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12/18/2008
THE RICH GET RICHER IN A VERY UNCAPITALIST WAY

I am not a leveller. I am not a class warrior. I believe that the free market should set pay scales for everyone from janitors and secretaries to the CEO’s of large corporations. I believe the government has no business telling corporations how much to pay their CEO’s or top management. Nor should government be in the racket of giving an advantage to labor unions in negotiations by doing away with the secret ballot and forcing unions down the throat of unwilling business owners.

But what happens when the rich corrupt the market and make their own rules? What happens when powerful interests interfere with the workings of the market and make a mockery of fairness, accountability, and common sense? This is where the libertarian, laissez faire capitalism model falls on its keister and fails to do its job. When companies are so big that their movements can overwhelm the natural balance that the free market seeks to impose on all, some other entity must step in to restore that balance.

We conservatives have been loathe to see government interference in the free market of any kind, deeming such nosiness as anti-business and anti-capitalist. Indeed, many regulatory efforts by the government are counterproductive to competitiveness and inimicable to simple liberty. But there is also something to be said for a government that works to keep that balance offered by the free market by not allowing things to get too far out of whack.

The problem is that much government regulation is written by the very people it seeks to regulate. One of the dirty little secrets in Washington is that of the thousands and thousands of proposed regulations published in the Federal Register every year, very few are enacted without “input” from lobbyists representing the interests being affected. This input goes far beyond the comments requested when proposed regulations are published. In fact, the regulator and the regulatee often have an incestuous relationship where much of the language upon which a regulation is based - regulations that have the force of law - is inserted by well heeled industry lobbyists who are allowed into the process due to their expertise.

There is nothing inherently wrong in this. In fact, such a right is guaranteed in the First Amendment’s “right to redress grievances.” The problem is that many of these regulations are written to choke off competition, not protect or expand it.

But that’s only half the problem. Government has become complicit with these anti-competitive forces in Congress as well. The insertion into an innocuous piece of legislation of a tax rider that grants a specific corporation a break on some arcane IRS rule. Business cronies of members who are steered to the right people in the bureacracy who can throw a federal contract their way, thus making a mockery of the competitive bidding process.

The point is simple; when government (and I include government headed by Democrats as well as Republicans) puts itself on the side of the rich and powerful instead of on everyone’s side - rich, poor, business, labor, the middle class - the market becomes skewed and we end up with the kind of crisis and bailout mania that we have now. To those who say on both sides that the government must “choose” whose side to take, you are missing the point. If the government took the side of the market and generated regulations and legislation that increased competition, fairness, and accountability, we would not be in the situation we are today. All would benefit from that kind of government and prosperity for most would be the norm.

George Bush didn’t want that kind of government. Neither does Barack Obama who thinks he can skew things toward the poor and Middle Class rather than the perceived favoritism shown toward the rich and large corporations. The problem with Obama’s good intentions is that without massive reform in the bureaucracy and on Capitol Hill, the rich will simply go on making their own rules that either exempt themselves from market forces or make it harder for their competition to do business.

Is it a pipe dream to envision this kind of reform? Given the cynicism and venality we find in official Washington today, such reform is probably impossible. We have allowed corporations to grow beyond all reasonable bounds and it is impossible to reign them in given their international reach and massive influence on the government. Then there are the titans of finance like Maddoff who are so rich, they can make water flow uphill by getting regulators to look the other way while he steals tens of billions of dollars.

I am not complaining that Maddoff is rich. More power to him if he gambles successfully in the stock and commodities market. But his lawbreaking highlights the unfair advantage that accrues to the rich when they can bend government to their will and warp the competitive marketplace to their wn advantage.

These rather disjointed thoughts are largely the result of the $8 trillion in bailout money that has been handed to these corporations with little more than a hope and a prayer that they will use the funds in a responsible manner. The fact that most of the managers and CEO’s whose unconscionably reckless and - dare I say - greedy actions got us in this mess in the first place still have jobs at these companies does not give me confidence that anything will change. In fact, many of these top managers gave themselves large bonuses on top of their huge salaries.

In a true market economy, those guys would have trouble getting a job picking fruit. But today, they are rewarded for hastening the end of the free market in America and the arrival of the Plutocracy.

By: Rick Moran at 1:33 pm
8 Responses to “THE RICH GET RICHER IN A VERY UNCAPITALIST WAY”
  1. 1
    Chuck Tucson Said:
    2:52 pm 

    Well said, Rick.

  2. 2
    funny man Said:
    7:37 pm 

    Government has to continuously set the rules so that FAIR competition is possible. That is always murky business. However, failure to do so would lead to monopolies and robber baron capitalism. Of course this is different in today’s world than in Rockefeller’s. I would maintain that capitalism is only viable because it can constantly correct itself and the government certainly has to play a role. If the ability for correction wasn’t there, Karl Marx would have been right.

  3. 3
    endorendil Said:
    8:09 am 

    Welcome to the modern socialist fold, Rick. Yes, the government is the only way that “the rest of us” have to counteract the vast power wielded by large corporations and wealthy individuals.

  4. 4
    endorendil Said:
    8:30 am 

    ”I am not complaining that Maddoff is rich. More power to him if he gambles successfully in the stock and commodities market. But his lawbreaking highlights the unfair advantage that accrues to the rich when they can bend government to their will and warp the competitive marketplace to their own advantage.“

    This is topical, but misguided. Madoff didn’t rely on legal loopholes he helped create. He simply worked hard and very smart (he was a real pioneer in electronic trading) to become a respected rich man in the financial industry. But when things started going badly, he started cheating, and found that this was very easy to start, but hard to stop. This is just human nature, and the only thing that guard against it is overzealous, overbearing regulators. And yes, they have to be overzealous and overbearing. How else would you describe them, since they have to assume that even the most intelligent, hardworking and respected investment fund manager can turn into a common crook at any point in time.

  5. 5
    sara Said:
    9:44 am 

    This piece should be discussed in every history/government/economics class in the country. Bravo.

  6. 6
    laura Said:
    3:28 pm 

    Good points, Rick. I agree with you. I think the laws have already been put in place to grant unfair leverage and benefits to certain groups. That’s not free enterprise. Free enterprise would allow an “up and comer” - a “Joe the Plumber” to step in and take market share with hard work and without someone having an advantage over him through bureaucracies, legalities, technicalities, and others gaining tax-favored status, etc., etc., etc.

    We need a very small government without INFLUENCE to peddle.

    And anti-monopoly statutes are not interference in free trade. If monopolies are used to stifle free competition, laws are needed to protect free competition.

    I’m sick of all the favoritism. Now, to get rich quick, just go through the government. They’re pooling all the money and the government, not the markets, decide who will be rich. I don’t believe Obama is for the middle class. He’s just playing the middle class to give the wealth to his fat cat friends like Blago does. It’s how government really works.

    Great blog.

  7. 7
    Tim Said:
    12:43 pm 

    Thank you for this post, Rick. As a dem, there was a time when I couldn’t say what you just said on a righty blog without being called a left-wing socialist. I’m glad to hear that someone on the right can see this for what it really is.

  8. 8
    DoorHold Said:
    5:03 pm 

    Often, such legislative abuse *eventually* gets corrected. The credit industry helped re-write laws to their advantage not too long ago, and corrections are just now being implemented. Checks and balances are in place and work, but in the short term, things can get out of hand.

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