9/11/11

Progressive Crony-Capitalism EXPLAINED!

There'd be no cronies without anti-capitalists in public office to cozy up to
Viewed in isolation, the Solyndra story is mildly troubling. But it is nothing Washington has not seen before. The late, great columnist Molly Ivins wrote some crackerjack pieces about the return on investment that corporate sharpies used to get from their campaign donations to Republican politicians. The Solyndra story sounds like the same old, same old.

Except it isn't. The Solyndra story encapsulates a much bigger issue than mere crony capitalism, bad as that is. Because Solyndra is not alone. The Obama administration has sunk billions into loan guarantees for dozens of other renewable-energy companies as well.

This is known as the political allocation of economic resources, and it entails all kinds of problems. The first and most basic: It's wrong. Government should not be picking winners and losers in the marketplace.

Problem No. 2: corruption. When government puts its massive thumb on the market scale, corporations have a huge incentive to try to win government's favor. Hence: campaign contributions and lobbyists galore. Progressives who want to keep money out of politics should help libertarians build a high wall between economy and state.

Problem No. 3: the distortion of market incentives. Although federal policy was far from the only reason for the recent housing bubble and crash, it played a significant role. And even when market intervention does not produce a crash, it can still produce a creature like the Chevy Volt—an electric vehicle for which there is zero demand despite a whopping $7,500 federal tax credit for purchase—or Cash for Clunkers. That idea, now universally derided, seemed bright at the time, at least to some. In retrospect, it seems as smart as paying people to burn down their houses to stimulate demand for new ones.
(full story at reason.com)

No comments:

Related Posts with Thumbnails