The core of capitalism has nothing to do with, and is in fact inherently corrupted by, the exercise of state power. At its heart, capitalism is one simple proposition — free exchange between individuals based on mutual self-interest. There is no room in this definition for subsidies or special government preferences or bailouts. The meat and potatoes activities of crony capitalism are corruptions rather than features of free markets. Where state power to intervene in economic activity does not exist, neither does cronyism.
Believe it or not, the Occupy movement reminds me of nothing so much as 1832. Flash back to that year, and you will find Federal officials with almost no power to help or hinder commerce… with one exception: the Second Bank of the United States, a powerful quasi-public institution that used its monopoly on government deposits as a source of funds for private lending. The bank was accused of using its immense reserves of government cash to influence elections, enrich the favored, and lend based on political rather than economic formulae (any of this sound familiar?). Andrew Jackson and his supporters, the raucous occupiers of their day, came into office campaigning against the fraud and cronyism at the Bank.
Jackson, much like the current OWS folks, was a strange blend of sometimes frontier anarchist and sometimes tyrannical authoritarian. But in the case of the Second Bank, the OWS movement could well learn from Jackson. He didn’t propose new and greater powers for government officials to help check abuses of the existing powers — he proposed to kill the Bank entirely. Eliminate the source of power, and men can no longer tap it for their own enrichment.
Unfortunately, the progressive Left which makes up most of the OWS movement has taken exactly the opposite approach over the last century or so, expanding government powers and the scope of state economic institutions and thus the greatly increasing opportunity for cronyism. In fact, most of the interventions that make crony capitalism possible are facilitated and enabled by the very progressive legislation that the progressive Left and the OWS protesters tend to favor.
The OWS protesters aim a great deal of vitriol at business people who successfully feed at the government trough, and I am happy to join them in this endeavor. But adding yet more government powers — and putting more economic activity under the government umbrella — only serves to create new and potentially larger troughs. The more that can be gained (or lost) by government action, the more time and money some people will be willing to spend to control those actions. The only way to really stop corporate cronyism is to remove the troughs altogether, to get rid of the ability of the government to pick winners and redirect resources through coercion.
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