Moochers and Cronies
Here is the face of Corporate Cronyism in the Age of Obama:
An except from "A Nation of Moochers:"
In the HBO series “The Wire,” the ability to influence power is referred to colloquially as “suckage.” Those who had it stood to gain favors, indulgences, and protection from the political class; those who lacked sufficient “suckage” were left out in the cold. The concept may go by different names but the principle dominates the nation’s capital, giving rise to a new aristocracy of clout.
Consider the new Lobbying Class: they neither sow nor build; they manipulate; they curry favor with legislators; they cajole regulators; they appease administrations; and they multiply as government expands. Even as the rest of the economy stagnated, the new class has flourished. A machinist might find his job outsourced to India or China but for the seeker of political clout all roads lead to Washington, D.C.
“Lay out a picnic, you get ants,” explains the Cato’s Institute’s David Boaz, “hand out more wealth through government, you get lobbyists.”[i] As the Washington Post noted in 2008, the explosion in the lobbying industry was “an extension of the growth and reach of government,” which increasingly “has its tentacles in every aspect of American life and commerce.” As a result, “No serious industry or interest can function without monitoring, and at least trying to manipulate, Washington's decision makers.”[ii]
Although the Great Bailout of 2008-2009 defined the high water mark, corporate cronyism is responsible for the transfer of tens of billions of dollars of OPM every year. The influence lobby employs hundreds of thousands and pays out billions of dollars in salaries and fees. The list of corporate welfare queens reads like a Who’s Who of American capitalism: Pfizer, Boeing, General, Electric, Archer Daniels Midland, Goldman Sachs, AT&T, AIG, and General Motors. They employ vast armies of favor seekers who lobby for bailouts, pork, tax credits, mandates, waivers, and even new regulations on their own industries.
One of the dirty little secrets in the culture of “suckage,” is that many in business and the lobbying class, including those who espouse free market principles, actually like Big Government. In his letter to shareholders after the 2008 election, General Electric’s CEO, Jeffrey Immelt, wrote that the Democratic victories that year meant that the economy had been “reset.”
“The interaction between government and business will change forever,” he explained. “In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”[iii] He could have been writing a manifesto for the new corporatism in which business not only looked for subsidies, handouts, and cash to pad their bottom-lines, but also for rules, regulations and bureaucratic tripwires that would benefit companies like GE.
Given the usual complaints about such regulations from business this might seem counter-intuitive, but many of the largest companies actually welcome the new regimes. More regulations make it harder for competitors to horn in on market share because the very complexity and opacity of the spider webs of rules give insiders special access to the keys to the kingdom. Since the 1970s, “public choice” theory economists have recognized that “regulation is acquired by the industry and is designed and operated primarily for its benefit.”[iv] This is known as “capture theory,” which describes how business seizes and uses the regulatory regimes for its own bottom line benefit. Far from being hostile to government intervention, capture theory explains how the push for ever increasing regulation “is influenced by the incentives of legislators seeking campaign funding, bureaucrats seeking to expand their budgets and prestige, and business interests seeking advantages over their competitors.”[v]
[i] David Boaz, The Stimulus Lobbying Frenzy, Cato Institute blog, February 2, 2009
[ii] Jeffrey H. Birnbaum, “Mickey Goes to Washington,” The Washington Post, February 17, 2008
[iii] “The Great Misallocators,” What Barack Obama and General Electric have in common, The Wall Street Journal, January 26, 2011
[iv] George Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics, Spring 1971
[v] Joseph L. Bast, ‘Why Regulate,” Policy Brief, The Heartland Institute, October 2010