Crony Capitalism: There Is Nothing New Under the Sun
I recently watched Nicholas Nickleby (2002), based on the Charles Dickens novel of the same name, and I thoroughly enjoyed it. It is a very light-hearted drama, or perhaps a comedy with dramatic touches — I am not quite sure how to describe it. I was sufficiently touched by the film to read Dickens’ novel, published as a serial in the 1830s.
I am only a little ways in, but I have already found a very interesting aspect to the story that did not make it into the film — and I think I can see why: It is a reminder that there is nothing new under the sun. The villain is Ralph Nickleby, and in the film we learn only that he is engaged in some sort of speculative financial activity that has made him very wealthy — and which requires him to associate with some really sleazy but wealthy people who are intent on becoming more wealthy.
Exactly what that speculation is, we never learn from the film, but clearly it is something a bit questionable. As both novel and film explain, a previous round of this questionable practice meant, “A mania prevailed, a bubble burst, four stock-brokers took villa residences at Florence, four hundred nobodies were ruined….”
In reading the novel, I find myself delighted with how Dickens explains how the villain is making his money. Today, Ralph Nickleby would likely be a bundler for the Obama re-election campaign. In chapter two, we learn that Nickleby and his unindicted co-conspirators are promoting — in the public interest, of course — a startup called the “United Metropolitan Improved Hot Muffin and Crumpet Baking and Punctual Delivery Company.” Nickleby and friends intend to get rich by taking the company public, and immediately selling their founder’s stock.
Okay, this does not sound so terribly nefarious: they are starting a company that satisfies a public need. Well, not quite. Ralph Nickleby and friends organize a public meeting at which various figures speak of the horrifying social problems that the existing competitive system of bakers and independent delivery contractors create: how the poor were “destitute of the slightest vestige of a muffin”; how “drunkenness, debauchery, and profligacy” were the state of muffin-sellers and the poor “who ought to be muffin consumers”; that the “unhappy youths” who delivered muffins and crumpets to customers at all hours suffered because of bad weather and traffic accidents.
The purpose of the public meeting is to sway emotions of the crowd so that they will sign a petition to Parliament chartering this new corporation — and oh yes, two members of the board, who are M.P.s, will sponsor the bill granting the charter. The charter, of course, does not simply create a corporation. It will abolish “’all muffin (or crumpet) sellers, all traders in muffins (or crumpets) of whatsoever description, whether male or female, boys or men, ringing hand-bells or otherwise’.”
obama and co. seem unaware that interfering with free markets can have a destructive effect? unaware? more like, acutely aware, and counting on it. for some bizarre reason, too many otherwise sensible people still believe the welfare of the u.s. capitalist system is something a very socialist/marxist obiwon worries about. these poor souls need to retrace his footsteps in the wake of his capitalist destroying actions. heck, even now he fights to stop putting folks/companies to work by getting energy resources closer to home.
“In chapter two, we learn that Nickleby and his unindicted co-conspirators are promoting — in the public interest, of course — a startup called the “United Metropolitan Improved Hot Muffin and Crumpet Baking and Punctual Delivery Company.” Nickleby and friends intend to get rich by taking the company public, and immediately selling their founder’s stock.”
Interesting that, if you were an average citizen today and had this insiders information, you would go to jail. But if you were a member of Congress and acted on this insider’s information, you would get one of those villas in Florence. Funny how some things never change.
In this day and age, the villas in Florence become Ambassadorships in Brussels, Berlin, Madrid, etc, for the “bundlers.”
I’m convinced they know that their actions have devastating consequences on the economy at large.
I’m also convinced they largely don’t care because they aren’t there for the American people – they push crony capitalism to benefit themselves and their connections, all for the sake of playing political ball.
I think you are giving Obama and friends too much credit for intelligence. This is a President who doesn’t know that Austrians speak German (not “Austrian”), who thinks the U.S. invented the automobile, and who does not know enough to recognize that “intercontinental” and “transcontinental” mean very different things. This is a Vice President whose knowledge of history is so deficient that he thinks FDR was President when the stock market crash happened, and that FDR went on television in response to it. I could go on and on with examples of how profoundly ignorant these people are.
Occam’s Razor encourages us to look for the simplest explanation for a situation. Conspiracies require intelligence, and there simply is not enough intelligence out there, especially in Democratic Party circles.
Typical Republican (aka “Stupid Party) always under estimating your opponent.
They are stupid, but very corrupt. Unfortunately, stupid isn’t enough to make them lose office; they are running against Republicans. It is depressing to see that our choices seem to be either immoral and smart (Gingrich, Cain), not terribly quick on their feet in debate (Perry), or weak on ideological rigidity (Romney).
Don’t confuse incompetent with stupid. They are not trying to “do a good job” as you or I would define it. Their incompetence is deliberate.
Not to make light of this serious topic, but remember this – Any average joe can make mistakes, but to really screw something up requires an expert.
They are not stupid – they are diabolical.
Crony Capitalism is a misnomer at best because it is anything and everything but Capitalism. An example of how Crony Capitalism works: Say you make a widget that is more expensive, bulky, and has few industry product manufacturers using your widget because it is more expensive and bulky and several other widget makers have a lot of cheaper and slimmer widgets they are happy to sell the the happy to buy them product manufacturers. As a result, your widget company is on the verge of bankruptcy. What to do? That one is easy. Bribe your Congressman to introduce Legislation that would require all products using widgets to buy your widget using some lame excuse promoting your widget more environmentally friendly than your competitors cheaper and better made widgets. The quickest way is for your Congressman to attach his/your Bill it to another bigger Bill everyone wants or is scared to not pass. Voila, overnight your near to bankrupt company is rolling in the big profits and your competitors are either going bankrupt or forced to spend billions on refitting their plants to make your expensive and bulky widget. For us consumers, the cost of the products that uses a widget have doubled; but not to worry, the Earth is saved from certain death do to a heat wave. Or better yet, just get your Congressman to subsidize the manufacturing of your widget nobody wants with free stimulus money.
Crony Socialism.
Not really a form of socialism, however, because property is largely left in private hands, even though regulation limits the owners of private property. Single payer health care would have been socialism; the mess created by Obamacare is crony capitalism because it leaves the system in private hands, but requires you to buy insurance.
I think what you are actually describing is National Socialism or what we commonly define as Fascism. In Nazi Germany, the government oversaw industry, picked the winners and losers, but left the actual operation of the companies in private hands. Thus you had industrialists like Flick and Thyssen becoming fabulously rich as long as they set aside a large share to Nazi overseers like Goering. I am not saying we are there yet, but there are some parallels in the way bundlers are getting rich as long as they keep filling the party coffers.
Without question. Crony capitalism is fascism as practiced, minus the snazzy uniforms and the police state.
I agree with your characterization. Cronyism, plutocracy, whatever you want to call it, is a feature of all societies at all times. But the question I think about is at what point does it become dominant – as in fascism, communism, monarchism, feudalism – or remain just an unpleasant, but not insurmountable feature, as is the case in all free market economies. Would we even recognize the point where the transition to the other side has happened?
Half full? Half empty? The same quantity, but apparently a different message.
Crony capitalism is the term I prefer to use, because fascism has so many connotations that it makes it difficult to get people to honestly and carefully analyze the corruption of what the Obama Administration has done. (They aren’t the first, but they seem to be the most blatant.)
Unfortunately for at least two generations crony capitalism has been the dominant mode of big business in America. Big-Ag, Big-Pharma, Banking/Wall Street, etc. do not compete in the market place as much as they compete in the halls of congress, the courts, and the regulatory agencies for favored legislation and rulings.
Wake up Americans! The U.S. governments at all levels are analogous to old hookers who have sold themselves to the highest bidder for years and years and are now riddled disease and without any virtue. Republicans and Democrats are both to blame and it is not realistic to think that they can fix themselves from within…because they are riddled with disease and without any virtue.
I completely agree with you. The problem is more pronounced in the Democratic Party, but it is part and parcel of much of the Republican Party as well, because you need campaign contributions to get elected, and the big contributions are usually given by either individuals or PACs who have something that they want.
Regulate a private industry until you destroy it.Government musts then take over that activity.Instant socialism. Worked with mortgages,healthcare, and finance.That’s crony socialism.
This is a very legitimate concern–that governmental regulation can destroy a private industry, creating pressure for governmental ownership. But in practice, it seldom actually goes all the way. Mortgages are as close as we have gotten to that so far. Fannie Mae and Freddie Mac became major players in the mortgage industry, but even today, there is still a large private mortgage market.
The government’s takeover of student loan financing might be a good example, but this was not because the private sector was regulated out of existence. The government simply passed a law making themselves the new originator of student loans. The existing private lenders continue to exist, and you can even get student loans still that have no governmental guarantee.
Healthcare is not a good example. This is still largely a private sector activity. Obamacare has the potential to destroy it, but it hasn’t happened yet.
Clayton – while the vast majority of health care provision in this country is still in private hands, over 50% of it (I’m not sure how much over) is paid for by some level of government or other, not even counting government employers paying for employee health care plans.
I have seen the claim that 44% of health care is paid for by the government. It has, however, not yet driven the private health insurance companies out of business.
Health insurance as it has existed for decades is the result of government intervention and as such is part of crony capitalism. A true free market would entail people paying directly for medical service that they used.
Thanks for an interesting augmenting to Daniel Hannan’s blog entry, http://blogs.telegraph.co.uk/news/danielhannan/100127395/crony-capitalism-is-failing-lets-try-the-real-thing/
Clayton,
As I’m sure you no doubt know Dickens was incorporating his own personal experiences and knowledge of the goings on of 19th century Britain (and probably the USA as well) into his stories.
Unfortunately once you cut away the facade of wedge issues like gays, rich-vs-poor, abortion, etc there really is nothing different from either political party and both are gaming the system to the advantage of themselves, their friends and their powerful benefactors (special interest groups, lobbyists, corporations, etc).
It is rather discouraging that here we are 100+ years later and so much has remained the same….
Best Regards
These “wedge issues” reflect real concerns that Americans have. I would not dismiss their importance.
The other problem, however, is also very real: widespread corruption of the political class in both parties.
Mercantilism is the right word. “Capitalists” making business based on political favors instead of earning their money in a free competition. Favors here mean: monopoly granted, annulation of competitors, taxes to “protect the national industry” from foreigner competition, subsidies to help the export (in the name of the public good, of course), hiper-regulation of the market to make difficult the entrance of newcomers.
All these favors can’t be given by private citizen, only by the government
Politics today is nothing but a contest between Parties over which side gets to control the redistribution of the spoils from 200+ years of the now defunct American Constitutional Republic that by virtue of individual freedom brought forth the most successful and prosperous peoples in the history of the World. Some people just can’t stand success and will do anything and everything to ensure its collective destruction. Others just want to be the boss (politicians); how they get to be the boss is irrelevant as long as they get there.
Some here will find this highly educational, and informative: District of Columbia Act of 1871 Defacto formed
http://www.youtube.com/watch?v=XPkauG6qE8k&am…