Crony Capitalism

Russell Roberts of George Mason University and Marta Mossburg of the Franklin Center for Government & Public Integrity discuss the growth of crony capitalism.

What caused today’s 10 percent unemployment? What caused today’s recession? These were the questions asked by John Stossel on his Fox Business show, February 15. Wall Street greed and capitalism are typically blamed, but is true capitalism at the heart of this crisis?

Russell Roberts of George Mason University explains that capitalism is a system of profits and losses: profits that encourage risk taking and losses which encourages prudance. “When you take away the loss, which is what we’ve been doing systematically in the United States,” according to the Roberts, “what are you left with? You’re left with socialism for the rich.” If corporations are assured that a government bailout will be available to them whenever they screw up, their risk taking spins out of control.

Political lobbyism is to a large extent to blame. “Pretty much everyone who is a lobbyist right now,” said Marta Mossburg of the Franklin Center for Government and Public Integrity, “has worked on Capitol Hill.”

Banks and businesses are anxious to hire Washington insiders to do their bidding. Mossburg warned of a situation “where you need more and more lobbyists in order to do the goverment’s work; in order to do business’ work.” The greatest problem? Overly complicated tax codes. Without them, “you would not need any of these lobbyists.”

Productiveness and trade are the two indispensable pillars of free-market capitalism. But, as Stossel pointed out, lobbyists aren’t producing anything. Indeed, “They’re not creating anything,” said Mossburg, “except more regulation — which then again, requires more lobbying.”

The most upsetting part, added Roberts, is that lobbyists pretend to service the public’s interest. “In the guise of creating a fairer system or a more competative system, they actually channel regulation and funds toward their friends.”

“The answer, we’re told,” said Stossel, “is some new regulation that will solve this problem.” Roberts reacted: “Every time we reform the system we move toward […] building a fail-safe system,” which the United States have been trying since the 1930s. “Maybe we ought to go in a different direction. Let’s let people fend for themselves. It’s called capitalism.”