John Buell

From Markets to Crony Capitalism

In a provocative op ed for the Bangor Daily News, Jon Reisman, a professor of economics and public policy at the University of Maine at Machias, celebrated the magic of free market capitalism.

He cited Koch Industries as a stellar example of the worth and contributions of capitalism, a system characterized by “economic freedom, limited government, the rule of law, and respect for property rights.” In Reisman’s eyes, the very success of Koch enterprises occasions their targeting and demonization by the “vast left-wing conspiracy.”

As one whom Reisman would surely lump in that conspiracy, I am reluctant to enter this fray. Nevertheless, I would like readers of this column to consider the possibility that the terms of this debate are badly framed.

The capitalism Reisman defends hardly exists any more. Furthermore, the blame or credit for that state of affairs lies not primarily with some left but with business interests themselves.

The Koch brothers have helped drive this process, but (in this I agree with Reisman) are hardly unique demons. They are symbols and products, as well as exceptionally single minded champions of a broad capitalist transformation.

Free-market capitalism is about limited government and private property. The forms of property most valued and defended have changed dramatically in 200 years. When Thomas Jefferson thought of property he envisioned plots of land with clear boundaries and the produce of that land. The forms of property most significant in the 19th century, however, were very different. The US would not be the economic power it is today without complex legal and administrative changes in property relations.

The railroads, the drivers of economic growth, were the product of changes in law, technology, and government support. Railroads were able to accumulate the capital needed to extend routes through charters of incorporation that limited the liability of stockholders, thus privileging one form of property over others. The courts established clear distinctions between the rights of management and individual shareholders, defined corporations as persons. Most importantly both before and after the Civil War governments made extensive land grants to the railroads.

Many free market conservatives are fond of the phrase that government never created a single job. Yet I wonder how many jobs 19th century free markets would have created without the railroad or twentieth century markets without the government subsidies of computers and the internet.

The size of government, both in relative and absolute terms, has grown throughout much of the twentieth and early 21st century.

Paul Krugman likes to say that the US government is an army with an insurance company. The increase in government spending can be attributed in part to entitlements, for which the left can take some credit or responsibility. Nonetheless, despite years of elite criticism, universal programs like social security (which in any case has contributed not a cent to our current debt) remain extraordinarily popular.

But much of the growth of the debt may be attributed to the cost of wars. The true unfunded liability the US faces is the vast cost of caring for the disabled veterans left by wars that benefit our corporations more than our citizens.

I can’t locate Reisman’s vast conspiracy. Liberals, Democrts and the left quarrel as much as they agree. Many Democratic backers of Obama criticized the whole idea of a stimulus and support major reductions in government spending. Reisman asks us to choose between Koch and such Obama backers as Jeffrey Imelt.

I will withdraw from politics if this is my only choice.

Imelt has probably outsourced as many American jobs as Obama’s tepid stimulus saved. We need a big fiscal stimulus, the construction of a modern infrastructure that could do for us what the rails did in the 19th century.

The deficit ballooned under Obama because the housing bubble and the corrupt, deregulated banking system collapsed. The Bush/Obama bank rescue, the (still not fully documented) Federal Reserve purchases of corporate paper, and Fed below market rate loans to investment banks constituted a corporate subsidy dwarfing Obama’s fiscal stimulus.

Corporate apologists maintain investment banks repaid the TARP loans, but such calculations omit the vast benefits from low interest loans.

(Give me essentially a zero interest loan and I’ll pay you back in five years and laugh all the way to the bank with the profits I reap.)

Corporations have ditched the free market. They rely on government subsidies and buy the political leaders who deliver those subsidies. The Koch brothers are perfect examples. Even as they denounce government safety nets, their vast corporate empire thrives through a variety of subsidies. Yasha Levine has reported: “Georgia Pacific, a … subsidiary of Koch Industries, uses taxpayer money provided by the US Forestry Service to provide their loggers … roads and access to virgin growth forests….

“Koch Industries won massive government contracts using their close relationship with the Bush administration. The Bush administration, in a deal even conservatives alleged was a quid pro quo because of Koch’s campaign donations, handed Koch Industries a lucrative contract to supply the nation’s Strategic Petroleum Reserve with 8 million barrels of crude oil. ...

“Koch won significant contracts to buy Iraqi crude oil…. The Koch brothers have claimed that they oppose government intervention in the market, but … blogger Andrew Halcro reported that a Koch subsidiary in Fairbanks asked Gov. Sarah Palin’s administration to use taxpayer money to bail out one of their failing refinery. See <http://www.truth-out.org/how-koch-industries-makes-billions-by-demanding-bailouts-and-taxpayer-subsidies-part-168141>.

We are not returning to a world of small farms, limited government, and businesses where competition and the general moral sense of small communities could assure growth and security.

Markets are useful and no society has prospered without some reliance on markets. Yet modern technology, economies of scale, and the speed and complexity of life demand something more than pure free markets.

It is long past time to give the public a larger voice in the shape and intent of the inevitable interventions and reforms of markets and their corporate titans.

John Buell (email jbuell@acadia.net) lives in Southwest Harbor, Maine. His most recent book is Politics, Religion, and Culture in an Anxious Age.

From The Progressive Populist, September 15, 2011