Government protected monopolies and subsidies hinder progress – Were the so-called Robber Barrons actually anti-monopolists?

I’m slowly catching the idea that there is far more good news about Robber Barrons than conventional wisdom allows. Most of what I recall from school was criticism of those horrible, terrible, disgustingly evil men who used poor children as a breakfast garnish and then roasted their parents for dinner-time appetizers. They assuaged their horrendous guilt by building a couple of public libraries or something with a few spare bucks they couldn’t use up on conspicuous consumption.  That’s a mild exaggeration of what I recall the books were saying.

Actually, I’m beginning to realize we owe much of our prosperity and economic capacity to those men.

T. Kurt Jaros has a nice series on Cornelius Vanderbilt. The Men Who Built America: Cornelius Vanderbilt is the introduction.

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Movie production credits – crony capitalism that attracts few jobs

Just in time for the Oscars….

Writing in the Wall Street Journal, Glenn Reynolds explains The Hollywood Tax Story They Won’t Tell at the Oscars.

He points out that about $1.5 billion, yes billion, goes to the movie industry as credits, exemptions, grants, and fee waivers to bring movie production to a certain state or city.

With 45 states in the game, all that does is move some amount of spending from one high-bidding place to a higher-bidding place.

The amounts tend to be less than the subsidies: (more…)

Lobbying is a very profitable investment – $1 that banks spent on lobbying before the financial crisis produced an extra $500 of bailout funding

That’s the conclusion from Professor Diana Thomas of Utah State University. Check out a 2½ minute video:

 

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Capital appreciation bonds -– compound the interest on a bond for 20 years before starting to make any payments. How’s that for a wonderfully bad idea?

(Cross-post from my other blog, Outrun Change.)

If you thought zero documentation and 120% loans were good for the economy, you will love capital appreciation bonds.

Here’s the deal – what are schools and local governments in California to do once they have run out of cash to pay even the interest on bonds, can’t cover the principal on the cost of new buildings, and face huge voter resistance to any increase in spending? What to do when you just want to keep spending?

How about issuing capital appreciation bonds. That allows the government agency to keep spending whatever they want.

You can borrow money, make no payments for 20 years, compound the interest into principal, and burden the adult children of current students with the huge payments.

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Does too big to fail, too big to punish, and too big to manage mean you are too big?

(Cross-post from my other blog, Attestation Update.)

George F. Will suggests the answer to the question is “yes”: When banks get too big to fail, they are too dangerous to leave intact

One of the U.S. senators on the left end of the political spectrum thinks it is time to break up the too-big-to-fail banks.

Look at the concentration of assets in the TBTF range and the long history of TBTF: (more…)

Crony capitalism as a factor in the financial crisis

I have two posts on my other blog, Outrun Change, discussing the $8.5 billion settlement between 10 big banks and the regulators. The settlement is for harm caused by the banks during foreclosures arising after the financial crisis of 2008-2009.

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Selective enforcement for harming eagles

One of the frightening dangers of crony capitalism is that a favored business or industry gets special treatment because they are favored.

The result can turn out to be that laws are enforced or not enforced based on whether the company has special contact with those who make decisions or is favored for other reasons.

So here’s the question:  Should the decision whether you get a pass or get hammered be based on whether you broke the rules or whether you do or don’t have special access?

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Pro Free Enterprise is not the same as Pro Business

Being ‘pro business’ is not the same as ‘pro free enterprise’. 

When the government is giving big favors away it means whoever gets their favors makes a lot of money.  Businesses are highly motivated to seek those favors. That is not being pro free enterprise.

In this video, the Nobel laureate Milton Friedman explains the why “pro free enterprise” is not the same as “pro business.”

 

Here’s a few ideas to ponder:

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Crony capitalism is not Capitalism

Rigging the system in favor of your business is not capitalism. It seems like the same and sounds alike, but it isn’t.

Here is a better description of crony capitalism:

 

 

 

Capitalism is when you get the rewards from your effort and drive, not take rewards from others because you’ve got buddies that got you favors.

Here is the link, if needed:  http://www.youtube.com/watch?v=2aO9tA5DWJM&feature=player_embedded

This is a good assessment: “more often than not, politicians are very poor when it comes to making business decisions.”

Crony capitalism is the pretend version of capitalism when you gain sales or market access or funding because you can get favors from government instead of having a product that the market wants and finds appealing. 

Success through favors instead of superior products.

Today’s illustration is from a failed video game company, 38 Studios, founded by a former Red Sox pitcher.  Anthony Fisher has the story – 38 Studios:  Curt Schilling’s Crony Capitalism Debacle.

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