Archive for the ‘Crony Capitalism’ Category

“All Restaurants Are Taco Bell”

Saturday, October 22nd, 2011
What Kind of Monopoly?

Drudge is linking the story about Google considering joining in on a bid for Yahoo.  Some are already beginning to raise a flag about monopoly, as the two Internet giants certainly occupy some of the same market space.  Of course, they might be interested in acquiring it just to slice it up and sell it off, or it could be that like so many things, Google has gotten so large that it wants multiple big-name brands to capture more of the market.  Either way, it’s not necessarily a monopolistic move, but many will already see it as such.  Part of the thing that makes a monopoly is government authority.  You may remember the silly, poorly-made movie starring Sylvester Stallone titled “Demolition Man,” in which the recently defrosted hero discovers that “all restaurants are Taco Bell.”  This was something enforced on the culture by government.  That is a coercive monopoly, which is the only sort that should cause you concern.

One of the problems is that people don’t understand the concept of monopoly, because what the popular culture tells them is that all monopolies are bad. Far be it from me to defend Google here, or in any instance, but I think it’s important that we understand what truly constitutes a coercive monopoly, as well as understanding how the concept has been oversimplified into the more generic and misleading term “monopoly.”

A monopoly is said to exist when a specific person or enterprise is the only supplier of a particular commodity.  For instance, if you patent a new device, and have sole rights to produce or license the production of the device, you have a monopoly.  If you own the last ham sandwich on Earth, with no expectation of there ever being more, you have a monopoly.  Look down at your keyboard. If you own it,  you have a monopoly on its use.  In this very obvious sense, a monopoly isn’t necessarily bad at all.  Copyrights are another form of monopoly, as are trademarks.  We could not long function as a society if there was no concept of property and no attendant “monopoly rights” of ownership.  As you can see, the concept is an important a vital part of a capitalist society.

Now let us turn to the much more specific and problematic concept of coercive monopolies.   This form of monopoly is a good deal different, and it’s the sort of which we should generally disapprove. Like patents, trademarks, and copyrights, coercive monopolies are granted and enforced by government, however, with these, there is nothing to prohibit another person from providing a substitute product or service.  When government creates a legal coercive monopoly, it freezes out substitutions, and it reduces the provider of the goods or services to one entity.  Consider the municipality that provides a public water utility, but prohibits the drilling of water wells.  Consider the public garbage collection service, while the city that provides it prohibits the use of alternative collection services, or requires that you pay the fees irrespective of your usage of the service.

Think of the public school system that collects your money, in most places based on the value of your property, whether you have children or not, and without rebate if you send your children to a private school at your own expense.  Notice that in this case, they are able to extort the money from you on the basis of seizing your property.  These are the sorts of monopolies with which governments empower themselves, but they also empower others as well.

Consider Major League Baseball, that gets a specific exemption from the anti-trust statutes under the law.  You can’t simply go set up your own baseball league.  This institution is protected by exemption from anti-trust laws, in specific legislation by Congress, under the assumption that it’s somehow too fundamental to American culture to permit competition.  Let me suggest that the idiotic legislators who passed this exemption failed to recognize something much more fundamental to American society: Competition.  The irony of protecting a competitive sport from external competition is mind-boggling.  If you’re a pro quality baseball player, you can either accept their rules or give up your career. This has been done in the main to restrict players from being able to negotiate.  If there was another league paying better, or willing to allow the player to decide the cities with which he would negotiate, the value of baseball players would escalate.  Some people think they’re paid too much already, but the fact is that they should earn whatever they can negotiate that the market will bear.

Of course, there are other sorts of monopolies that government rigs all the time.  Back in the 1990s, Bill Clinton put a huge swath of territory in Utah off-limits to coal mining, allegedly on the basis that it was to protect the environment.  It was also one of the only known sources of clean-burning coal in the world, the other being offshore.  Guess who had been buttering Mr. Clinton’s bread?  Yes, this sort of game is played all the time in Washington, where effective monopolies are created by legislation, and it’s part of the entire universe of crony capitalism that so many have been lamenting recently.

The government has enacted anti-trust laws advertised as being used to break up monopolies, or to prevent their formation, but all too frequently, this is just an excuse for intervention in the markets used to extort money from companies.  The most egregious cases of this are when government imagines a monopoly into existence so that they can squeeze money out of them.  Consider the case of Microsoft, that in the early 1990s became the dominant player in desktop operating systems.  At the time, Microsoft didn’t have a massive lobbying operation, and Bill Gates ran his company, but once he started to really beat his competitors badly, his competitors cried foul and turned to government for relief.  The problem is that Microsoft wasn’t really doing anything illegal, despite all the posturing by its competitors, and such laws as could be stretched to cover its actions were miserable ideas born of crony capitalism.

Several companies, all competitors, went to politicians and lobbied them to take steps against Microsoft.  It was a bi-partisan lynching, and after the affair, I believe it signaled the beginning of Microsoft’s market-share decline.  Bill Gates learned from the experience, as did his successor, and you can believe that Microsoft now employs plenty of lobbyists to plead its case before government. Did consumers benefit?  No.  So who did?  It didn’t save Netscape, which had been one of the complainers, and the truth is that Microsoft’s market share had been the product of great marketing, a very good product, and good, old-fashioned competition.  In the main, it had been what is termed a “natural monopoly.”   People simply preferred their products.  In the end, the only beneficiaries of this fiasco had been government and its officials, its regulators, and of course, all the lobbyists who now rake in cash.

When somebody complains to you about the monopoly some company allegedly enjoys, you’d be right to consider just what it is that the term means in the context proposed.  Not all monopolies are bad, and some are even vital parts of our economic system, but the ones with which we ought to be most concerned are those created in the cloakrooms in Congress, in the old executive Office building, and in the White House.  It never fails to be the case that it is this sort that subjects us all to the greatest perils.


Weakening America: The Federal Reserve’s Latest Risky Scheme

Saturday, October 22nd, 2011

Taxpayers on the Hook - Again

It simply doesn’t seem possible, and yet here it is, right in front of us: Our own Federal Reserve under the direction of Ben Bernanke is pushing for a policy that will leave American tax-payers on the hook for tens of trillions of dollars in liabilities.  European derivatives for Bank of America in its Merrill investment banking unit  are being shifted to the depository arm and this is insured under FDIC, your Federal Deposit Insurance Corporation.  That’s right, this is going to be a gigantic crisis when Europe finally implodes, and with Greece now needing a 60% write-down on its bonds, you must know that calamity is right around the corner.   What’s worse is that it is now revealed that this will be hidden from you in part due to Dodd-Frank, the “financial reform” law that Congress passed in 2010.

Ladies and gentlemen, our country is being systematically destroyed.  These obligations are the financial form of a dirty bomb planted in the US Treasury, and it will destroy us.  This is insanity.  It also turns out JP Morgan is doing much the same thing.  We’re talking about trillions of dollars in redistribution of tax-payer wealth to private global banking interests.  This is setting the stage for the mother of all bail-outs.  I can’t believe that this is being done, or that anybody thinks this is a prudent plan.  It’s as though the American tax-payer is being robbed at gunpoint without knowing it.

This is the one thing about which Ron Paul is consistently correct:  The power of the Federal Reserve system must be curtailed if not eliminated entirely.  We simply can’t afford any more of this.  It has the potential for destroying us.  Our political leaders must stand against this, but in too many cases, they’re part of the problem because they’ve enabled much of this.

We need a return to a sound monetary system, and those who think it should be tied to the other currencies of the globe are out of their minds.  Of course, they want that for the same reason this is being done:  To offer themselves protection. Ladies and gentlemen, we’re looking at a possible, or even probably catastrophe here, and other than just a rare few media outlets, nobody is telling you about it. You should begin to wonder why they’re not.

Sarah Palin Slams Obama Crony-Capitalism

Saturday, October 22nd, 2011

Only twenty-four hours ago, former Alaska Governor Sarah Palin tweeted a link to an ABC story about a electric car manufacturer from Finland receiving US government loan guarantees that decided to take its loan and its plant home.  As the details have begun to  emerge from the swamp that is the Obama administration, it’s becoming crystal-clear that we have a giant problem in Washington DC.  In a follow-up to here tweet on the issue, Palin has posted a note on Facebook entitled American Crony Capitalism Brings Jobs to Finland.

Her posting begins by explaining some of the linkage that has been revealed to Obama cronies like Al Gore, whose investment capital firm is a partner in the venture.  That’s simply another stunning revelation about how deep the corruption goes.  I’m certain there was probably nothing illegal, since those who right the laws permit these sorts of things, but it’s not merely a matter of law.  It should be a simple matter of right and wrong, and it wasn’t so long ago that decent Americans, including many politicians, didn’t think the law was the only limit on their conduct.  I don’t need a law to tell me some things are simply wrong, and even if they figured out a way to stay within the strict wording of law, they certainly have shredded its spirit.

She hammered away at the obvious corruption and said this:

“It’s bad enough that we borrow money from foreign countries to give to foreign countries. Now we borrow from foreign countries to finance jobs in foreign countries. (This kind of reminds me of the $2 billion assistance President Obama provided Brazil for their off-shore energy developments, while shutting down or blocking much of our own off-shore domestic drilling. He’s in favor of energy jobs in Brazil. But in America? Not so much.)”

Yes indeed, I remember the story quite well.  The main Brazilian company involved is Petrobras, the Brazilian oil monopoly(I thought liberals hate monopolies?) and as an interesting side-note, George Soros has been an investor in the venture, and his timing seems to have been impeccable. Interestingly, it’s a deep drilling operation off the coast of Brazil, much deeper than the Deep Water Horizon that gave Obama the excuse to band off-shore drilling in the Gulf of Mexico.  Isn’t this also a case of the ultimate in crony-capitalism?

This is the game being played in Washington, using your dollars on boondoggles to enrich politicians and their well-heeled friends and family members.  This ought to be stopped.  Sarah Palin goes on to further support her case, before she  concludes:

“Wake up, America, before it’s too late.”

Indeed, America, wake up!