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Crony Capitalism: There Is Nothing New Under the Sun

Does any of this sound familiar?  Dickens, of course, is having fun with this, but he is describing a surprisingly common problem throughout history: crony capitalism. Most Americans are unaware of how common this is, and not just in the Obama administration.  Some of the earliest Supreme Court decisions concerning the meaning of the Constitution’s interstate commerce clause come out of a monopoly granted by the state of New York to two individuals to operate steamboats between New York and other states. When New Jersey challenged the monopoly, by granting others the right to operate steamboats between the two states, the U.S. Supreme Court ruled that a state could not grant a monopoly involving interstate commerce.

But while state authority to grant monopolies in interstate commerce did not survive, a great many arrangements remained involving strictly intrastate commerce -- and some survive today.  The states lost power over interstate commerce. Congress made similar, often corrupt, and frequently unseemly deals involving the expansion of the railroads across the United States.  The size of these grants is staggering: the Union Pacific received land roughly equal to “New Hampshire and New Jersey combined.”  Kansas Pacific received land as large as Vermont and Rhode Island.  A total of 131,230,358 acres of government land were granted to the railroads -- or more than 205,000 square miles.  You can see why sleazy maneuvering in Congress concerning railroads is a constant part of the nineteenth century -- and why railroad companies abusing their enormous economic power was a big part of what drove nineteenth century populism.

President Obama recently compared his administration’s promotion of green energy to the federal government’s encouragement of the “intercontinental railroad.” (He meant “transcontinental railroad,” but we can’t expect someone as poorly educated as Obama to know the difference.)  It is an apt comparison: we gave away an enormous amount of land to promote development, accelerating westward expansion and the inevitable collision with the Plains Indians.  There is no question that, one way or another, conflict between the expanding United States and the Indians was going to happen -- but you do have to wonder if it would have been as fast or destructive in its results, without the federal government’s subsidies to railroads.

You also have to wonder if the concentration of wealth that is part of the Gilded Age at the end of the nineteenth century would have been quite this extreme, without those land grants.  Cornelius Vanderbilt, one of the great robber barons of the time, was a steamship and railroad tycoon.  Obama and the other apologists for crony capitalism (or as they imagine it, government encouragement of the common good) seem completely unaware that interfering with the free market can have very destructive effects -- even if a bit more subtle than Nicholas Nickleby’s “United Metropolitan Improved Hot Muffin and Crumpet Baking and Punctual Delivery Company.”