Daily Constitutional

Crony capitalism for the people

Posted by richardmoore on December 16, 2016 at 12:20 PM

When a politician does what he says he’s going to do, you’d better get ready for the flak from the ideological and special-interest hacks.

And so it was that President-elect Donald Trump got both the Left and Right in a dither recently when he made good on his promise to save jobs — about a 1,000 of them, give or take — that Çarrier Corporation, a division of United Technologies, said it was going to move to Mexico.

All through the campaign, Trump hammered Carrier for its decision, and he promised to call the company’s executives after he won the election to convince them to stay. Otherwise, Trump said, if they still wanted to leave, he would say ‘adios and good luck’ and slap a 35-percent tax on any goods it imported into the USA.

Trump calls things like that “the art of the deal.” He wrote a very successful book about it.

The Left — Bernie Sanders and his ilk — and the Right — Sarah Palin and other Tea Party types — immediately called The Donald out, saying the deal was one more example of crony capitalism. Palin, an early Trump supporter, was indignant because, she said, the government shouldn’t be picking winners and losers, and especially by feathering the nests of special interests, in this case Carrier, with incentives to do what they should be doing anyway.

To be sure, the Carrier deal is loaded with incentives, about $7 million over 10 years.

So is Donald Trump a fraud? Hardly. In making the deal he made good on a campaign promise.

But was it just another example of crony capitalism, and a sign that nothing has changed after all?

The answer to that is a resounding ‘no.’ Palin and those attacking Trump for this deal could not be more wrong. It’s a good deal, and we should hope the president-elect can make more of them.

Technically, of course, it is crony capitalism — the government is intervening in the marketplace to help a single company — but the context makes all the difference.

First, it’s important to remember that Trump has yet to take office. There’s no way — yet — he can attack the massively spilling gravy boats of crony capitalism that saturate and stain virtually every policy document in Washington.

Once he’s in office, we expect him to make good on his broader promise to get government out of the way, end corporate welfare, and let the markets work. When he does, we’ll praise him; if he doesn’t, we’ll call him out for crony capitalism then, at the proper time.

Second, if this is cronyism, Carrier doesn’t know how to play the game very well. In exchange for that $7 million in incentives over a decade, Carrier is giving up a large chunk of what it has estimated would be about $65 million a year in savings by moving those jobs to Mexico.

So this is hardly a sweet deal for Carrier, as crony deals go, and it’s the sweetness of the deal that defines cronyism in the first place.

Third, this can be more accurately labeled counter-crony capitalism, or, to say it another way, Trump is undoing the evils of earlier crony capitalism the best way he can before taking office, piece by piece.

The real crony capitalism was NAFTA, by which U.S. corporations and Mexican business interests lined their pockets under the guise of free trade. It was anything but free trade; the flow of capital and technology may have been freed up, but the labor market side of the equation remained tethered to the existing standards of their respective national economies, which was devised by big business for itself and rigged against the workers.

Read NAFTA and you read a crony capitalist’s wet dream — some 1,000 pages of limiting the sovereignty of the partner nations, i.e., not only their ability to regulate foreign imports but to protect workers and, in Mexico, to enact standards comparable to those governing American workers. The crux of NAFTA was to keep Mexican workers poor and force American workers to compete against them.

Adding insult to injury, the American government subsidized agricultural products, providing cheap dairy, grain, and meat to Mexico; the result of that crony trade was to create an artificial market of cheap imports to Mexico that crippled domestic agriculture and, according to the Economic Policy Institute, drove some 2 million workers off their farms.

Guess where they went? Yup, to the U.S., as illegal immigrants. In the wake of NAFTA, illegal immigration to the United States rose by more than 75 percent.

In short, NAFTA was the sweetest of sweetheart deals for crony capitalists, all of it legitimized by government.

In the real world, down in the streets rather than up in the free-traders’ ivory towers, free trade only works when all the market components are free — when conditions of competitiveness exist on both the labor and capital sides — not just those that benefit big business. There’s nothing free or capitalist about a cartelized international economy that dictates to nation states what capital, investment, and labor standards they can and cannot pass.

Here’s what the libertarian economist (as in opposed to government intervention and crony capitalism) Murray Rothbard wrote:

“Yet NAFTA is more than just a big business trade deal. It is part of a very long campaign to integrate and cartelize government in order to entrench the interventionist mixed economy. In Europe, the campaign culminated in the Maastricht Treaty, the attempt to impose a single currency and central bank on Europe and force its relatively free economies to rachet up their regulatory and welfare states. In the United States, this has taken the form of transferring legislative and judicial authority away from the states and localities to the executive branch of the federal government. NAFTA negotiations have pushed the envelope by centralizing government power continent-wide, thus further diminishing the ability of taxpayers to hinder the actions of their rulers. Thus the siren-song of NAFTA is the same seductive tune by which the socialistic Eurocrats have tried to get Europeans to surrender to the super-statism of the European Community: wouldn’t it be wonderful to have North America be one vast and mighty ‘free trade unit’ like Europe? The reality is very different: socialistic intervention and planning by a super-national NAFTA Commission or Brussels bureaucrats accountable to no one.”

In this free trade world, capital was globalized and mobilized; technology was globalized and mobilized; productivity was globalized and mobilized; even desperate Mexican workers were globalized and mobilized.

American workers and their jobs? They were destabilized and immobilized.

American workers were rooted to the decaying spot, and it was all part of the free-trade planned economy. This is what crony capitalism, which is really bureaucratic collectivism, looks like. In such a situation, what is the president-elect to do?

The situation is comparable to that of a general of an advance army unit that has surrounded a barbaric government guilty of the ongoing slaughter of its citizens. The general is holding in place until the full army arrives to liberate the country. Meanwhile, the slaughter of citizens continues, but a few rogue members of the surrounded government decide to try and cut a deal. They make one last crony offer — we’ll spare some of these citizens if you just pay us the right price and let us get out alive.

Should the general stand on principle and let those the general could have saved die, while waiting for the full army to arrive? Or should the general save whom he or she can until the cavalry arrives to save whoever is left? Should he or she make the deal with the rogue band of barbarians and save real lives in real time?

In this scenario, the NAFTA economy is the barbarian government carrying out the slaughter of American workers and the president-elect is the general of the advance army. The liberation army he is waiting on is his government authority that will officially arrive on Jan. 20. Carrier represents the break-away band who offers to spare a 1,000 families, if it can get a deal, any deal.

In Sarah Palin’s world, the right thing to do is let the 1,000 die and wait until Jan. 20 to attack the entire problem from a principled, ivory-towered perch. Trump, a man of action, decided to save the few he can while he readies himself to save the many and to end once and for all the sort of sordid deals he had to make.

Trump’s way is the right way. It is the action of a man who sees and feels pain. Those who live in the ivory towers do not feel the pain of others; their theories do not bleed or sob from hunger. The philosopher kings and queens cannot feel compassion, for they are in love with only abstractions, devoid of humanity.

Trump’s spot deals are not without precedent. John F. Kennedy famously called out U.S. Steel for its pricing policies and used his bully pulpit to call out other corporations not acting in the national interest.

In this respect, Trump may be more like Kennedy that he is like Ronald Reagan.

His Carrier deal may well be crony capitalism, but it is crony capitalism in the national interest, not in the globalists’ interests. It is crony capitalism for the public interest, not for the private special interest.

It is crony capitalism for the people, and it is long overdue.

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