Does This Work?
By Arnold Kling
Here is a video on Crony Capitalism. It offers a number of libertarian talking points on the issue. I agree with many of the individual points, but they are made rather quickly. The argument that regulation was intensified, not cut back, in recent decades is perhaps the most interesting and most important, but it gets only a few sentences.
My claim is that the video will sound convincing only to people who already see government as the problem. Those who think that corporations are the problem will not be persuaded. They will think in terms of campaign finance reform or more regulation or greater independence of regulators as the answer. They will view this video as the product of people who are blinded by free-market ideology and thus cannot see instances of market failure.
For people who are suspicious of capitalism, I think this sort of statement will confirm their suspicions without altering their view of government. I don’t think it will win them over to the idea of limited government.
Not that I have any magic solutions for winning people over to the idea of limited government. My preferred approach is to focus on the limitations of individual humans and human institutions. I see supporters of government intervention as enchanted by an implicit sense of government perfection, and my goal is disenchantment.
For example, I like to start the discussion of health care policy by saying that each of us individually would like to have unlimited access to medical services without having to pay for them. However, we cannot make that work in the aggregate. Pretty much everyone gets that. By itself, it does not convince you (nor should it) that health care should be mostly a market-provided affair. But it takes the argument away from “greed” vs. “the right to health care” and instead frames the problem in terms of limited resources.
Along these lines, I would rather talk about barriers to entry than “crony capitalism.” I would point out that when firms receive subsidies, bailouts, and regulatory protection, competition gets stifled. I would point out that as firms grow to depend on government favoritism, they naturally expand their lobbying efforts and use their clout to protect their market position. Potential new entrants find it too costly to compete, and ultimately consumers are made worse off, not better off.
In a sense, the poster child for crony capitalism might be Harvard, not Goldman Sachs. The incumbents in the higher education industry benefit from a vast array of regulations and subsidies.
For another way to discuss capitalism (and make the point about crony capitalism en passant, listen to the latest podcast with Russ Roberts and Mike Munger.