The old robber barons were far from being free-enterprise men: J. P. Morgan and Andrew Carnegie, like many businessmen of their generation, believed strongly in state-directed collusion among firms (they’d have said “coordination”) to avoid “destructive competition.” You can draw a straight intellectual line from their thinking to Barack Obama’s views about state-directed “investments” in alternative energy or medical research.
…the capitalists are not prepared to offer an intellectual defense of capitalism or of classical liberalism. They believe in something else: the managers’ dream of command and control.
His claim is that many top corporate executives are naturally inclined toward progressivism.
Of course, we have known since Adam Smith that business leaders do not like markets and competition. What they like is protection and cronyism.
Progressives will engage in rhetoric against protected large businesses and cronyism, but that is not because they believe in markets and competition. What they believe in is industries that are organized and directed by government (e.g., Obamacare), which in practice devolves to. . .protected large businesses and cronyism.
I am skeptical of attempts, such as the Niskanen Center or ProMarket.org, to reach out to progressives. I would say to those who are trying this: don’t hold your breath waiting for progressives to reciprocate. They may favor you with a few status points, but their antipathy toward economic liberty will not abate.
I am not suggesting that an alliance with conservatives is the answer. There are many enemies of liberty among them, also. Moreover, reaching out to them will cost you status points with progressives.
Populism? I don’t think that the “keep your hands off of my Medicare” crowd is going to be our salvation.
All I can think of is to keep trying to explain the rationale for economic liberty, and hope that somehow amidst the din of all the outrage politics that the message gets through to some people and that they grasp it.
File this post under “being frustrated with those who disagree.”
The old robber barons were far from being free-enterprise men: J. P. Morgan and Andrew Carnegie, like many businessmen of their generation, believed strongly in state-directed collusion among firms
?????? I always thought the worst part of the legend of Jon Galt is he learned very quickly to use their money and influence to become the new version of the Taggarts. Wasn’t Bill Gates the Galt of the 1990s and now look at Microsoftie and Bill Gates Foundation? Wal-Mart was blazing the 1980s – 1990s and now they appear to have a good but not unique business anymore. Several points:
1) Successful businesses and societies benefit a lot from corporation. (especially in tighter labor markets) Look how well the various ‘Uber’ for (blank) have done the last 3 -4 years. Uber mostly thrived disrupting a ridiculous city taxi system and they are still losing a ton of money. So I think the jury is still out on them.
2) Assume the Political Parties policies are fluid. Back in the 1990s Democrats were supported more closed borders and less support for free trade. Donald Trump won with a different set of voters and part of the problem of Republican healthcare is these Trump Republican voters are significantly hurt. HRC was much more pro free global markets in the campaign than Trump. (Trump is taking the Republicans back to the Mckinley days.)
3) At times it appears that libertarian economist want to return to the eras of 1929 – 1932 were intense competition created 25% unemployment and lots of failing farms. It is awfully hard to explain to someone that capitalism is successful in those circumstances.
Populism? I don’t think that the “keep your hands off of my Medicare” crowd is going to be our salvation.
That crowd is who elected Trump in 2016 and gave the Republicans their majority! That crowd hated on NAFTA as well! ABut remember they vote the most!
Again, it does appear most developed and developing nations are several generations behind Japan society. In 2016, the US is slower than Europe or China but we are all following their trail.
Medicare is a system where people believe they are simply taking out what they paid in. We can complain about the actuarial economics of that statement, but its certainly what the man in the street has been told his whole life and he’s watched it deducted from his check for 40 years. He feels like the money “went somewhere”.
So ignoring the pay as you go aspect, Medicare is social insurance. People don’t view it as a welfare transfer payment, but something you’ve earned through your own taxes. They don’t view it as being “on the dole”, they view it as getting their money back.
They are also intensely correct to realize that most proposed cuts to Medicare aren’t going to be to cut the deficit or taxes or do something better with the money. In the case of Obamacare Medicare money was taken to pay for exchange subsidies mostly used by the poor and often non-white. If someone says, “I’m taking money out of the pot you paid into your whole life to pay off inner city people who hate you,” how exactly do you expect people to react.
It’s trite to say that the “get your hands off my Medicare” crowd wants to be a bunch of dole drawing layabouts. In fact interviews with Trump voters show an intense dislike for people on the dole. It’s more of a “get off my property” attitude.
Wealthy white women are going to outlive everybody. They get the money. That’s where it’s all going.
Wealthy white women who, for decades, spent money taken from their husbands, are looking forward to spending money taken from random young men who are stupid enough to have jobs. Complete strangers, males in their 30s, are on the hook to make sure that wealthy white women keeping going on cruise ships.
Free global markets? Hillary campaigned against them. Her line, in public, was that free trade was bad for jobs and wages. For her audience at Goldman Sachs, in secret, she said the opposite. And her team was briefing journalists overseas to ignore her public statements denouncing trade. Her secret plan, according to nameless sources, was for Congress to pass TPP against her stated objections. Her record as a Senator, on the third hand, is that she actually is anti-trade. So if she really believes something, it’s anyone’s guess.
I suspect the two-party system bifurcates the voters along economic lines and then a lot of rationales are constructed to fit the preferences.
the two-party system bifurcates
But the two-party system is fluid over time. Look at Ross Douthat tweets about Bill Clinton 1996 Democrat Platform. It is worth remembering they were more closed borders at the time and less interested in free trade. (We should remember a lot of Clintonism was protected by the Boom economy.) Trump was an unusual right center candidate that ran on protecting Social Security but really anti-Immigration and almost McKinley 1900 economics.
Look at Senator Obama. He was saying we have to “punish employers who choose to hire illegal immigrants.” He was talking about “undetected, undocumented, unchecked” immigrants who “pour” in, cut in “line” in front of people “waiting patiently, diligently, and lawfully.”
Two party is a side show. Big picture political, economic, and social trends happen all over the OECD whether its two party or proportional representation parliamentarian. Had the US implemented universal healthcare in the 1970s there wouldn’t be any substantial differences with the rest of the OECD.
Most view markets like nature, productive and useful, but best guided and nurtured to bring out their best and fulfill the many goals of mankind. Libertarians, worshiping at the altar of markets, tolerate no other gods before it. All goals must kneel before it. It exists as an apology to maintain the existing status quo and justify the powerful.
No, we just view markets as they are.
It’s not that pure free markets can’t be improved. It’s just very hard to stop at improvement.
The reality is that a free-market result will never be achieved unless it is packaged up in populist sentiment. Rationality doesn’t drive voter behavior, emotions do. Simply ‘explaining it better’ isn’t going to get there.
Where is the evidence of crony capitalism? “Crony capitalism” is a complete myth and a right wing talking point (“Hey, I don’t just oppose welfare, I also oppose CORPORATE WELFARE, that’s how principled I am”) Here is a list of large US business that have been through bankruptcy or seen its franchise seriously eroded or nearly gone bankrupt in the last 20 years: Sears, K-Mart, Borders, Tribune Company, GM and Ford, Kodak, Polaroid, Bear Stearns, Lehman Brothers, Washington Mutual, Washington Post, New York Times, Energy Future, virtually the entire US coal industry, Solyndra, Macys, virtually the entire US airline industry goes in and out of bankruptcy every few years, Enron, AIG, US West, Worldcom, Lucent, Digital Equipment, Novell, Apple, Compaq, etc etc. That encompasses everything from retail to media to manufacturing to banking to technology to transportation to utilities. Where is the crony capitalism?
You can’t say that GM and the banks got bailed out. The GM shareholders, lots of GM dealerships (Oldsmobile and Pontiac and Saturn), and some of the GM bondholders got wiped out. Or take Washington Mutual. Shareholders got wiped out, lots of employees lost jobs, and some bondholders got wiped out. Where is the crony capitalism? It doesn’t exist. It’s a right wing talking point.
Do you even work in corporate America? Most companies I’ve worked for are crony. Most things I’ve worked on were crony. Whole industries are crony. I wouldn’t even know where to start with someone who can’t see any crony capitalism wherever he looks.
Not only have I worked in corporate America, I’ve also worked as a political fundraiser, so I’m familiar with both sides of the “crony” equation. The fact that something is “crony” is no defense against a determined competitor and changing technology, as my many examples and a quick glane at a 1990 version of the Fortune 500 show.
Okay, but marginalism?
Are you saying crony capitalism doesn’t exist or is everywhere? Doesn’t matter or makes a difference?
It exists in some industries but it’s swamped by other factors, which creates the high turnover among the Fortune 500. Name an industry outside of healthcare or utilities that is “crony capitalist.” Technology? Retail? It’s hard to name an industry. You could name banking but remember that the ROE at Citi and Bank of America is in single digits. Goldman Sachs isn’t doing much better. A good example of crony capitalism is the mutual fund industry, which benefits from the complexity and limited selection of corporate 401k and IRA plans. But even the asset management industry is being decimated by Vanguard. Overall, the ROE for most of corporate America is around 10-12%, and that’s been true for a long time. It’s been going up recently but mostly due to the effect of low-capital technology firms like Google and Apple, which are not crony capitalist. So my argument is, name a crony capitalist outside of healthcare. It’s hard to do.
Depends on what you mean. A story I’ve told often is that I worked for a consumer products company. We used stringent quality testing. Our competitor used a useless test, resulting in their cause lots of problems. The government got involved. We proposed the industry standard test should be the one we use. The government chose the one preferred BY THE CULPRIT! I’d call regulator capture a form of crony capitalism.
But I don’t get where that is a right-wing talking point. It is usually a response to the left who claim capitalism itself is the problem.
I bet John Bogle would have lots of complaints about how Vanguard should have demolished the retail finance industry much faster.
And Fidelity should have come in to offer index funds that much sooner to compete with Vanguard, etc. etc.
I’ve used the point about turnover of fortune 500 companies before to counter the leftists who claim profit itself results in oligarchy.
Think about the position of a right wing pundit. He doesn’t want to talk about anything contentious, like immigration, gay marriage, foreign policy, etc. That could hurt his career and permanently lower his status. So he tries to find some uncontroversial but still conservative issue that he can bang on about and still remain respectable – crony capitalism! It’s a diversion. On the list of things imperiling the republic, crony capitalism is far down the list. That’s why it’s a tiresome right wing slogan. The two Carneys, Jay Cost, Williamson, Pethokoukis, they all seem to think that it’s an imminent danger threatening America, but it’s not.
Let’s the take the example you give, consumer products. Consumer staples are about the most profitable industry of all because consumer habits are very slow to change. A Crest user is probably going to brushing her teeth with Crest ten years from now. No amount of crony regulations are going to affect the profitability of tooth paste very much. It’s a non-issue, as it is in most industries.
FIRE + Healthcare + Education + Government = What % of the economy again?
And that’s just the ones where people won’t even argue much they are crony.
Some people want to know what most people don’t know. They will happily and eagerly grasp the message that the conventional wisdom is wrong, that the man in the street’s been misled by a myth. The man in the street doesn’t know that the real Herbert Hoover was an intervening, big spending, activist president. Write a book about that. The man in the street doesn’t know that Franklin Roosevelt somehow convinced himself that collusion is a good thing, and that price fixing works, and people don’t even know what Roosevelt himself knew by 1938, which was that these disastrous policies prolonged the Depression. Write a book about that, and people will buy it.
My 5th grade kid was talking to me about what he learned about the Great Depression. They taught him that Herbert Hoover just wanted to help businesses, but FDR wanted to help the people.
I’ve been so focused trying to deal with the Common Core math craziness that I completely ignored what was going on in other subjects.
I have a lot of work to do.
Don’t worry, education doesn’t work.
“The slogan into which the Nazis condensed their economic philosophy, viz., Gemeinnutz geht vor Eigennutz (i.e., the commonweal ranks above private profit), is likewise the idea underlying the American New Deal and the Soviet management of economic affairs. It implies that profit-seeking business harms the vital interests of the immense majority, and that it is the sacred duty of popular government to prevent the emergence of profits by public control of production and distribution.”
–von Mises, Ludwig. (1947) Planned Chaos
Or this view from 1950. I like the “government-guided enterprise”, but it apparently didn’t catch on as a label with economists today calling such “free market”. Although, with today’s intervention level, state-strangled enterprise would be more accurate.
“Is the big and successful corporation its own master, then? Not quite.
“To begin with, it is severely circumscribed by the government. as Professor Sumner H. Slichter has said, one of the basic changes which have taken place in America during the last fifty years [1900-1950] is “the transformation of the economy form one of free enterprise to one of government guided enterprise….The new economy,” says Dr. Slichter, “operates on the principle that fundamental decisions on who has what incomes, what is produced, and at what prices it is sold are determined by public policies.” The government interferes with the course of prices by putting a floor under some, a ceiling over others; it regulates in numerous ways how goods may be advertised and sold, what businesses a corporation may be allowed to buy into, and how employees may be paid; in some states with Fair Employment laws it even has a say about who may be hired. “When a piece of business comes up,’ writes Ed Tyng, “the first question is not likely to be ‘Should we do it?’ but ‘Can we do it, under existing rules and regulations?’ “He is writing about banking, but what he says hold good for many another business. Furthermore, in the collection of corporate income taxes, withholding taxes, social security taxes, and other levies the government imposes upon the corporation an intricate series of bookkeeping tasks which in some cases may be as onerous as those it must undertake on its own behalf. Thus the choices of enterprise are both hedged in and complicated by government. ”
—-‘The Big Change: America Transforms Itself 1900-1950’ (1952), Frederick Allen Lewis
I’m always surprised when people think that Atlas Shrugged was about how how businessmen are good, government is evil.
They miss the point. Sure, in Atlas, the State is gonna state.
Instead, the book is primarily about how businessmen *should* behave.