Thursday, September 6, 2012

The Deadwood of Crony Capitalism | Online Library of Law and Liberty

The Deadwood of Crony Capitalism | Online Library of Law and Liberty

Much of the recent rhetoric surrounding the supposed need to “create jobs” as a core goal of public policy has focused on the way in which government can, by promoting job creation in particular industries through subsidies and the like, also promote “sustainability” in both the economy and the environment. One need only consider how much political energy has been spent arguing for “green jobs” as part of the stimulus program as well as the longer term policy and budget goals of the Obama Administration.

Unfortunately, as the recent example of Solyndra demonstrates, these sorts of subsidy programs, and related public-private partnerships, have shown themselves to be failures at both job creation and economic growth. As I shall discuss below, the failure of Solyndra, after being given a $527 million government loan and being touted by the President as the exemplar of the “new economy,” “green jobs,” and the future of public-private partnerships, is a point-by-point example of what’s wrong with this approach. At best, such programs are a particularly insidious form of crony capitalism that enriches a small group of people with access to those in political power distributing the economic goodies while wasting valuable economic resources in the process. Continuing to funnel resources into such wasteful programs deprives the market of much needed capital, which entrepreneurs who are calculating on the basis of genuine market prices and profits and losses will use far more efficiently. In other words, the perhaps well-intentioned policies meant to produce a sustainable economy inevitably turn into a form of crony capitalism that is itself not sustainable.

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