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Crony Capitalism vs. Laissez-Faire

by Eric Lumpkins

The word “capitalism” gets used quite loosely and seems to always be the scapegoat for the various economic and social problems afflicting society. High prices, economic crashes and instability, corporate dominance, high unemployment, racism in markets, sexism in markets, abusive monopolies, and the list goes on. Capitalism receives the blame for all of these issues and much more, yet ironically, government power has more to do with these issues than free markets ever did.

Corporate Socialism

There is a world of difference between being “pro-business” and being “pro-market.” To support the market is to believe that no business deserves special privileges and favoritism, rather that every business should compete for consumers’ money by offering them valuable goods and services. “Pro-business” policies such as subsidies, corporate handouts, tariffs, special tax breaks, bailouts, and protection from competition are the antithesis of a free market.

The state’s power to sell favors and privileges is what incentivizes lobbying and rent-seeking. It incentivizes businesses to spend money on receiving protection from competition rather than on creating value for consumers. For example, because the large banks knew they’d be bailed out, they had no incentive to act responsibly – instead they made risky investments. This is a form of “privatizing profits and socializing losses,” where a few benefit at the expense of the many.

The root problem here isn’t capitalist greed, but rather the state’s power to sell special favors to those greedy corporations. If there were no protection or handouts for those corporations to lobby for, they would have nothing left to do except to productively compete in the market.

Government is the Parasite

Businesses receive the blame for inflation, yet inflation has nothing to do with markets and everything to do with Federal Reserve money printing. Free enterprise is lambasted for creating permanent, grinding unemployment, yet that is precisely the fault of minimum wage laws, insane labor regulations, and the perverse incentives of the welfare state.

Unrestrained capitalism is scapegoated as the cause of crashes and panics, yet a closer examination of history shows that government distortions and regulation were the fundamental culprits. Corporate dominance and monopolies are assumed to be a natural result of free-market competition, yet the total opposite is true. Corporations and monopolies are creations of government-granted privileges and stifling of free competition.

To those on the left, capitalism has relations to sexism and racism in society, but again the opposite is true! It was state governments that mandated racism in the South. Many businesses hated these racist regulations and in the long run the market punishes irrational discrimination. It was capitalism too that allowed women to choose a different path for themselves.

The Hatred of Freedom and Love for Central Planning

The US has already implemented several planks of Karl Marx’s Communist Manifesto. Productive individuals are seen as tax cattle. Freedom of association is seen as dangerous chaos. Planners everywhere want to design and micromanage society from the top down. We must continue to point out economic truths, spread positive messages for liberty, and teach the philosophy of laissez-faire capitalism to the next generation.

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