No Free Market With Crony Capitalism

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Take a minute to google “Crony Capitalism.” Within thirteen seconds an astounding 3.9 million hits will pop up. Obviously, the subject is a hot topic among internet users. People are talking, writing, and reading about it. Unfortunately, in the United States, there are still relatively few adults who understand the meaning of crony capitalism beyond the basic definition given by any dictionary.

Most people understand the practice to be one of businesses maintaining close relationships with government officials. What they don't understand is just how much the practice hurts the American economy. They don't understand that ever increasing rates of practice are wiping out the little guy's bank account and fattening those of the government, as well as the mega corporations. I use the term “practice” loosely, as it's quite obvious that the practitioners have become experts. The cronies involved are quite adept at their game, and play it well.

But just who are these cronies? There has been a lot of finger pointing in the last several years, and with the coming presidential election, the fingers are jabbing frantically in an effort to place negative attention on the opponent. Liberals/Democrats are claiming that the Conservatives/Republicans are to blame for the negative impact of cronyism on our economy, and vice versa. So, who's right? The answer doesn't reside in one party or another. Crony capitalism is alive and well in both parties. Government officials getting rich from the game come from both sides, and corporations don't have a party affiliation in the same vein as an individual voter may carry. Frankly, corporate entities don't give a hoot who's providing the means for them to exceed in their endeavors, so long as they are successful in meeting their goals. They simply grease the palms of whomever is in a position to help them achieve success, either through campaign contributions for specific politicians, or job offers for highly paid executive positions.

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Otherwise Known as Insider Trading

The hot debate of what's become known as Obamacare created a furor in the immediate months preceding it becoming law. However, before the American public was aware of Obama's specific intentions, our Congress and Senate was dividing the spoils to be won through insider trading based on knowledge the little people didn't possess. Our politicians had advance knowledge of which companies would be impacted by the mere fact that they were involved in writing the legislation that would instigate the changes to be faced. Many of them cashed in on their advance knowledge, to the tune of millions of dollars.

Corporations strive to protect themselves by employing lobbyists to help shape legislation. It is the lobbyist's job to sway legislators to write provisions which will provide a healthy bottom line for them in whatever industry to which the corporation is related, or to exert some damage control if the legislation is perceived to be negative. When meetings between industry representatives and the legislators are held to determine who wins and who loses in regards to the proposed legislation, the doors are closed. Such meetings are not for public consumption.

A prominent player in the Obamacare game was none other than Senator John Kerry who serves as a member of the Health Subcommittee on the Senate Finance Committee. While Kerry was busy pushing and promoting the healthcare bill, he was equally busy purchasing stock in private healthcare and pharmaceutical companies, as well as dumping stocks deemed to be on the losing side of the legislation. During his career, he has made millions trading stocks related to legislation he's been involved in shaping. Records of his transactions show an “uncanny” pattern of perfect timing for reaping the highest returns or evading a major loss.

In his book, “Throw Them All Out”, author Peter Schweizer named a dozen politicians who manned prominent positions on committees directly related to the healthcare legislation. They were both Democrats and Republicans, and they traded stocks netting themselves millions of dollars. The stocks in question were all healthcare and pharmaceutical related. Had anyone of those listed been employed as an executive of a corporation, he would have been in the sights of the Security and Exchange Commission. Most likely, he would have been fined and jailed for insider trading. But the SEC, a government agency, does not fine and jail their own. Power certainly IS money!

Bailouts = Bonuses

With all this talk of stocks and insider trading, power and money, we have to address how the financial industry has become so closely associated with the US government. From 2007 to 2010, financial institutions such as banks, Wall Street houses, hedge funds and insurance companies, to name a few, spent about $600 million in campaign contributions and lobbying. In the years preceding, those running such institutions became aware of the benefits doing so would award them.

Beginning with Bill Clinton's bail out of banks involved with the Mexican Peso Crisis, financial institutions have come to expect the Federal government to subsidize their reckless gambling in the markets. Bill Clinton, Alan Greenspan, Larry Summers and Robert Rubin were the genius engineers of the bailout who did not have approval from Congress for the $20 billion taken from a Treasury fund. The money was paid out simply to rescue certain big banks from suffering the repercussions of bad loans they had written. It was one of the first lessons teaching bankers that they do not have to fear failure from making risky decisions. The American taxpayer will be forced to bail them out.

During an interview with David Stockman, the Reagan appointed budget director, Bill Moyers stated, “Following the 2008 economic meltdown came the mother of all bailouts,” referring to the plan for economic recovery through expenditure of $700 billion, better known as TARP (Troubled Asset Relief Program). Under this program, the Bush Administration came to the rescue of some of our country's biggest financial institutions. General Electric, Morgan Stanley, Goldman Sachs, etc. were all bailed out. The bailouts lead to what's come to be known as the Bailout Scandals, where executives of the institutions receiving TARP monies rewarded themselves with huge bonuses.

One scandal centered around the insurance giant, AIG, but if anyone wants to know the real scandal that was hidden in plain sight, check out:

http://www.slate.com/articles/news_and_politics/the_best_policy/2009/03/the_real_aig_scandal.html

Bailers and Bailee's Appointed to Leadership Roles

In the end, taxpayers had had enough. A new government was elected into office, believing the wished for change would take place under the guidance of Barack Obama. Unfortunately, change of the magnitude necessary isn't going to take place with Obama as the helmsman. He appointed Larry Summers, who was a central figure in the Clinton led Mexican bailout, as Director of the White House United States National Economic Council. He appointed Timothy Geithner as Secretary of the Treasury. It was Geithner, who as president of the Federal Reserve Bank of New York, directed the Federal Government's spending of $350 billion in TARP funds...the same monies that went to AIG, Morgan Stanley, Goldman Sachs, etc. In Stockman's words, “The cronies of capitalism are in charge of policy.”

And then there's Jeffrey Immelt. Last year, Obama appointed him to the President's Economic Recovery Advisory Board for the purpose of advising the president with advice for fixing America's declining economy. He's been appointed chairman of the Council on Jobs and Competitiveness. This guy is the same guy who is currently the chairman of the board and CEO of General Electric. He's the same guy who recklessly funded a lot of assets at GE Capital and suddenly needed a Treasury funded bailout in 2008. He's the same guy working for a corporation that has outsourced more American jobs than any other corporation, cutting the American GE workforce to 150,000 while employing 300,000 worldwide.

Care to read more horrors about the policies this guy has supported and helped bring to fruition?

http://www.ourfuture.org/blog-entry/2011010321/who-should-be-leading-our-job-creation-strategy

We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do what is ever necessary if it involves tax relief, tax incentives, tax cuts, loan guarantees, Federal Reserve market intervention and stabilization. Whatever it takes in order to keep the game going and their stock price moving upward. That's where they are.”

~~~ David Stockman~~~

David Stockman also makes the observation that true free-market capitalists would never go to Washington with their hands out, would never expect the Federal Reserve to hand out cheap or free money for them to continue making bad and risky decisions. They would expect to weather the storm of their own making, or at the very least, if a helping hand were offered, they would expect limitations and boundaries to be set against them. They would expect to lose bonuses, maybe jobs, even complete failure of their firm.

Closing The Door On Cronyism

If free-market capitalism is truly over and the truth is that today our government is dominated by the power of money, how do we turn it around? There have been two popular suggestions on that front.

The first is to place term limits on our elected political figures. It's believed that shorter term limits will halt the back scratching between elected officials and representatives of corporations looking to line their pockets through legislation and federal regulatory agencies. Supporters of term limits believe that lengthy years spent in elected positions is what opens the door to corruption and graft. They believe career politicians are more able to forge relationships with others in equally powerful positions, and that these relationships are detrimental to the public at large. Those opposed to placing limits claim that stability and efficiency would be sacrificed, as well as professionalism. It's believed those who make a career out of politics are more likely to make sound judgments because their track record is what leads them to re-election.

The second and more likely to be successful at closing the door on crony capitalism is to ban corporations from making campaign contributions altogether, and to disallow them the right to try to sway/influence elections. Nothing will change unless the money factor is removed from elections, which means the way elections are financed must undergo restructuring.

So, then what can we do about the insider trading resulting from politicians using their advance knowledge of legislative endeavors? We can demand that personal assets be made available to the public for scrutiny. We can demand that those who have succeeded in their bid for an elected position be banned from engaging in financial activities related to pending legislation. We can also demand that any politician with responsibility toward shaping a piece of legislation, not have possession of assets associated with the proposed legislation.

Some may argue that we already have a mechanism in place to help avoid conflicts of interest...the blind trust. However, just because a politician has placed his assets in a blind trust, it doesn't mean he isn't feeding information to the trustees that can be used in making financial decisions. The only thing a blind trust will accomplish is the hiding of personal assets, preventing the public from recognizing any conflicts of interests.

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Comments 15 comments

Happyboomernurse profile image

Happyboomernurse 4 years ago from South Carolina

Very interesting, comprehensive and well researched article about crony capitalism. I agree with the conclusions you stated here.

Voted up, useful, interesting and awesome.


Terri Meredith profile image

Terri Meredith 4 years ago from Pennsylvania Author

Thanks for reading and commenting. A special thank you for the Tweet! and other votes. Every time one of us passes information written by another author, we're doing our part to spread the information and/or enjoyment!


innersmiff profile image

innersmiff 4 years ago from UK

It makes me laugh when Alan Greenspan "regrets" not realising that "capitalism" couldn't prevent the financial crisis. First of all, it's not capitalism. Crony capitalism is more akin to fascism than anything else. And second, it was his fault for creating the false bubbles in the first place!

Good article. If one gets this, one is half way there to solving America's problems.


Terri Meredith profile image

Terri Meredith 4 years ago from Pennsylvania Author

innersmiff: most people don't really know what crony capitalism is all about. The majority think it's just a bunch of "good ole boys" doing favors for each other, and don't get that it destroys an economy allowing those in power to get rich while the constituents they are supposed to be representing get left holding the (empty) bag.


f_hruz profile image

f_hruz 4 years ago from Toronto, Ontario, Canada

Very well put, congratulations!

It's exactly what gives US Capitalism a bad name ... this and the constant war machine driven by a desire to destabilize anything which stands in the way of "vital national interests" ...


Alastar Packer profile image

Alastar Packer 4 years ago from North Carolina

Nobody does it like you Terri. I'll only add when F.D.R. said it takes one to catch one and placed Joseph Kennedy over the SEC during the Great Depression at least he did what he was supposed to do in many cases.


Terri Meredith profile image

Terri Meredith 4 years ago from Pennsylvania Author

A huge problem for turning the country around is that so many folks have become rather despondent and apathetic, feeling it's all too big to be conquered by us "nobodies". I don't foresee those already in office as men/women who will do what's necessary by placing limits on themselves. They are career politicos for the very reason that they can rapidly expand their personal wealth through the job. It's not likely they will put anyone in charge of anything other than having their backs.


Alastar Packer profile image

Alastar Packer 4 years ago from North Carolina

Well stated Terri. Capitalism/Democracies greatest inherent weakness on display; if it ain't nailed down in granite it's fair game and bye-bye. It's near stunning to compare the parallel thirties with today. Its almost amazing the virulent attacks on the programs that actually put people back to work and gave them hope back then. Yes, FDR saved capitalism but he didn't take absolute dictatorial power when he could have. Not sure how that speaks for today but there it is.


f_hruz profile image

f_hruz 4 years ago from Toronto, Ontario, Canada

Capitalism, just like Marxism is only a socio-economic theory. It takes a national culture to make things work for a nation!

Some private enterprise is just fine, and the Chinese make full use of it ... but they know already, corruption is hard to fight, and letting multi-nationals do as they please would be the end of modern day China ... but because conditioning and manipulation has made people into passive consumers totally incapable of organizing a cultural revolution here, the end of the US capitalist system is virtually just around the corner ... :)


pagesvoice profile image

pagesvoice 4 years ago from New York/Pennsylvania border

I am so glad I came across your article. Wow, have you hit the nail on the proverbial head with this in depth analysis of what has and continues to destroy our economy. As a new participant here, I will look forward to reading more from you.


Terri Meredith profile image

Terri Meredith 4 years ago from Pennsylvania Author

@f_hruz: I'm not sure a cultural revolution isn't already underway. People are getting tired of being broke, of being mislead and lied to. The spirit of the American people may appear to be waning to some onlookers, but I truly believe the answer is all about getting the right information into their hands. Why else do you think there's been such a clamp down on "news" as well as wanting to control our internet activities? Information is power. I'm talking about well researched and documented information. It's much too easy to run off at the mouth armed with nothing more than opinions, but when people are assaulted by information loaded with accurate, hard evidence, over and over, eventually they begin to see the light.

@pagesvoice: Welcome to Hubpages...again! I see you've not been active in the 2 years you've been a member. The more active you become, the more you will see that this is a community of talented writers, full of information about myriad subjects. I look forward to reading some of your work. I thank you for your praise and hope that others will find it just as informative, perhaps deciding to pay closer attention to the workings of our government. Changes will only come if the masses demand them and settle for nothing less.


f_hruz profile image

f_hruz 4 years ago from Toronto, Ontario, Canada

Hello Terri,

thanks for your reply!

Your work is first class, but the way I see things from right next door, up in Toronto, where I have been watching the situation in the US since I first came here from Europe in the late 60's, when the place was full of Vietnam War draft dodgers and there was a vital and active opposition at home to such a criminal war lunacy, is less optimistic ... because not much was learned from it by the population at large.

Money was spent on more wars, and is still being spent even when the deficit is astronomical!

You ask the average Joe, and they will tell you ... "It's us against the terrorists [the rest of the world or any excuse will do] ... so we have to be strong!".

Next thing you hear ... "Oh, Michael Moore is not a good patriot" ... it must be because his documentaries are not sugar coating reality and their patriotic brainwashing would first have to make one thing clear to them, it's not your country any more ... you just live there.

If ordinary working people had some sense of where they really belong in the spectrum of things, they would no longer say US but realize it's THEM - the multinationals, the political prostitutes and the war criminals like Dick Cheney ... who still walk the streets as freely as nothing ever went down 911 - not in NYC, the Pentagon or Pennsylvania, even though you had the Truth Movement raise more than enough questions to look for the REAL facts, etc. ... the focus is not on socio-economic change put on keeping things quiet, to let things go on as long as possible - serves the establishment just fine - and the popular culture will endure it in the name of "vital national interest"!

Where do you see a credible, radical intellectual opposition on a broader scale forming in the US today?

I wish just 80% of folks south of the boarder would be like you. I would fully share your hope if enough of these passive consumers who like to keep waving the flag but have no clue about social activism, started or learned how to run a growing movement for real social change and had their act on the road by now ...

A few demonstrations, here and there aren't going to do it!

Obama's election was a well tuned operation, and even that big let down event has failed the people. He was much too quick to sell out to the pressure of his daily CIA briefings because he remembered JFK and his brother who also thought they could bring REAL change to Wishingtown!

Franto in Toronto


wba108@yahoo.com profile image

wba108@yahoo.com 4 years ago from upstate, NY

I would agree with term limits and finding a way to hold Congress more accountable to the Constitution. But to limit campaign contributions would to be limit free political speech and would

only treat the symptoms and not the cause. And the fact is as long as the Government is handing out trillions of dollars of loot each year and uses its power to pick winners and losers in the marketplace, corporate money will somehow find its way into the hands of politicians.

Limiting campaign contributions will also help increase the influence of some while decreasing it for others. Trusting the government, (who created the problem) to fix the problem is like giving the inmates the keys to the asylum. What needs to happen is for the government to be held to the Constitution by getting out of the free market.


Terri Meredith profile image

Terri Meredith 4 years ago from Pennsylvania Author

Thank you for your comments. I appreciate your point of view, but when I speak of limits on campaign contributions being limited, one of the areas of most interest to me, is in the allowance of corporate contributions. Corporate personhood is a sham designed for making bribe money look legitimate. Corporations are made up of many individuals. It's the individuals who should be contributing out of their own personal funds (which of course many of them do). Every single citizen of this country is free to donate or not based on personal beliefs. However, by allowing unlimited amounts we've opened the door to corruption. If I donate $25 to your personal cause and my neighbor donates $10,000 because he can afford it, who are you going to feel you owe the most? Are you going to vote the way I would like you to vote on an issue of concern or are you going to vote the way the bigger donor asks? There might be 10 more folks like me who gave $25 but it still doesn't equal $10,000.

You mention treating the cause...just what is the cause of man's greed and selfishness? The only way to combat the frailties of the human race is to put in checks and balances designed to eliminate the ability to exercise such impulses. Following the Constitution isn't a difficult task for honest men and women. Our whole election process is designed to promote dishonesty, greed, and corruption. Until that is fixed with proper checks and balances, we'll not see honest people in positions of power.


wba108@yahoo.com profile image

wba108@yahoo.com 4 years ago from upstate, NY

Thank you for answering my comments, it will certainly give me something to think about!

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