FRONT PAGE CONTRIBUTOR
Senator Mike Lee Takes On Crony Capitalism
Utah Senator Mike Lee has an interesting post at Heritage’s blog, The Foundry.
If Republicans want to grow their party into a national majority, we must begin, as Reagan did in 1981, by confronting our present crisis: America’s large and growing Opportunity Deficit, namely, immobility among the poor and insecurity in the middle class.
Compounding the shortage of opportunities among the poor and middle class is an unholy union of big government, big business, and big special interests that twists public policy to benefit Washington insiders unfairly at the expense of everyone else.
This is America’s growing crisis of crony capitalism, corporate welfare, and policy privilege, and it represents a uniquely malignant threat to American exceptionalism.
The free enterprise system is based on the fundamental equality of opportunity for all—to succeed and to fail—on a level playing field, but cronyism cements the status of the politically well-connected, making it easier for favored special interests to succeed and harder for their competitors to get a fair shot. As a result, honest small business owners, would-be employees, and investors are unfairly kept on the sidelines of a rigged game.
This is spot on.
We are slowly seeing our economy morph from one that was primarily free market, though I think it is arguable that we were ever a completely free market economy, to one that is dominated by crony capitalism in which government money and government regulation is used to enrich the politically connected at the expense of the average citizen and the economy.
This is not new. The Grant Administration was rocked by the Credit Mobilier scandal. We’re all familiar with the Kelo decision where private property was given to a politically connected developer. RedState’s Ben Howe chronicled the destruction of a community in Detroit to build a GM plant. The Golden Age of crony capitalism in America has taken place under the Obama Administration. Solyndra. Ecotality. Ener1. A123 Systems. The list of companies, run by major Democrat donors, who have taken billions of dollars from the US government and gone belly-up goes on and on.
But crony capitalism is not limited to taking government cash. Sometimes it involves trying to put a company out of business so you can capitalize on the resulting drop in stock price. For instance, hedge fund manager William Ackman has invested a billion dollars in destroying Herbalife.
At a Midtown Manhattan steakhouse last June, William A. Ackman, the activist hedge fund manager who had bet a billion dollars on the collapse of the nutritional supplement company Herbalife, offered his latest evidence to a handful of other hedge fund managers about why the company’s stock could soon plummet.
Mr. Ackman told his dinner companions that Representative Linda T. Sánchez, Democrat of California, had sent a letter to the Federal Trade Commission the previous day calling for an investigation of the company.
The commission had not yet stamped the letter as received, nor had it been made public. But Mr. Ackman, who had personally lobbied Ms. Sánchez and stood to profit if the company’s stock dropped as a result of the call for an inquiry, already knew what it said, and read from a copy of it that he had on his cellphone.
When Ms. Sánchez’s office ultimately issued a news release a month later, it was backdated as though it had been made public the day before Mr. Ackman’s dinner talk.
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Representative Linda T. Sánchez, Democrat of California, sent a letter to the F.T.C. asking it to investigate Herbalife. Mr. Ackman obtained a copy of the letter before it was made public.
The letter was a small hint of Mr. Ackman’s extraordinary attempt to leverage the corridors of power — in Washington, state capitols and city halls — for his hedge fund’s profit after taking a $1 billion financial position called a short, a bet that will pay off only if Herbalife’s stock drops.
I hold no brief for Herbalife, but using the power of the federal government to ruin another’s business, ruin those who depend upon that business, and doing so to make a profit is an activity that should be dealt with by horsewhipping and a long prison term.
In the annals of Obama’s crony capitalists, though, Ackman is a mere piker. Major democrat donor Tom Steyer is seeking to drive the coal companies in the US out of business and is a major player in preventing the Keystone Pipeline in the name of preventing global warming and general environmentalist hokum. His real agenda is much more banal: money and political clout to make more money. Steyer stands to profit from government investments in his “green energy” projects. He is also (or at least was as recently as I can determine) in Keystone’s major competitor as well as in coal mines outside the US. By defeating Keystone and beggaring the US coal industry, Mr. Steyer will make himself even more wealthy.
Crony capitalism is nearly baked into our system of government. Small wonder that the US Chamber of Commerce contributes mightily to establishment politicians, the go-along-get-along crowd who will not not upset the trough or push any well heeled plutocrat away from the public teat. Senator Lee’s shining the spotlight on this problem is long overdue.