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Crony capitalism

Posted by Richard on November 20, 2008

When you start handing out free money, expect a long line to form. Wall Street bankers and insurance companies have been joined in the bailout line by student loan debtors (and their creditors), domestic auto makers, states, municipalities, … I'm sure the line will get longer day by day.

The heads of the "big three" car makers were in Washington begging today (after flying there in their private jets). They were accompanied by UAW president Ron Gettelfinger, who joined them in begging for taxpayer money. But Gettelfinger made it clear that the union wouldn't accept any pay or benefit cuts.

This is absurd, and the claim that the current financial crisis caused the carmakers' problems is nonsense. GM's losses have averaged more than $1.5 billion per month for years, so its share of the proposed $25 billion bailout merely lets it continue on an unsustainable course for a few more months. It's like giving someone a transfusion while their severed carotid artery continues spurting blood. 

The severed artery that the "doctors" in Congress don't want repaired is the UAW contract. Total employee compensation for the "big three" averages about $73 per hour. For the American factories of Toyota, Honda, and Nissan, it's about $44 per hour.

And that cost disparity doesn't even take into account the deleterious effect of an inch-thick union contract full of bureaucratic, restrictive, and onerous work rules. Or the thousands of union members in the "jobs bank" program getting $31 an hour plus benefits to work crossword puzzles and watch TV for 40 hours a week.

Bill Wilson, president of Americans for Limited Government, neatly summarized what's wrong with this bailout plan in a letter to Congressional leaders: 

“The automotive industry’s problems cannot and should not be passed on to the American taxpayer. And they will only be compounded if the federal government now offers billions of dollars of taxpayer-financed loan guarantees to companies that would otherwise file for bankruptcy,” Wilson wrote in the letter.

“These taxpayer loans will, by design, perpetuate these companies in their present form,” Wilson said. “However, it is the very present forms of each company that must be addressed and resolved by market forces, a process that will not occur if government gets in the way of bankruptcy.”

Newt Gingrich has a name for what's happening in Washington these days: 

There’s a term that’s commonly applied to the economic systems of some Asian and Latin American countries. It’s “crony capitalism.”

Crony capitalism is when government controls significant parts of the economy. Under this kind of bureaucratic micromanagement, politicians — not the free market — call the shots. And that means that the decisions that control the economy are of necessity political decisions, not economic ones.

Crony capitalism is bad for government. Economic power in the hands of politicians breeds corruption. 

Crony capitalism is bad for democracy. Individuals and businesses outside favored industries have an unequal voice in self-government.

Crony capitalism is bad for business. Politicians wedded to the status quo stifle growth and innovation.

And there’s one more thing about crony capitalism: It’s come to America.

Read the whole thing. Then contact your senators and representative and tell them, "Enough! No more bailouts! No more crony capitalism!"

UPDATE: The Center for Individual Freedom will blast fax the President and Congressional leaders on your behalf. But in addition (or instead), it's best to call your congresscritters' offices and tell the nice staffer whose keeping a tally of calls for and against what you think. (Oops, forgot the link — fixed now.)


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