Al Gore Was Right About [Crony] Capitalism
While talking about capitalism last week, former U.S. Vice President Al Gore got it right.
On Thursday, he said this about the United States’ economic structure:
“While we believe that capitalism is fundamentally superior to any other system for organizing economic activity, it is also clear that some of the ways in which it is now practiced do not incorporate sufficient regard for its impact on people, society and the planet.”
Taken by itself, that statement is completely true: Capitalism is the best economic system available, and the version America has been practicing for years is badly flawed.
Gore’s stance becomes a bit murky when combined with remarks made by David Blood, his ideological partner, concerning short-term profit fixation. Apparently, the two men believe that discouraging businesses from releasing quarterly performance reports would somehow get the United States back on track.
With all due respect to both of them, that tactic would likely lead to just as many problems as we have now, if not more. What would have a much more positive impact, however, would be to abolish the deep-seated crony capitalism that has been going on in this country for decades now.
Because that’s truly the biggest problem with capitalism in the United States today.
Crony Capitalism At its Worst
Late last year, Garrett Baldwin, then the executive editor of Investment U, spoke with Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital and Euro Pacific Precious Metals, one of the few guys who managed to recognize the real estate bubble for what it was before it burst.
During the interview, Schiff commented that we have “a lack of capitalism,” since we’re running instead on “crony capitalism. It’s government interference and meddling in the economy that prevents capitalism from working.”
And several months earlier, David Stockman, former Michigan Congressman and Director of the OMB under Reagan, said the same: “I believe we no longer have free market capitalism and we no longer have a democracy… [America is now running on] crony capitalism.”
Mainstream Americans partially woke up to that fact last November, when “60 Minutes” aired a story based on Peter Schweizer’s book, Throw Them All Out. The show highlighted how Congressmen and women of both political stripes use the specialized industry information they receive to make a lot of money off the market.
In the business world, their actions would be labeled “illegal insider trading.” But since Congress writes the laws, it wrote that one in such a way as to exempt itself completely.
Embarrassed at the public anger directed at them after that news broke, both the House and Senate have since been working on the Stop Trading on Congressional Knowledge (STOCK) Act. But the American public shouldn’t get too excited, since lawmakers are quite clever enough to write just as many specialized loopholes into the new legal language as they did before.
And even if they didn’t, there would still be plenty of room for corruption, since Wall Street corporations benefit just as much from the crony capitalism saturating the markets as their buddies in Washington.
Wall Street is Just As Bad As Congress
After decades of bad behavior on the part of America’s representatives, Wall Street knows very well how to play the established system.
While some of the big banks bailed out under both Presidents Bush and Obama had to be coaxed and even bullied into taking their loans, car companies Chevrolet and General Motors went literally begging for their federal aid.
Admittedly, those were hard times, but even during economic booms, the various industries spend billions lobbying the Executive and Judicial Branches to get their way.
The aforementioned Schiff notes:
“If we had capitalism, none of the banks would have been bailed out. In fact, if we had capitalism, none of the problems that caused the banks to fail and need the bailouts would have existed in the first place. Capitalism would have prevented all this stuff from happening.”
That’s because capitalism involves a free market where businesses rise and fall on their own merit mixed with a bit of luck. Crony capitalism, however, works through bribes and brownnosing; only the powerful or the connected get ahead, and everybody else loses out in one way or another.
Whenever government and businesses start palling around too closely, it’s an all but guaranteed recipe for disaster. For solid evidence of that, look no further than the recent rash of failed solar companies, such as Solyndra, most of which received heavy doses of taxpayer funding... right before they went bankrupt.
That kind of behavior on both the part of Wall Street and elected leaders is a major factor in America’s rising debt and deficit problems. And this country won’t see fiscal solvency again until businesses and government alike acknowledge their proper places.
Jeannette Di Louie