with guns - Suicide or Murder - either way - you're dead.

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