Big Government

We’re Barely Capitalists (Part II)

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Recently I wrote a post titled “We’re Barely Capitalists” talking about the “crony capitalism” that lies in our midst. Since I live in the city of Chicago examples abound as far as the eye can see.

Let’s say, for example that you want to open up a bar in the City of Chicago. You find an architecturally interesting building in a “hot” location in River North, for instance, such as an antique store. Then you just turn it into a gigantic Wal-Mart sized bar, right?

The City of Chicago officially has been limiting the number of liquor licenses and tavern licenses that are allowed, particularly in residential areas. Per this article in USA Today:

Opening or buying a tavern in Chicago can be complicated, says Mike Costanzo, a real estate broker with Jameson Commercial. Aldermen can seek liquor license moratoriums in areas as small as two blocks, and buyers are required to purchase the corporate entity that owns an existing tavern and license, he says. “Getting a new tavern license issued in a residential neighborhood is brutal,” Costanzo says. “It’s virtually impossible.”

River North today is heavily populated with condos and apartments; there are thousands of residents packed in an area that is overrun with bars, taverns and restaurants that serve lots of booze (I realize that the city differentiates but walking around late at night they are all virtually the same). So if you or I just went over and tried to use one of the supposedly diminishing liquor licenses on an antique store, we’d be laughed right out of the room. And yet that didn’t slow down this company (which also owns bars in Lincoln Park and Wrigleyville) from getting clearance…

And how do you get something like that cleared up with the city? By employing someone like the guy whose license plate on his Mercedes says it all – “CLOUT”. These sorts of connections are like property rights, and you have to partner or utilize contacts from someone in order to get anything done. I find it amazingly brazen that someone would get out of a Mercedes with plates like this and do business, but hey, this is Chicago.

The use of formal and informal intermediaries to accomplish business goals through a bureaucratic maze is the essence of “crony capitalism”, on display before our eyes.

Cross posted at LITGM

In the Post

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I’ve been thinking for a while based on my own use of the service that the good old US Post Office is something well past its best-if-used-by date. Oh, no not that it should be done away with as a government service entirely. But I can contemplate delivery of the mail only two or three times a week with perfect equanimity … which is at least a little tragic for there were times when the daily arrival of the mail was a much-looked-forward-to thing. When I was overseas, or in a remote location like Greenland (and in military outposts today I am certain) the arrival of the mail (three times a week) was anticipated with keen interest, since it was our lifeline to the outside world. There were letters from family, loved ones, magazines, catalogues and packages with goodies in them sometimes gifts, sometimes items ordered … the whole world, crammed into a tiny box with a locking door in the central post office; the magical envelopes, the catalogues and magazines in a tight-packed roll, the little pink slips that meant a package … and then, between one or two decades, it all changed.

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Pay Government Employees When You Pay Suppliers

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Recently the city of Scranton, Pennsylvania (yes, home of the fictional “Office”) was forced to pay employees $7.25 per hour (minimum wage)

As a desperation measure to keep the city’s books balanced

Employees were furious and took the mayor to court, until a “rescue”
plan was put into place where the state gave a one time $250,000 grant and a $2M state loan, enabling the city to pay back the short paycheck. The plan raises Scranton property taxes by 33% over three years.

It is interesting that any sort of pay delay merits a large article in a major news media source (the WSJ), and yet paying SUPPLIERS late isn’t news at all.

The state of Illinois, for instance, is famous for delays to various suppliers, and it hits small businesses particularly hard, since they generally have a lower cash “cushion” to begin with. There has been a periodic scuffle about this issue, but not a long term plan to fix it.

In Europe under austerity it has gotten so bad that there are many cases of business people committing suicide, at least per this article (originally appeared in the NY Times).

The Italian state alone owes more than $90 billion to entrepreneurs. Some have been waiting to be paid for up to two years.

There doesn’t seem to be a compelling moral basis for why any government would routinely pay their own employees regularly while waiting an interminable amount of time to pay suppliers, who are citizens and taxpayers, too. Late payments to these suppliers don’t raise hackles, and in fact is “business as usual”, while delays of even a single paycheck cause howls of protest and are written up in newspapers.

If paying employees late is such a heinous act, then apply that same logic who provide services to the government but AREN’T government employees and treat them with respect, as well. Failing that, pay both the employees, the elected officials, and businesses at the same time.

Cross posted at LITGM

Bourgeois Dignity

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I was struck yesterday by a post on Ann Althouse’s blog, and by a Virginia Postrel piece that makes the same point, how wrong Obama was to say “You didn’t build that..”

The incident, so characteristic of this leftist ideologue president, is the stimulus for theorizing about how economies work, and perhaps why this one is so stuck with Obama in the White House.

There is an excellent analysis by David Warren printed last year in Canada and which I have saved. It is a comparison of Obama with Gorbachev and brings considerable light on the subject of success of nations.

Yet they do have one major thing in common, and that is the belief that, regardless of what the ruler does, the polity he rules must necessarily continue. This is perhaps the most essential, if seldom acknowledged, insight of the post-modern “liberal” mind: that if you take the pillars away, the roof will continue to hover in the air.

Gorbachev seemed to assume, right up to the fall of the Berlin Wall and then beyond it, that his Communist Party would recover from any temporary setbacks, and that the long-term effects of his glasnost and perestroika could only be to make it bigger and stronger.

There is a corollary of this largely unspoken assumption: that no matter what you do to one part of a machine, the rest of the machine will continue to function normally.

This brief discussion fits well with the book that was recommended by the Postrel piece.


The Bad History Behind ‘You Didn’t Build That’
By Virginia Postrel

The controversy surrounding President Barack Obama’s admonishment that “if you’ve got a business — you didn’t build that. Somebody else made that happen” has defied the usual election-year pattern.

Normally a political faux pas lasts little more than a news cycle. People hear the story, decide what they think, and quickly move on to the next brouhaha, following what the journalist Mickey Kaus calls the Feiler Faster Thesis. A gaffe that might have ruined a candidate 20 years ago is now forgotten within days.

Three weeks later, Obama’s comment is still a big deal.

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Did the government really build that?

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Recently, President Obama opined that businesses depend on infrastructure built by the government. Roads, bridges, “you didn’t build that”. So the businessman writing the big check for taxes? His money sent to government doesn’t mean that he built it. Fair enough, but why is President Obama’s check privileged over the businessman’s check? The guy with the backhoe, the flagger, the asphalt plant, chances are that all of them are private industry. In all justice what makes it the government’s road?