Sunday, January 1, 2012

The Quote to Start the New Year. . .

. . . comes from Chrystia Freeland, right, (H/T HotAir) who looks at the unrest the world over and comes to this conclusion.
The unifying complaint is crony capitalism. That’s a broad term, to be sure, and its bloody Libyan manifestation bears little resemblance to complaints about the Troubled Asset Relief Program in the United States or allegations of corrupt auctions for telecommunications licenses in India. But the notion that the rules of the economic game are rigged to benefit the elites at the expense of the middle class has had remarkable resonance this year around the world and across the political spectrum.
Indeed, it is a call for a measure of justice, a universal feeling among human beings of all cultures. Here in the United States the issue has propelled the tea party movement, and to a lesser extent the coffee party (to the extent that it is a movement) and occupy. The issue resonates with left, right and center. Freeland is hopeful for the western democracies on this score.

As for crony capitalism, this slogan of the street is both a challenge for the state and an opportunity. For some regimes, of course, crony capitalism, with a side order of repression, is the only dish on the menu. For them, the trends of 2011 do not bode well.

But most of today’s troubled market democracies don’t need a revolution to sweep away their cronies. What they do need is a new version of capitalism, designed for the 21st century. That is what the world’s protesters, in their different ways, are all asking for. Here’s hoping that 2012 provides some politicians with some answers.

The left sees crony capitalism and concludes that more regulation of business is required to prevent business from seeking ill gotten gains from government intervention. They forget problems of regulatory capture and the fact that regulation favors the entrenched business interests of today, against the entrepreneurs of tomorrow.

The right calls for less regulation, forgetting to tackle the problem that government is enriching corporations in the first place. The tea party answer, is for government to be stripped of the power to enrich corporations in the first place. In my opinion, such a theory is incomplete, because some opportunities for mischief, especially in financial markets are so great that after the fact prosecution is an insufficient deterrent. See some of the danger in The War on Terabytes from the Economist. The answer has to be transparent and simpler regulation. I will post on this more extensively later, but in summary, financial regulation is too complex to be understood or to be effective. Further, given the wide discretion given regulators, made worse by Dodd-Frank, the danger of regulatory capture is increased. Protecting our financial markets from a recession causing melt down requires fewer regulations of a well understood nature.

Meanwhile, crony capitalism must be put to shame. The Obama administration has been making a very good case, in the negative sense, through Solyndra, Fisker, and the GM and Chrysler bailouts.

Picture of Chrystia Freeland from


  1. Just laws protect the public from the lawmakers and their accomplices.

  2. Thanks for putting it in a broad, universal context.