That is the purposely inflammatory title of my article this week at Forbes.com, finding the roots of crony capitalism not in capitalism itself, but in progressive legislation. An excerpt:
The core of capitalism has nothing to do with, and is in fact inherently corrupted by, the exercise of state power. At its heart, capitalism is one simple proposition -- free exchange between individuals based on mutual self-interest. There is no room in this definition for subsidies or special government preferences or bailouts. The meat and potatoes activities of crony capitalism are corruptions rather than features of free markets. Where state power to intervene in economic activity does not exist, neither does cronyism.
Believe it or not, the Occupy movement reminds me of nothing so much as 1832. Flash back to that year, and you will find Federal officials with almost no power to help or hinder commerce... with one exception: the Second Bank of the United States, a powerful quasi-public institution that used its monopoly on government deposits as a source of funds for private lending. The bank was accused of using its immense reserves of government cash to influence elections, enrich the favored, and lend based on political rather than economic formulae (any of this sound familiar?). Andrew Jackson and his supporters, the raucous occupiers of their day, came into office campaigning against the fraud and cronyism at the Bank.
Jackson, much like the current OWS folks, was a strange blend of sometimes frontier anarchist and sometimes tyrannical authoritarian. But in the case of the Second Bank, the OWS movement could well learn from Jackson. He didn't propose new and greater powers for government officials to help check abuses of the existing powers -- he proposed to kill the Bank entirely. Eliminate the source of power, and men can no longer tap it for their own enrichment.
Unfortunately, the progressive Left which makes up most of the OWS movement has taken exactly the opposite approach over the last century or so, expanding government powers and economic institutions (such that today the scope of the second bank seems quaintly limited) and thus the opportunity for cronyism. In fact, most of the interventions that make crony capitalism possible are facilitated and enabled by the very progressive legislation that the progressive Left and the OWS protesters tend to favor. Consider some examples...
I guess it's become de riguer to take a shot at Joseph Rago's editorial in the WSJ the other day, saying in part:
Some critics reproach the blogs
for the coarsening and increasing volatility of political life. Blogs,
they say, tend to disinhibit. Maybe so. But politics weren't much
rarefied when Andrew Jackson was president, either. The larger problem
with blogs, it seems to me, is quality. Most of them are pretty awful.
Many, even some with large followings, are downright appalling.
Every conceivable belief is on the
scene, but the collective prose, by and large, is homogeneous: A tone
of careless informality prevails; posts oscillate between the uselessly
brief and the uselessly logorrheic; complexity and complication are
eschewed; the humor is cringe-making, with irony present only in its
conspicuous absence; arguments are solipsistic; writers traffic more in
pronouncement than persuasion . . .
I haven't really posted on this editorial any more than I have posted on the commercials I hear every day for FM radio telling me how bad satellite radio is, and how much I should enjoy hearing 15 minutes of commercials an hour rather than paying $30 a month in fees. There is a consistent human behavior which tends not just to be threatened but to be outraged by upstart competitors. Remember this story on the milk cartel -- entrenched interests are flabbergasted that anyone would even attempt to compete with them in a new way. New competitors are not just bad and unworthy, they are portrayed as threatening all the good things that already exist.
Now that I am started, though, here are a few other random thoughts:
- It is inappropriate to compare single blogs to individual newspapers. The WSJ has hundreds of reporters, while most blogs have one. In making such a comparison, one is comparing a brain on one hand with a single brain cell on the other. Blogs have much of their value as a network or swarm, in how the individual "cells" interact with each other and complement each other. We might read one or two iterations of the daily fishwrap each day, but I read at least 30 blogs, all aggregated together for me in a convenient form by Google Reader. And these thirty are augmented by links that I follow to as many as a hundred other blogs each week to learn more about individual issues.
- I don't particularly disagree with this statement:
The blogs are not as significant
as their self-endeared curators would like to think. Journalism
requires journalists, who are at least fitfully confronting the digital
age. The bloggers, for their part, produce minimal reportage. Instead,
they ride along with the MSM like remora fish on the bellies of sharks,
picking at the scraps.
Few bloggers would disagree with this view that we depend on the reporting of the MSM for a starting point of much of what we do. However, I would probably argue that some of the scraps we are picking up are larger than Rago would concede. By the way, if you leave out a few papers like the NY Times, I could make the same accusation against 99% of the papers in this country, arguing that they are riding on the backs of the wire services, only doing a small percentage of their own reporting. What's the difference?
- One of the reasons there are so many scraps left for us blogger-remoras is that newspapers load up on people whose education and entire professional career is in writing and journalism, rather than in economics or business or law or science whatever they are writing about. You can just see the institutional hubris in Rago's complaint quoted above about the quality of the prose and the humor, longing for real journalists who can use logorrheic and solipsistic in the same sentence (not to mention four commas, five semi-colons, one colon, and one set of ellipses). So while newspapers load up on journalism and English majors who write lovely and witty prose, blogs are written by leading economists, legal practitioners and professors, successful business people, technology experts of every stripe, etc. etc. No newspaper, for example, has even one tenth the economic firepower the combination of Cafe Hayek, Marginal Revolution, the Knowledge Problem, and the Mises Blog, among many others, bring to my desktop. Ditto for Volokh / Scotusblog / Instapundit / Overlawyered / Tom Kirkendall on legal issues. [Update: Oh, and a lot of those other bloggers are, uh, journalists]
- One of the mistakes newspaper-types make in comparing newspapers to blogs is that they compare the reality of blogs with the ideals of newspapers, particularly on things like sourcing and fact-checking. However, it's becoming clear that this comparison is increasingly unfair, because the reality of newspapers is diverging a fair amount from their ideals. Of course, we all tend to fall short of our ideals. But what is worrying about newspapers is that those who purport to be gaurdians and watchdogs of these ideals are increasingly becoming appologists for their violation. How many times are we going to hear the "fake but accurate" response to blogger accusations of problems in MSM sourcing?
- I will concede that the Mr. Rago's employer the WSJ is one of the few newspapers that really understand how they create value, or at least are consistent in their value story and their pricing policy. If, as Rago and others argue, it is the reportage that is of value and editorializing is just the remora, then shouldn't it be the reporting behind the firewall and the editorials out front? This is how the WSJ does it, but for some odd reason the NY Times does it just the opposite: They let everyone have access for free to the output of their uniquely large and talented reporter pool, but put the confused economic rantings of Paul Krugman and Maureen Dowd behind a paid firewall. Huh?