The Failure of Crony-Capitalism
Will Bunch is always worth a close read, and his piece in the 12 May Philly Inquirer (h/t to anonymous in the Thursday Open Thread) is no exception. I’ve had this open in a tab since last night and have been thinking alot about his question: Money monster: What if the problem’s not the candidates but capitalism?
Taking a look at 3 clear trends — the reduction in retail jobs because of more online shopping; the worldwide reduction in manufacturing jobs due to better productivity (read: machines) and the easy disrespect of American workers (especially low skilled ones) exhibited by employers — Bunch wonders if we aren’t as much dissatisfied with our candidates (and their proposed solutions) than we are unhappy the very broken state of capitalism. That’s a great question. I’ve noted frequently that Bernie and Trump supporters are have similar economic anxieties, but with very different reasons for and approaches to fixing those anxieties. Bunch cites Time Magazine asking this question:
This crisis of faith has had no more severe expression than the 2016 presidential campaign, which has turned on the questions of who, exactly, the system is working for and against, as well as why eight years and several trillions of dollars of stimulus on from the financial crisis, the economy is still growing so slowly. All the candidates have prescriptions: Sanders talks of breaking up big banks; Trump says hedge funders should pay higher taxes; Clinton wants to strengthen existing financial regulation. In Congress, Republican House Speaker Paul Ryan remains committed to less regulation.
All of them are missing the point. America’s economic problems go far beyond rich bankers, too-big-to-fail financial institutions, hedge-fund billionaires, offshore tax avoidance or any particular outrage of the moment. In fact, each of these is symptomatic of a more nefarious condition that threatens, in equal measure, the very well-off and the very poor, the red and the blue. The U.S. system of market capitalism itself is broken…
He sums up:
Maybe now it makes sense that voters respond so well to Bernie Sanders’ call to break up the big banks, even if the details are fuzzy. Not to mention Trump’s talk on trade, not that I think that’s the main reason for his support. But for all the horrible things that we’re saying about the 2016 race, the scariest thought may be a thing that we’re not even talking about. What of the likelihood that the next president — regardless of who he or she may be — can do almost nothing to stop the slow, steady rot of capitalism as it’s practiced in the 21st Century?
You think the torches and pitchforks are out now? Wait until 2020.
Interesting. But I’d specifically put the finger on the failure of crony-capitalism — the bought and paid for government support of a system of commerce that is only concerned for itself and is meant to benefit the 1%. This is the system that Ronald Reagan started making possible (with Democrats following along). I’m not sure that we’ve ever lived with laissez faire capitalism, but for much of the 20th century, American economic policy specifically privileged the building and maintenance of a middle class. 30+ years after Reagan started privileging businesses (and the government) in this equation, we are at the point where the middle class is officially shrinking. Which for middle and working class people, feels like the American Dream is more of a reach because the structural inequality and more restrained economic mobility is now baked in the cake. That, of course, benefits the 1%, but does not benefit (and provides no incentives to benefit) the people who are creating all of this value.
I’m not entirely certain how to fix it. This did not happen overnight and won’t get fixed overnight. Reducing the amount of money Americans pay for health care is one piece. Eliminating tax policy that provides a reduced rate to those in the shadow banking business is another. Stop incentivizing the movement of companies overseas. Stop incentivizing the mistreatment of labor. Stop subsidizing low wage work. Insist on corporations paying their fair share of taxes. Take on an investment in infrastructure like it was the old race to the moon.
More?
Good post, Cassandra.
I think it would be a hard sell, but I do think under the right circumstances the American people in the fairly near term could buy into some resilient form of social democracy. And that would be far better for millions of Americans than what they experience now.
I also believe that one integral component is strengthening the ability of unions to organize people in the workplace. That could easily prove extraordinarily difficult in the USA given the widespread distrust of unions by the populace, a distrust facilitated by economic and political interests and, to tell the truth, partly the unions themselves. Nevertheless, all the successful social democracies have a high percentage of union representation in their workplaces.
Also, somehow the Gestalt in America needs to change from looking on corporations almost exclusively in terms of opportunities for owners to experience a near monopoly on liberty and to think of them as entities whose permitted existence entails the consent that a portion of their revenue will, through taxation (as well as their conduct within the workplace through regulation), be used to serve social good.
Finally, publicly financed elections. Dear God, that one should be a no brainer.
I do think that we have internalized the mythology that the wealthy and the corporations that they control can’t be taxed any higher or they will just raise their prices and “get their money one way or another”. The myth extends to almost everything, from minimum wage to closing tax loopholes. That, too, is a Reagan legacy. The number of people that I see struggling at $16/hour screaming about “lazy fast food workers” that want $15 is mind-boggling.
^^^
Yes.
The thing that this does, though is fixate on one pot of money — that money that comes from consumers. The alternate pot of money, of course, is the profit pot. The money that accrues to shareholders and owners. Plenty of these folks would still be plenty well off if they spent part of the value that accrues to them on taxes or better wages.
Costco does it.
After years of my liberal evangelizing, in a home that doesn’t even get FOX News, I find my own wife and son are opposed to increasing the minimum wage. My wife said sincerely and with horror, “If the minimum wage goes up, won’t PRICES GO UP?” And my high-school son who is starting his first job tomorrow at minimum wage, thinks that is plenty.
*bangs head on wall*
The problem is that ALL capitalism is crony capitalism–and I say that as a libertarian.
There is plenty of theory about capitalism as a pristine economic system, but absolutely zero evidence that capitalism can survive without State support.
The reason for this, as Fernand Braudel, Immanuel Wallerstein, and Manuel da Landa have repeatedly shown, is twofold.
First, capitalism is not synonymous with competitive free markets. Free markets pre-existed capitalism, and most participants in markets (going back to medieval times) welcomed a certain amount of government regulation for a whole variety of reasons. Market economies and capitalist economies are different animals; markets refer to a competitive process wherein goods are voluntarily exchanged.
Capitalism emerged in the 15th-18th Century as various extended families, banks, and eventually nation-states began to treat capital itself as a commodity to be amassed and used to (primarily) anti-competitive advantage. (The need for amassing large amounts of capital came from many sources–one was the rise of expensive siege artillery and the general advancements in large-scale pre-industrial revolution production that started happening in the 15th and 16th Centuries.)
From its inception a key element of successful capitalists has been acquiring not only the protection of the State, but preferential treatment in terms of borrowing, lending, licensing, tax breaks, tax farming, protectionism, appointments, etc. Pretty much everything you’ve seen modern “crony” capitalism do in the latter half of the 20th Century on has been part of all capitalism from the get-go. With one major exception: the development of the limited liability corporation with complete fictive personhood. That the US can claim legitimate credit for.
I would take exception to the title of cassandra’s otherwise excellent post. Crony capitalism has not “failed.” It has done EXACTLY what crony capitalism has to do in order to succeed: keep labor costs as low as possible no matter what it takes; eliminate all forms of emergent competition; “partner” with the State both in terms legal and not-so-legal, and contrive a tax system that is not only essentially regressive in its collection, but functionally redistributes society’s wealth upward.
“Reducing the amount of money Americans pay for health care…Eliminating tax policy that provides a reduced rate to those in the shadow banking business…Stop incentivizing the movement of companies overseas… Stop incentivizing the mistreatment of labor… Stop subsidizing low wage work… Insist on corporations paying their fair share of taxes. Take on an investment in infrastructure….”
I think Cassandra is feeling the Bern!
@SN “The problem is that ALL capitalism is crony capitalism–and I say that as a libertarian.”
This is also a problem that many countries do not have. China is a prime example. One reason they can get so much done is that the major corporations do not control the party elites. The system of legalized corruption (i.e. buying politicians) is instead replaced by one of illegal corruption. But the net effect is a positive one.
Example… China has built more than 12,000 miles of high speed rail. It’s done that over the objection of many special interests… but none of it had any real effect (but the illegal corruption scandals sure did). Now they are building ultra-fast lines (Japan too).
But in America, there is an anti-rail lobby spearheaded by the airline industry and the oil companies. And as a result, taxpayers “give” about $50 billion per year to prop up the airline industry and less than $2 billion for all rail spending.
As a result, we have no high-speed rail at all, while the rest of the world passes us by in a spectacular manner. Rest assured… There will be a price to pay for our “legal” corruption.
@LE: Aren’t you the same person who thinks Wasserman-Schultz is just fine despite the fact that she takes money from the payday loan industry? Are you for this corruption or not? Or does it only matter when Republicans do it?
Or are you arguing for totalitarian government?
@a “Aren’t you the same person who thinks Wasserman-Schultz is just fine despite the fact that she takes money from the payday loan industry?”
If I started hating politicians based on who donates money to them, I’d have to hate them all. Sure… Rent seekers that prey on the poor are some of the worst sort, but hardly as damaging as the military industrial complex rent seekers pushing bogus and worthless weapon systems.
“Are you for this corruption or not?”
Hell no. I’m all for getting money (especially dark money) out of the system, but I don’t really see that as any sort of realistic goal.
“Or are you arguing for totalitarian government?”
Hell no, but there ARE things that totalitarian governments do better than we can do. And so there is something to learn from them. To turn a blind eye to what they do better is a kind of arrogance and stupidity that affects way too many Americans.
At least we should all see the price we pay for our legalized corruption system.
“we have to change when change really isn’t warranted.”
LE we are apparently living in two different Americas. A decade ago it was conventional wisdom that our existential challenge was the deficit. Now we know that our existential challenge all along is to reverse the decline in wage incomes, expand the middle class, and complete unfinished business in minority and women’s rights. Obama can’t do all of that with executive orders; a wave election is needed.
Obama’s round of executive actions in the final quarter of his Presidency was welcome, but realize that he was liberated to do that because he no longer needed to run (and raise donor money for) for reelection. We all liked “no longer gives a f**k” Obama.
The zeitgest is moving left on the economy. Hillary has shown through her rhetoric that she understands that, but we need her to “not give a f**k” on Day One, without being inhibited by her donors, and we need Congress on the same page.
@p “Obama can’t do all of that with executive orders; a wave election is needed.”
I don’t see how that is possible… except for the GOP side. You want that wave?
Look… For this election, I’m happy if everything doesn’t go into the dumper.
“Look… For this election, I’m happy if everything doesn’t go into the dumper.”
No wonder you’re so jumpy.
I have to disagree strongly with this assessment. I think it’s highly possible that Trump could be rejected in a tsunami. Yes, he’ll win the South, but I can’t believe that a majority of voters will elect him. If they do, then the European aristocrats who laughed at democracy will have been proven right.
Any other Republican would get the benefit of the party’s voting-machine chicanery. But I don’t think they’ll wheel it into battle for a guy they don’t trust.