Dr. David Cowan
One thing is for certain, whoever wins a Trump v Clinton race it will be a victory for crony capitalism, which is essentially a form of feudalism. If the problem with Socialism is said to be that eventually you run out of other people’s money, you would have thought that the problem with crony capitalism is that you eventually run out of your friend’s money or favors. Trump and Clinton are evidence this doesn’t seem to be the case, as they have found the gifts that keep on giving. Trump’s wheeling and dealing and the Clinton Foundation have proven there are golden eggs to be had if you know the right people.
This election cycle then is heralding a new era of feudalism. This was the social system that existed in Europe during the Middle Ages in which people worked and fought for nobles, offering loyalty, in return for protection, titles and the use of land in return. Adam Smith defined feudal government as a stage of social development characterized by the absence of commerce and by the use of semi-free labor to cultivate land. Any of this sound familiar?
To understand this modern-day feudalism, we need to look more into crony capitalism. According to Cato Institute estimates, crony capitalism costs taxpayers roughly $100 billion per year and consumers hundreds of billions more in higher prices. This puts a brake on economic growth and creates greater inequality. It also encourages corruption. Yet, isn’t government corruption supposed to be higher in poor countries than in richer countries?
If we look at the ten least corrupt countries they have, on average, a GDP per capita of around $40,000. These countries include Singapore, Denmark, New Zealand, and Switzerland. If we look at poor countries, the GDP per capita in the ten most corrupt countries, which includes Sudan, Turkmenistan, and Uzbekistan, is around $5,000. Where is America in all this? The NGO Transparency International in their evaluation of 168 countries for corruption puts the United States currently at number 16 in this hit parade.
Should the world’s “number 1” capitalist economy really be so high on this list of economic corruption basket cases? It is revealing. It reveals that it is something of a myth that America is still this great capitalist economy. It indeed once was, but it has been on the crony decline in recent decades.
The problem with crony capitalism is that it encrusts existing power structures and maintains the political equilibrium; in other words it is the tool of status quo. Left and right, the interests of organizations, whether they are investment firms like Goldman Sachs or labor unions like the teachers, grease the levers of government to maintain their position by political intrigue.
Crony capitalism also takes the form of cash subsidies, tax preferences, earmarked appropriations and no-bid contracts, regulatory and trade protection, and a host of other means used to ensure favorable treatment. It is no irony then that Trump has made money out of casinos and property speculation, he has been used to loading the dice. It is little wonder that the Clintons created the Clinton Foundation to commoditize their power.
We should understand that capitalism inevitably relates to power, so it should come as no surprise that it is susceptible to cronyism. In this respect, there is nothing new here, as cronyism predates capitalism. Rulers didn’t need capitalism to use reward as a way to buy allegiance. Hence, we will see Trump or Clinton become the new ruler counting the gold in their castle, popularly know as the White House.
Those people who criticize capitalism for all the ills and inequalities of society are misplacing their anger at the idea of capitalism. Capitalism is a tool, or as I wrote in Economic Parables, it is like a knife, which you can use to cut bread to share or use to kill. Through cronyism, the capitalist economy of America is being misused and abused by those in power today. The private interests and corporations would not have corrupting access to the levers of power if they weren’t being shown how to use them by government.
Among the reasons for this increase of cronyism is the mounting cost of election campaigns at all levels of public office, making politicians more dependent on raising campaign finances and pleasing their new lords, than on figuring out what really solves the problems of the nation. Along with this has been the helter-skelter increase in lobbying by all sectors of the economy.
What crony capitalism fundamentally does is to stifle entrepreneurism by favoring “insiders” and reducing competition. It impedes fundamental economic reforms and effective regulation, by twisting the rules to suit vested interests. It creates cost barriers in the form of even higher taxes, more regulation and tax break favoritism to suit these vested interests. It is in short bad capitalism, and the anti-capitalist protesters should instead be campaigning for a better capitalism.
This adds urgency to the task of finding solutions to the rise of crony capitalism. Crony capitalism is reducing not just the competitiveness of the U.S. economy, but the very entrepreneurial spirit that built a nation. Without this spirit we do not get the innovation and energy of capitalism, and thus we will not get the socially and economically productive behavior that drives success in the economy. Instead we get the sluggishness of a rent-seeking economy, riddled with the subsidies and taxes of vested self-protecting interests.
America is at a tipping point, and we are closing in on the end of the American model of capitalism. What this means is that America has become an increasingly feudal-like economy. Just as America has brought “royalty” in the form of Kennedys, Bushs and Clintons, and there was I thinking Americans wanted rid of aristocracy, so too America is bringing back feudalism. Forget all the other issues in this eclection. If we are to have a Trump v Clinton race then we’ll indeed see it is the crony economy stupid! It is no doubt too late for this election cycle, but when their feudal reign begins there will be an urgent need in the next four years to find a candidate who knows what America is truly about economically, and reverse this tide of feudalism.