Another Socialist Lie: Crony Capitalism



By: Dr. Charles Ormsby-January, 2012


Circles can’t be squares and squares can’t be circles. For something to meet the requirements of both definitions is a logical impossibility.

Just as square circles and circular squares don’t exist, I can assure you that crony capitalism doesn’t exist. And if you knew and understood the meaning of the word capitalism you would immediately understand the logical impossibility of such a creature.

The term crony capitalism is a purposeful contradiction that seeks to undermine the meaning of capitalism while laying at capitalism’s doorstep the evils of socialism.

What image comes to mind when you hear the term crony capitalism?

Do you picture excessively wealthy businessmen raking in gobs of additional, undeserved wealth because they have special political connections? The emotional response that is provoked proceeds from a rational distaste for injustice: Why should these individuals benefit from special privileges when these same privileges are not available to me or to others? It makes you mad, and rightfully so!

After your initial anger dissipates, the concluding emotion is intended to be a visceral hatred for the wealthy and specifically for the wealthy businessmen who are the icons of capitalism. The elixir that socialists want you to embrace is bigger and more powerful government.

In simple terms you are supposed to conclude: The wealthy are evil. Capitalism is evil. Government is good. And government is the proper instrument for setting things right.

This is quite an accomplishment for a two-word lie.

So why is crony capitalism a logical impossibility … a square circle? Because the special, government-granted privileges that are at the core of this problem contradict the very essence of capitalism and would never exist under capitalism.

Ayn Rand defined capitalism as “… a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”

She goes on to say, “The recognition of individual rights entails the banishment of physical force from human relationships: basically rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force.”

Finally, Ayn Rand writes, “In a capitalist society, all human relationships are voluntary. Men are free to cooperate or not, as their individual judgments, convictions, and interests dictate. They can deal with one another only in terms of and by means of reason, i.e., by means of discussion, persuasion, and contractual agreement, by voluntary choice to mutual benefit.” And later in the same paragraph, “It is the institution of private property that protects and implements the right to disagree – and thus keeps the road open to man’s most valuable attribute (valuable personally, socially, and objectively): the creative mind .”

How in a capitalist society are government-granted special privileges possible?

They are not.

In a capitalist society, individuals have the right to deal with others or not based on their own rational judgment. The government would have no power to transfer one individual’s wealth to another just because the other is connected. It would have no power to interfere with a private commercial transaction nor to dictate that any such transaction be concluded when both parties do not consent.

So how did the “crony capitalist” end up with his unearned wealth? Did the government hand him property expropriated from individuals via taxation? Did the government provide special monopoly power or restrict competition through licensing or tariffs? Did the government give special tax advantages or burden his competitors with onerous regulations? If so, he is a thief and a beneficiary of socialism. If he supports the system that gave him these privileges he is not a capitalist, he is a socialist.

No, the culprit isn’t crony capitalism. And the beneficiaries of these evils are not crony capitalists; they are crony socialists.

While the term crony capitalism suffers from being a logical contradiction, crony socialism suffers from being a redundancy.

When private property rights are abolished, a central tenets of socialism, those with special access to the inner sanctum of government via friendship, bribes, or backroom deals will acquire special privileges. Such privileges are not the exception in a socialist system; they are the rule. Corruption is not just an unfortunate occurrence in a socialist society; it is a central and unavoidable feature of socialism’s core tenants.

It would take an encyclopedia to detail even a very small fraction of the instances where crony socialism has committed theft on behalf of those seeking special privilege. From labor laws and licensing requirements to tariffs and permitting, the government is constantly using its powers to expropriate wealth from some and to confer advantages to others … all while diminishing the freedoms of us all.

Crony socialism has accelerated dramatically under the Obama administration. Today the government intrudes on every part of our lives. We live in a society where we have no right to keep what we earn, or to decide for ourselves how to expend what the government does allow us keep. Today, whenever we decide to do anything of consequence, we must ask, “Mother may I?” If we really want to play the game, we send lobbyists to Washington to ask the price of gaining special privileges.

Where the misuse of one hundred dollars by a government employee used to be considered criminal, today billions of dollars are thrown around with no accountability. We all know of prominent examples: bank bailouts, loan guarantees (be they for rotten mortgages or for corporations such as Solyndra), or the takeover of GM and Chrysler, or the hundreds of billions in stimulus projects which would never pass muster with private investors … the list is endless.

Everyone likes to complain about the influence of lobbyists in Washington, but the simple fact is that all of these lobbyists would disappear overnight if our federal government wasn’t in the business of selling favors. There were no swarms of lobbyists in the early decades of our republic when the federal government stuck to its enumerated powers.

Today there are two kinds of lobbying, one moral and one immoral. The moral kind consists of individuals and organizations trying to defend themselves from rules, regulations and taxes that infringe on their right to property and freedom of action. The immoral kind consists of attempts to gain special privilege.

Our current socialist government has become a master of soliciting both: the first by making threats and the second by offering potential privileges. The price of escaping the threats or winning the booty is the same: boot licking in the form of campaign contributions, bribes or any other means that increase and solidify the politicians’ or the bureaucrats’ wealth and power.

The system is rotten to the core. Of course it is … it is socialism.

So the next time someone complains about crony capitalism, do not let the insult to capitalism stand. Interrupt them and ask, “Don’t you mean crony socialism?”