Socialism, Corporatism, and Capitalism

The traditional political debate in America saw economic matters as being between two forces- Soviet style Socialism, or free wheeling capitalism. But over the past few decades, the battlefield has shifted, to resemble the struggle that occurred in the Gilded Age of 1880- 1900, between Teddy Roosevelt populism, and the entrenched oligarchy. In this new debate, Glenn Beck ends up being on the opposite side from David Brooks, and Glenn Greenwald sits opposite Dianne Feinstein.

In short, the concept that there is a battle between free market capitalism and Soviet style Socialism is wrong headed, because it ignores the third, more venomous entity, which is corporatism, or crony capitalism, whereby the powerful and connected entities merge forces with the State to destroy the competition of the free market- in short, ensuring that the market becomes not free, but rigged in favor of a select few.

In the American Enterprise Institute’s current issue, Brad Delong makes some insightful comments on crony capitalism, quoting at length from Prof. Luigi Zingales’ article in Foreign Affairs, “Capitalism After the Crisis”. Likewise, Simon Johnson’s article “The Quiet Coup” regarding his experience at the IMF, compares the US economy to the banana republics and Third World oligarchies that he dealt with.

Liberals who rail at “capitalism” or the “Wall Street Bankers” miss the picture; Tony’s Pizza on Main Street is not oppressing anyone; Tony probably provides an example of freedom and upward mobility that liberalism only talks about. And Lehman Brothers was as much a Wall Street player as anyone; but Lehman didn’t have Goldman’s Washington connections as pointed out in Matt Taibbi’s Rolling Stone piece  .

But conservatives who strain to pin all economic ills on government regulators and bureaucracies or who defend private corporations as proud John Galtian heroes likewise overlook the willingness of the business community to destroy the very capitalism they claim to defend.

Probably nowhere is the pernicious effect of corporatism seen than in government contracting. Someone once asked the bank robber Willy Sutton why he robbed banks. He is said to have replied, “because that’s where the money is.”

Government contracting is where the money is. Everything from military procurement, to road construction, to accounting- it is all contracted out by federal state and local jurisdictions, sometimes with capable oversight, but often without.

The recent ACORN scandals inadvertently point this out; shutting off the flow of funds to fraudulent contractors will have the effect of shutting down the entire military procurement system. It is not disputed that many military contractors- Halliburton, DynaCorp, Blackwater, Boeing, McDonnell Douglas- have defrauded the government time and again.

Likewise, no matter who comes or goes in Washington- liberal or conservative, Democrat or Republican, it is a fact that the Treasury Department will be staffed by Goldman Sachs alumni, who all are waiting until the day they can return to their natural home on Wall Street.

For anyone who views the capitalist system as offering freedom and opportunity, corporate America must be regarded with suspicion and skepticism. Not reflexive opposition, not antagonism, but healthy skepticism. Corporations do not have principles, they do not have ideals, they do not have beliefs. They only have interests which must be served. Patriots and citizens must have principles first and foremost.

There are plenty of ways to pursue capitalism without surrendering to private corporate interests; the best way to begin is to demand full transparency in government’s dealings with private interests such as Goldman, ACORN, and Halliburton. “No Bid” or secret contracts, revolving doors of consultancy, are all an open invitation to a cesspool of corruption and favoritism. The concept of “too big to fail” should mean “too big to exist.” Any entity that has a unilateral ability to destroy the nation’s economy should, by definition, be broken up into smaller more competitive units.

Mostly, we need to recognize that there are other choices between liberal special interests and business special interests.