How Govt & Business in Cahoots Destroys Legitimate Competition

Charles G. Koch is chairman of Koch Industries and has written an impassioned defense of free markets in the face of "cronyism" practiced by the Obama Administration. They used to call it "Corporatism" or "Corporativism":

Italian Fascism involved a corporatist political system in which economy was collectively managed by employers, workers and state officials by formal mechanisms at the national level.[33] This non-elected form of state officializing of every interest into the state was professed to reduce the marginalization of singular interests (as would allegedly happen by the unilateral end condition inherent in the democratic voting process).wiki-corporatism

Even though it would denigrate or eliminate voting, FDR admired it in Mussolini's Italy until Benito linked up with Hitler in the late '30s:

Businesses have failed to make the case that government policy—not business greed—has caused many of our current problems. To understand the dreadful condition of our economy, look no further than mandates such as the Fannie Mae and Freddie Mac "affordable housing" quotas, directives such as the Community Reinvestment Act, and the Federal Reserve's artificial, below-market interest-rate policy.

Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.

With partisan rhetoric on the rise this election season, it's important to remind ourselves of what the role of business in a free society really is—and even more important, what it is not.

Koch goes on to elaborate:

Only societies with a system of economic freedom create widespread prosperity. Studies show that the poorest people in the most-free societies are 10 times better off than the poorest in the least-free. Free societies also bring about greatly improved outcomes in life expectancy, literacy, health, the environment and other important dimensions.

So why isn't economic freedom the "default setting" for our economy? What upsets this productive state of affairs? Trouble begins whenever businesses take their eyes off the needs and wants of consumers—and instead cast longing glances on government and the favors it can bestow. When currying favor with Washington is seen as a much easier way to make money, businesses inevitably begin to compete with rivals in securing government largess, rather than in winning customers.

We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.

When government subsidizes one company or industry, it tilts the playing field, Koch avers. Business, legitimate businesses, that is, suffer from this tree rot of cronyism:

Because they have the advantage of an uneven playing field, crony businesses can drive their legitimate competitors out of business. But in the longer run, they are unsustainable and unable to compete internationally (unless, of course, the government handouts are big enough). At least the Solyndra boondoggle ended when it went out of business.

By subsidizing and mandating politically favored products in the energy sector (solar, wind and biofuels, some of which benefit Koch Industries), the government is pushing up energy prices for all of us—five times as much in the case of wind-generated electricity. And by putting resources to less-efficient use, cronyism actually kills jobs rather than creating them. Put simply, cronyism is remaking American business to be more like government. It is taking our most productive sectors and making them some of our least.

This is known in the the monetary world as the bad coinage driving out the good. I forget the economic name for the effect, perhaps it is Gresham's Law & I will google to check. And government suffers from this as much as business, because corruption from patronage swells the government bureaucracy with useless layabouts:

The effects on government are equally distorting—and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.

Subsidies and mandates are just two of the privileges that government can bestow on politically connected friends. Others include grants, loans, tax credits, favorable regulations, bailouts, loan guarantees, targeted tax breaks and no-bid contracts. Government can also grant monopoly status, barriers to entry and protection from foreign competition.

Whatever form these privileges take, Americans are rightly suspicious of the cronyism that substitutes political influence for free markets. According to Rasmussen, two-thirds of the electorate are convinced that crony connections explain most government contracts—and that federal money will be wasted "if the government provides funding for a project that private investors refuse to back." Some 71% think "private sector companies and investors are better than government officials at determining the long-term benefits and potential of new technologies." Only 11% believe "government officials have a better eye for future value."

To end cronyism we must end government's ability to dole out favors and rig the market. Far too many well-connected businesses are feeding at the federal trough. By addressing corporate welfare as well as other forms of welfare, we would add a whole new level of understanding to the notion of entitlement reform.

His final line is Koch's assessment of this sham of a President, who is trying to subvert business with a judo move that uses many businesses' greed to immerse themselves in government labyrinths seeking where to curry favor. In the end, it's either Congress or the White House. In this sorry Administration, it's the White House, although the ObamaCare fiasco was largely Pelosi, the Wicked Witch of the West. But Koch ends with a coda of exhortation:

If America re-establishes the proper role of business in society, all kinds of benefits will accrue. Our economy will rebound. Our liberties will be restored. And when President Obama tells an entrepreneur "You didn't build that," everyone will know better.

Along with his remark to Joe the Plumber that we should "spread the wealth around," Obama's slap in the face to small business implying that without patronage of some sort or another, they are helpless, both demonstrate this Amateur's disdain for business, or rather his contempt. Contempt from the Contemptible: sort of sums up Obama in four words.