The Public Policy

Crony Capitalism Critics Claim the Moral High Ground

The Left is defending a bankrupt status quo.

By 5.9.14

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Thomas Piketty’s Capital in the Twenty-First Century moved the policy conversation onto a battleground that has traditionally favored the Left—inequality. Advocates of free enterprise were expected to object to Piketty’s premises and prescriptions, and they have: Why focus on relative outcomes rather than actual increases in living conditions for society’s less fortunate? 

But perhaps the Left didn’t expect that Utah Senator Mike Lee and others would seize on the same populist impulse that’s fueled interest in Piketty and take aim at the privileged and the powerful from a different direction. Instead of Piketty’s redistributionist agenda, these reformers are calling for an end to crony capitalism and more limits on a spendthrift government. 

Commentators on the Left are circling their wagons. How else do we read Jonathan Cohn’s New Republic piece that charges in its title, “The Conservative Crusade Against Crony Capitalism Turns Out to Be Another Crusade Against the Safety Net”? 

Cohn doesn’t object to the crusade against crony capitalism, per se. What defender of the little guy would support the taxpayer-backed loan guarantees that Lee attacks in the battle over reauthorization of the Export-Import Bank? Shouldn’t we all rally around transparency efforts like OpenTheBooks.com, a new project of American Transparency that revealed that 99 of the Fortune 100 companies are receiving some form of corporate welfare?  

Cohn’s objection is that these moves to eliminate market-distorting cronyism and wastefulness are small ball in the scheme of things. Cohn won’t be happy until Republicans embrace his own prescriptions to extend unemployment benefits, spend more on infrastructure, and pretend the entitlement state is actuarially sound.

But as I see it, it is Cohn who proposes more of the same while whistling past the graveyard—dangerously abiding by the empty promises of a welfare state that sits on $100 trillion of unfunded liabilities. All Ponzi schemes face a reckoning, and it is simply immoral to deceive those who are counting on receiving benefits our country cannot afford. It’s also a failure of imagination (and historical understanding) to think large-scale government-administered programs are the best, or only, solutions to public welfare problems. Those interested in the history of voluntary mutual aid societies, displaced last century by government-run welfare states, might start by reading David Green’s and David Beito’s contributions to After the Welfare State, edited by my Atlas Network colleague, Dr. Tom G. Palmer.   

Cohn allows that some of us conservatives and libertarians “delude [ourselves] into believing” the poor would benefit from our small government agenda. But, he says, we have failed to present compelling evidence. I’d point him to the Fraser Institute’s "Economic Freedom of the World" reports that show correlations between free economies and prosperous economies. Or to work from the Mercatus Center by Alberto Alesina and Veronique de Rugy that uses international comparisons to show broadly the advantages of reducing government spending to improve companies’ balance sheets and trigger economic growth. Or new research by the Competitive Enterprise Institute calling attention to the costs of regulatory compliance that are strangling economic opportunity in the U.S.

Or perhaps Cohn could randomly select 100 Texans and 100 Californians and ask about their economic prospects. The differences won’t be as stark as South and North Korea, but I bet his findings would tilt toward the same conclusion. 

I’d ask, in turn, for his compelling evidence that we ought to continue fighting the War on Poverty with the same recipe used over the last five decades. Who really benefitted from the $16 trillion spent during that time period? 

The biggest beneficiaries are surely those who have positioned themselves as political champions of the working class—while giving the working class incentive-destroying transfer payments rather than opportunities to prosper.

True advocates for the poor should welcome conversations about reforming safety nets that can no longer support the expansive promises made by a profiteering political class. True foes of privilege should welcome advocates of limited government who are fighting against the cronyism that thrives when power is concentrated in Washington.

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Brad Lips is CEO of the Atlas Network.