Crony Capitalism: A Love Story

Crony Capitalism: A description of capitalist society as being based on the close relationships between businessmen and the state. Instead of success being determined by a free market and the rule of law, the success of a business is dependent on the favoritism that is shown to it by the ruling government in the form of tax breaks, government grants and other incentives.

Investopedia

I recall back in the Bush Administration when I heard the crony capitalist label hurled with regard to Halliburton.  The Vice President had been the CEO and now the administration was giving no-bid contracts to a division of Halliburton.  There were also claims that the administration was an ally of Big Oil; would we rather have government as an enemy of Big Oil?  Regardless of the details of these cases, the question is where are all the folks who were so scandalized by crony capitalism now that the President Obama is practicing it with abandon?

Let us consider the cases:

Chrysler & GM: These two car companies would have gone bust if not for government intervention.  The free market and the rule of law were not responsible for the success of these companies.  The UAW, which was a big contributor to Obama, made out rather well thanks to the bail out.  This particular case is shared with Bush who embezzled government funds to save the companies until Obama could embezzle much more to ‘save’ them.  I say ‘embezzle’ because the Congress specifically refused to pass legislation to save the two car companies so neither president had legal authority to raid TARP.

Fisker Automotive: This car company received $528 million in loan guarantees.  This company is still in business so there is yet hope the taxpayer won’t get stuck with the tab.

Solyndra: The most infamous of the Green Energy jobs initiative, this company had investors who were big fundraisers for Obama.  The Obama Administration granted $535 million in loan guarantees to the company that folded shortly thereafter.

Abound Solar: Fortunately for the taxpayer, this company folded before it used all of the $400 million in loan guarantees.  Thus, it only cost the taxpayer $70 million.

Solar Trust: Offered $2 billion in guarantees, this company filed for chapter 11 before the taxpayer was soaked.

Energy Conversion Devices: Another solar company, it received $13.3 million in stimulus before it went bankrupt.

Ener1: This Company got $118 million in stimulus in 2009 but filed for bankruptcy in 2011.

Beacon Power Corp.: This one got only $43 million in loan guarantees before going bust in 2011.

SpectraWatt: Yet another solar company though this one didn’t even reach the $1 million mark before going under.

Raser Technologies: A geothermal company that got $33 million in stimulus but, shockingly enough, it went bust in 2011.

With the exception of Fisker, these companies would all have failed – and cost the taxpayer nothing – had they been left to the mercies of the often-maligned free market.  Instead, thanks to the president’s fascination with non-economic renewable energy and/or indebtedness to donors/fundraisers, the taxpayer was forced to support these failing models.

Government should not bail out or give loans to business.  If a company cannot convince us to voluntarily invest, why should the government coerce us to invest via our tax dollars?  That goes for ethanol, mohair, trains, airlines, flood insurance, etc.  Let the free market do its job and leave crony capitalism to the Europeans.