Courtesy of Pater Tenebrarum of Acting Man
A Growing Sense of Awareness – Public Opinion is Catching On
A friend pointed us to two recent Rasmussen Reports polls. These are actually quite interesting: in one poll it was found that “70% Think Government, Big Business Often Work Together Against Consumers, Investors”, with only 13% of respondents voicing disagreement and 17% 'not sure'. In another poll that was worded slightly differently (although it actually asks a very similar question), it was found that “34% Say U.S. Has Crony Capitalist Economic System”, with only a slim majority of 36% still calling it a “system of free market capitalism”.
The first poll employed slightly more general terms and was therefore probably more accessible to a larger percentage of respondents, which may explain the lower share of 'don't knows'. To some extent negative knee-jerk reactions to the term 'corporation' are probably conditioned by leftist views, but no supporter of free market capitalism would deny that the current system is a far cry from a true free market economy.
It is of course well known that large corporations lobby to obtain privileges from the State; however, in a way many also have little choice in the matter, since they may otherwise become the victims of regulations that could severely hamper their business. It is often difficult to tell where a legitimate attempt to ward off statist intrusion ends and crony capitalism begins. It is certainly a fuzzy line that is separating the two. It would also be an error to condemn big business merely on account of it being big. Economies of scale have after all made the mass-market consumer economy possible. It is often difficult for defenders of the market economy to make the difference between crony or State capitalism and a free market clear, especially as the media have depicted the existing system as somehow representing a free market economy. However, it should be clear that if there were no State and State officials that could be petitioned ('bribed' probably is the more accurate description) to grant privileges, there could also be no 'State capitalism'.
The growth of the State and the thicket of costly regulations it issues benefits large corporations by making it difficult or impossible for upstarts on a shoestring budget to compete. It happens relatively rarely that a company grows from a 'garage business' to a huge concern in well-established business lines. Most of the success stories of upstarts are these days in branches where simply very few or no established businesses exist – think e.g. of Google. Who knew in 1990 what a 'search engine' was? Whenever new technologies are invented or become marketable, there has been no time yet to regulate the sector to death. The internet was referred to as the 'intertubes' by a Congressman as recently as two years ago. Make no mistake though: bureaucrats all over the world are certainly dreaming of regulating it to death, and established big businesses are unlikely to stand in their way – this is a well-worn pattern.
Still, it is interesting to see that the public at large is beginning to realize that we have arrived in what one might term 'Fascism light', or a corporatist State. The 2008 crisis and the associated bailouts may have served as an eye-opener in this regard.
The Mainstream Media Message May Have Fallen on Deaf Ears
These poll results are heartening news, in view of the 'official line' regarding what the current system represents.
Immediately after the 2008 crisis and ever since, the storyline sold to the hoi-polloi by the controlled media (or 'presstitutes' as Paul Craig Roberts and Gerald Celente so colorfully refer to them) was that the crisis was an example of a 'market failure' and that government had to step in to 'save the market economy from itself'. We have previously remarked on what a travesty this narrative represents.
For one thing, without government-directed interventions, there would have been no crisis in the first place (at least not of such magnitude). The media were and are falling over each other singing the praises of our 'saviors', rarely expending a drop of ink on the fact that these allegedly so praiseworthy minions of the State were in essence the same people that were responsible for the mess in the first place. It is deeply ironic that the law that is supposed to make future crashes 'impossible' by drenching one of the most over-regulated sectors of the economy in even more regulations, is named after two of the biggest apologists of the housing bubble related activities of the GSEs; men who regularly denounced critics of Fannie Mae and Freddie Mac as heartless fear-mongers whose only goal it was to deprive the underprivileged from getting their hands on their fair share of the American dream. For another thing, it is simply erroneous to characterize the present-day system as a 'free market economy'.
In a recent favorable critique of Hunter Lewis' book 'Crony Capitalism', David Gordon writes:
“Those who condemn the free market do so by considering bad features of the present economy, both in the United States and elsewhere in the world. In judging the free market in this way, they rely on an unexamined assumption. They take for granted that the present order of things is the free market in action.
As Lewis explains and documents to the hilt, this assumption is false. What we have today is not the free market but “crony capitalism,” an altogether different matter. Government and business are in a predatory partnership that extracts wealth to its own benefit. The fact that many suffer under the present system should occasion no surprise. Predatory “cronyism” has existed throughout history and has been the main block to economic progress.
Lewis states his arresting thesis in this way: “indeed it may be argued that cronyism is as old as recorded human history and has always been the dominant system. This is precisely why the human race has made so little progress in overcoming poverty. For most of human history, there has been no economic growth at all. People born poor died poor. Whenever economic capital began to be accumulated, it was generally stolen by rulers or their friends or allies.” (emphasis added)
As the free market stood falsely accused in the press shortly after the crisis, George Reisman wrote a heartfelt defense of laissez faire capitalism, inter alia noting:
“The mentality displayed in these statements is so completely and utterly at odds with the actual meaning oflaissez faire that it would be capable of describing the economic policy of the old Soviet Union as one of laissez faire in its last decades. By its logic, that is how it would have to describe the policy of Brezhnev and his successors of allowing workers on collective farms to cultivate plots of land of up to one acre in size on their own account and sell the produce in farmers' markets in Soviet cities. According to the logic of the media, that too would be "laissez faire" — at least compared to the time of Stalin.”
Reisman's article is well worth reading in its entirety. At the time it was written and published it was clearly a minority opinion. Hatred of free market capitalism was whipped up by the press and politicians alike, as the etatistes decided to go down the well-worn path of blaming the usual suspects: entrepreneurs, speculators, anyone connected with what's left of the market economy, so as to deflect blame from themselves.
The polls discussed above are a sign that the public is no longer prepared to simply swallow the official story hook, line and sinker. Although it is a good bet that a fair amount of confusion remains, a change in thinking has to start somewhere.
Privileged Über-Cronies
As an aside, the governmental cronies in the banking cartel that was at the center of the crisis never suffered any visible harm, in spite of being the target of well-deserved public scorn. With very few exceptions, CEOs that had to step down for negligence (that occasionally seemed to border on fraud) received generous 'golden handshakes', while all the rest soon began collecting giant bonuses again with nary a pause for effect. This would be nothing worth getting exercised over if their compensation were merely a matter concerning shareholders. However, these rent-seekers profit at the expense of every user of the central bank issued currency, not to mention that they received direct tax payer funded support as well (and probably will receive it again next time). The costs inflicted on the wider economy by the fractionally reserved banking cartel cannot be simply shrugged off as an accident akin to an unexpected earthquake or a similar calamity inflicted by nature: rather, it is a direct result of the extraordinary privilege to create money from thin air.
It is noteworthy in this context that this particular aspect of the system's workings is practically never discussed in the mainstream media. Central banks are never portrayed as institutions that might be less than beneficial for society as a whole. If there is critique, it usually confines itself to the discussion of concrete plans that may or may not be implemented. The legitimacy of such institutions per se is considered beyond the pale of debate. Fractional reserve banking and the credit expansion it makes possible usually don't even rate a mention (it should also be noted that financial journalism on how the system works is often marked by ignorance; to wit, the giant amount of nonsense that has been written in publications like Reuters and Bloomberg about excess reserves that pile up on central bank balance sheets in the course of 'QE', 'LTROs' and similar measures). And yet, as J.H. De Soto argues, rightly in our opinion, the existence of the practice is in conflict with property rights in more ways than one. It conflicts directly with them as the promise to pay deposits that are not backed by standard money on demand cannot possibly be kept, and indirectly by inflicting losses on society at large by causing the boom-bust cycle.
It is argued by some defenders of the practice that it is a bulwark against 'unexpected increases in the demand for money', as if society-wide sudden increases in the demand for money were falling from the sky unbidden (in reality, they usually only happen when a credit expansion inevitably resolves in a bust), while others argue that if not for the ability to expand money and credit willy-nilly, the 'growing needs of commerce' for currency could not possibly be satisfied (a favorite canard of defenders of inflationism).
However, as Rothbard rightly remarked, society at large has nothing to gain from money supply inflation (Mises already pointed out that any money supply is as good as any other to do all the work that money is expected to do). It is what money can buy that is the decisive point. One thing is however certain: inflation does benefit a small part of the population at the expense of everybody else. It is not a policy indulged in for the sheer heck of it – there are definitely profits to be made from it. In short, there are very tangible reasons for the official state of the debate (i.e, its literal non-existence).
Conclusion:
It must be regarded as progress that such a large number of respondents has realized that what we have by no means deserves to be called a free market economy. Crony capitalism is indeed a far more apt description. However, one must be careful not to throw out the baby with the bathwater. Historically, economic crises have often led to rather disturbing backlashes against both capitalism and liberty more generally. One has to keep in mind that history often rhymes and guard against an unreflected populism. However, there is nothing that says the mistakes of the past have to be always repeated. Just as free market capitalism (to quote/paraphrase Israel Kirzner) ultimately “does away with the scarcity framework” and thereby both ensures progress and makes it impossible for us to chart its future with certainty, so it is with how society deals with adversity and the realization that the current economic system is far from the ideal one. It all depends on current and future states of knowledge, which it is in everyone’s power to influence in his own environment to some extent.
