Mike Lee: Crony capitalism brings 'a new and unnatural kind of sclerosis' to the economy

Senator Mike Lee (R-UT) spoke against what has become widely known as “crony capitalism” at the Heritage Foundation on Wednesday.  He described this fusion of Big Government, Big Business, and special interests as “a uniquely malignant threat to American exceptionalism.”

It might be unique, but it’s not new.  In fact, as Lee reminded the audience, it was the crony arrangement between the British crown and the mighty British East India Company that led to the Boston Tea Party, and lit the fuse on the American Revolution.  A large, well-connected corporation was given special privileges denied to its smaller colonial competitors.

That should sound very familiar to every citizen of 2014 America.  It’s the standard operating procedure for our modern government.  Political connections have become the most valuable commodity in our stagnant economy, which is a big reason it remains stagnant.  Government sells the unique and extremely valuable service of anti-competition – packaged as everything from “too big to fail” bailouts, special rules to benefit monopolistic labor unions, occupational licensing that keeps new competitors out of sealed markets, regulatory mazes that only the biggest corporations can afford to navigate, a TARP bailout that rescued big banks right when the market stood ready to discipline them… and, of course, what the Senator described as “the epic cronyist disaster movie of ObamaCare.”  Why shouldn’t politically-connected insurance companies and Big Pharma love a scheme that makes purchase of their products legally mandatory, while protecting them against risk with guaranteed taxpayer bailouts?

Senator Lee is in the mood to chuck some Solyndra solar panels into Boston Harbor.  “It’s not enough to cut the size of Big Government,” he explained.  “We must also fix broken government.”  Toward that end, he recommended a “zero-tolerance” policy toward special interest advantages and cronyist legislation for Republicans.  He commended such efforts as Senator Rand Paul’s REINS Act – an excellent bill with a lovably dorky acronym that stands for “Regulations from the Executive in Need of Scrutiny.”  It would require congressional approval of every Executive Branch rule with an economic impact of $100 million or more, putting an end to the kind of fast bureaucratic dealing that keeps the crony capitalist machine humming.

Lee also spoke highly of Rep. Paul Ryan’s (R-WI) budget, Senator Marco Rubio’s (R-FL) effort to head off the coming ObamaCare insurance company bailouts, Rep. Mike Pompeo’s (R-KS) crusade against cronyism in the energy sector, Rep. Jeb Hensarling’s (R-TX) battle against reauthorization of the Export-Import Bank, and Rep Dave Camp’s (R-MI) work on simplifying the tax code – which, Lee pointed out, currently weighs in as the equivalent of either five King James Bibles or six copies of “Atlas Shrugged,” depending on which measurement you prefer.

“The problem isn’t too much money in politics,” said Lee.  “It’s too much politics in the economy.”  He championed a Republican war against crony capitalism as a fusion of good politics with a populist appeal, the right medicine for Obama’s dead-parrot economy (which, we just learned, came to a dead halt in the last quarter, kept out of official recession solely by the socialist spending and crony payoffs Lee decries) and superior morality.  “The lesson for conservatives is that Big Government is worse than inefficient – it’s unfair,” he said.

Lee went so far as to describe the siphoning of tax money through political conduits as a re-distribution program that loots middle-class American taxpayers for the benefit of the ruling elite and their favored partners.  He called it a “monstrous” perversion of free-market capitalism, with the added danger that it helps the Left obscure the true nature of capitalism from the public.  Of course, the State blames all of its policy failures on its Little Partners in the private sector (and, as with President Obama’s scapegoating of insurance companies for the failures of ObamaCare, they’ll take the abuse, because they’re being well-compensated for it.)  The fusion of socialist ideology with capitalist machinery leaves the latter looking far worse in the public mind.  Lee noted that protesters on both the Occupy Left and Tea Party Right agree about some of the undesirable effects of cronyism, but strongly differ on where the blame should be placed; the Occupy Left ends up protesting the wrong things, empowering the political forces that caused the problem.

A politicized economy pumped full of anti-competitive State controls – including a regulatory burden that theoretically affects everyone, but is only a crushing burden for small competitors – ends up increasing the cost of what Lee described as “the staples of middle-class prosperity,” ranging from energy to education.  It also creates a dangerous “deficit of opportunity,” making it difficult for anyone who doesn’t already have wealth and valuable political connections to launch new entrepreneurial endeavors.  In fact, the adventurous middle-class entrepreneur with good business ideas and an appetite for risk is likely to find the fusion of Big Government and Big Business his active enemy, even if he can afford the labor and material resources cronyism has made more expensive.

Sadly, it could not be said that Republicans have clean hands when it comes to building the crony-capitalist empire.  On the contrary, Lee was unsparing in his criticism of Republicans who support and benefit such relationships, and an Establishment that insists things can never change.  He observed that Republicans, with their nominal commitment to free enterprise, suffer greater political damage when they get their hands caught in the crony cookie jar, because profiting from political connections is not “hypocrisy” for the Left.  Their platform is straightforward about the superior compassion and wisdom of the political elite.  They believe the new aristocracy is entitled to rich rewards for their virtues, and should have the power to divert public money into the coffers of their just and capable business partners.  The Right suffers more when Republicans betray their party’s official belief in the moral and practical superiority of economic liberty.

Of course, it’s not easy to say “no” to the vast army of lobbyists laying permanent siege along the Potomac… especially when so many of them are former colleagues and staffers of Republican representatives.  The free market can be a rough playground, as Lee illustrated by rattling off a list of expensive failed ventures, from New Coke to the Microsoft Zune music player.  Vigorous competition leaves bruises.  The bruised will always cry out for relief, and for referees to throw penalty flags against the victors.  “Fairness” has been re-defined in the popular imagination as weaponized unfairness, directed against those who have done too well for too long… even if no one can prove they’ve done anything wrong.

As for Lee’s contention that broken government must be fixed, in addition to downsizing Big Government, there are some who say Big Government is always broken.  The advantages politicians can provide to their special private-sector friends make corruption inevitable as a greater inventory of valuable power is made available to those political salesmen.  In its own perverted way, corruption follows market rules: a valuable product finds its way to motivated buyers, and big money changes hands.  It’s getting hard to tell the illegal brand of corruption from Washington’s standard operating procedure, except on those colorful occasions when the FBI catches a politician cutting a deal on hidden camera in a motel room.

Senator Lee is exactly right about where the new Revolution needs to begin.  The American people need to be reminded of what “unfairness” means, how many “fat cats” can be found inside the Beltway, and just how those cats got so fat.  We all know business as usual will destroy us soon enough, if it hasn’t inflicted fatal damage already.  On the bright side, even after years of degeneration at the hands of our political and media elite, the American public remains the most eager audience in the world for a lesson in the power and righteousness of liberty.