May 24, 2018
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From markets to crony capitalism

By John Buell, Special to the BDN

Recently in a provocative column, Jon Reisman celebrated the magic of free market capitalism. He cited Koch Industries as a stellar example of the contributions of capitalism, a system characterized by “economic freedom, limited government, the rule of law, and respect for property rights.” The very success of Koch Industries occasions their demonization by the “vast left-wing conspiracy.”

As one whom Riesman would surely lump in that conspiracy, I am reluctant to enter this fray. Nevertheless, I would like readers to entertain the possibility that the terms of this debate are badly framed. The capitalism Reisman defends hardly exists anymore. Furthermore, the blame or credit lies not primarily with the left but with business interests themselves. The Koch brothers have helped drive this process, but (in this I agree with Reisman) are hardly unique demons. They are symbols and products of a capitalist transformation.

Free market capitalism is about limited government and private property. The forms of property most valued have changed dramatically in 200 years. When Thomas Jefferson praised property he envisioned plots of land with clear boundaries and the produce of that land. The forms of property most significant in the 19th century, however, were very different.

The U.S. would not be an economic power today without complex legal and administrative changes in property relations. The railroads, the drivers of economic growth, were the product of legal interventions, technology and government support. Railroads accumulated the capital needed to extend routes through charters of incorporation that limited the liability of stockholders, thus privileging one form of property over others. The courts established clear distinctions between the rights of management and individual shareholders, defined corporations as persons. Most importantly both before and after the Civil War governments made extensive land grants to the railroads.

I wonder how many jobs even 19th century capitalism would have created without subsidized railroads or 20th century markets without government subsidies of computers and the Internet.

The size of government, both in relative and absolute terms, has grown throughout much of the 20th and early 21st century. The increase in government spending can be attributed in part to entitlements, for which the left can take some credit or responsibility. But much of the growth of the debt lies in the cost of wars. The true unfunded liability the U.S. faces is the vast cost of caring for the disabled veterans left by wars that benefit and help constitute what President Dwight Eisenhower called our military-industrial complex.

Federal Reserve purchases of corporate paper, and Fed below market rate loans to rescue deregulated banks from their own excesses dwarfed Obama’s fiscal stimulus. Corporate apologists maintain investment banks repaid the TARP loans, but such calculations omit the vast benefits from low interest loans.

I also can’t locate Reisman’s vast conspiracy. Many Democratic backers of Barack Obama criticized the whole idea of a stimulus and support major reductions in government spending. Obama confidante Jeffrey Imelt has probably outsourced as many American jobs as Obama’s tepid stimulus saved. We need a big fiscal stimulus, the construction of a modern infrastructure that could do for us what the rails did in the 19th century.

Corporations have ditched the free market, rely on government subsidies, and buy sympathetic political leaders. The Koch brothers are perfect examples. Even as the Kochs denounce government safety nets, their vast corporate empire thrives through a variety of subsidies. Yasha Levine has reported: “Georgia Pacific, a … subsidiary of Koch Industries, uses taxpayer money provided by the U.S. Forestry Service to provide their loggers … roads and access to virgin growth forests. … The Bush administration, in a deal even conservatives alleged was a quid pro quo …, handed Koch Industries a lucrative contract to supply the nation’s Strategic Petroleum Reserve with 8 million barrels of crude oil.”

We are not returning to a world of small farms, businesses and limited government where competition and the general moral sense of small communities could assure growth and security. Markets are useful and no society has prospered without some reliance on markets. Yet modern technology, economies of scale and the speed and complexity of life demand something more than pure free markets. It is long past time to give the public a larger voice in the shape and intent of the inevitable interventions and reforms of markets and their corporate titans.

John Buell is a political economist who lives in Southwest Harbor.

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