Crony Capitalism

Reading the Tea Leaves.

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Once again, Richard Fernandez finds the essential point.

Russia isn’t governed well. But people don’t rise to power in Russia according to their skill at solving public policy issues. They climb a ladder by how well they can grip the rungs of guns, bribery and deceit. Putin’s “political socialization took place as vice mayor of St. Petersburg in the 1990s, where … one of his key roles was acting as a liaison between the political and criminal authorities. It was the Wild Wild East, a world where duplicity was the norm, rules are for sissies, and only might makes right. It was a world where informal networks ruled and you controlled people by corrupting them.”

Such jungles tend to evolve very capable predators.

Putin, in my opinion, has done a fairly good job with Russia given the serious problems they have as a nation.

Madison tried to warn us about the risk of corruption, or as he called it, “Faction.”

Complaints are everywhere heard from our most considerate and virtuous citizens, equally the friends of public and private faith, and of public and personal liberty, that our governments are too unstable, that the public good is disregarded in the conflicts of rival parties, and that measures are too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority.

We now are at serious risk of electing the corrupt member of a cabal of self interested manipulators of the public interest for private gain.

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Hillary Clinton’s Alinskyite Attacks on Pharma Companies

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“Pick the target, freeze it, personalize it, and polarize it.” (Saul Alinsky)

Hillary is clever to go after individual companies. If she attacked the pharma industry as a whole, it could unite politically in response and perhaps gain political support from other industries that would reasonably see themselves as similarly vulnerable. But individual companies have no defenses against this kind of attack. By singling out one victim she discourages other industry players from doing anything in response, because any company or industry group that responds risks being targeted in the future.

She has done this kind of thing before. She will probably keep doing it because it’s politically effective. Her attack on Mylan destroyed a large amount of wealth, and probably not just for Mylan’s shareholders. Today Mylan’s CEO is groveling in the media. As with past political attacks by Hillary and others on vaccine manufacturers, yesterday’s attack on Mylan will discourage pharma companies from introducing valuable new products and will reduce the availability of current products. We will probably see more of this kind of extortionate behavior by the federal govt if she is elected, because that’s how the Clintons operate and because a Hillary administration would appoint more lefty judges and DOJ and regulatory officials who would go along with it.

Quote of the Day

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Dale Franks, Vote Properly, You Virulent Racist!:

But let’s go even further. Even if you could prove that, on balance, free trade is an unquestionable economic benefit, people might still prefer to be measurably poorer if that’s the price that must be paid to maintain their traditional social and political cultures. (This has even more relevance in the case of the EU, because the EU actually has power. Imagine if NAFTA had an unelected Commission in Ottowa or Mexico City that could impose laws on the United States.) Perhaps people don’t regard their economic interests as important as their national or cultural interests. It doesn’t matter what elite opinion thinks the people’s most important interests are. In a democratic society, ultimately, it only matters what the people think they are. People get to determine their own priorities, and not have them dictated by elites. The people get to answer for themselves the question, “In what kind of country do I want to live?”
 
Of course, I would argue that we don’t have truly free trade or, increasingly, a free economy in the United States. The Progressives always look at the rising income inequality and maintain that it’s the inevitable result of capitalism. That’s hogwash, of course, and Proggies believe it because they’re dolts. But the problem in this country isn’t free trade—we have precious little of it—or unrestricted capitalism, since we have precious little of that as well. The issue behind rising income inequality isn’t capitalism, it’s cronyism. Income isn’t being redirected to the 1% because capitalism has failed, it’s happening because we abandoned capitalism in favor of the regulatory crony state and its de facto collusion between big business/banking interests and a government that directs capital to favored political clients, who become “too big to fail”. It doesn’t matter, for instance, whether the president is a Democrat or Republican, because we know the Treasury Secretary will be a former—and future—Goldman Sachs executive.

Franks’s post is very well thought through and ties together the main themes that appear to be driving US, British and European politics. It’s worth reading in full if you haven’t yet done so.

Who’s More Fascist: Presidential Candidate Donald Trump or Former Federal Reserve Chairman Ben Bernanke?

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How Economists Facilitated the Transition of Erstwhile “Market” Economies to Fascism

The Left calls Donald Trump a fascist invoking the memory of Hitler and Mussolini, to which Trump might reply: “they were losers; I’m no loser.” Fascism is in essence the political control of the private economy, historically justified by democratically elected leaders to defend against perceived or orchestrated external threats. Progressive war politicians from Presidents Wilson and FDR to Johnson and Obama and now candidate Clinton have pursued this same goal in the US as has the social democratic European Union.

At the recent meeting of the G20 leaders and central bankers political responsibility for and control over their respective economies was assumed, but their Alfred E. Newman “what, me worry” smiling faces belie the fragility of the current global economy. The political distortions to both the financial and real economy have arguably never been greater, to which politicians and their economist enablers prescribe more of the same mostly wasteful public spending financed by money printing, a cure reminiscent of medieval bloodletting.

Having never been of much use to business, economists mostly followed “Say’s Law” that supply creates its own demand (for academic economists). They got their first pervasive shot at political power when President Wilson – an academic who chafed at constitutional constraints – created the Federal Reserve which helped US bankers fund the Allies until he could mobilize a war economy, making the first WW “Great.” The unprecedented death and destruction of the Great War knocked the global economy off kilter and the massive international war debts made stabilization politically difficult. As the creditor and least damaged victor, the US economy boomed in the roaring ’20s, followed by a bust.

Purveyors of the “dismal science” had previously counseled that politicians had to own up to the cost of war until the private economy recovered. While the “arts” of manipulating the value of currency and public spending financed by coercive taxes and often uncollectable debt as well as coercive regulation were as old as politics and war itself, post WW I economists became noticeably less “dismal” and purportedly more “scientific,” believing that such “macroeconomic” interventions could be calibrated to “tame business cycles” in part by transferring or defaulting on war debts. This was complemented by “microeconomic science,” the recent objective of which has been to prove that individuals aren’t always perfectly rational (and by inference in need of paternalistic political protection and direction). Macroeconomists contend that this psychological defect is contagious, conjuring irrational mobs running on banks (or attending Trump rallies).

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Quote of the Day 2

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Nassim Nicholas Taleb on Facebook:

What we are seeing worldwide, from India to the UK to the US, is the rebellion against the inner circle of no-skin-in-the-game policymaking “clerks” and journalists-insiders, that class of paternalistic semi-intellectual experts with some Ivy league, Oxford-Cambridge, or similar label-driven education who are telling the rest of us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think… and 5) who to vote for.
 
With psychology papers replicating less than 40%, dietary advice reversing after 30y of fatphobia, macroeconomic analysis working worse than astrology, microeconomic papers wrong 40% of the time, the appointment of Bernanke who was less than clueless of the risks, and pharmaceutical trials replicating only 1/5th of the time, people are perfectly entitled to rely on their own ancestral instinct and listen to their grandmothers with a better track record than these policymaking goons.
 
Indeed one can see that these academico-bureaucrats wanting to run our lives aren’t even rigorous, whether in medical statistics or policymaking. I have shown that most of what Cass-Sunstein-Richard Thaler types call “rational” or “irrational” comes from misunderstanding of probability theory.

(Via Richard Fernandez.)