John Stossel on Crony Capitalism

Tonight’s John Stossel program was on “Crony Capitalism”, also known as “Fascism”. I didn’t sleep well last night, it was a long day at work, so I’m just going to type as it plays.

Stossel started off by highlighting a company called Serious Materials, and the cozy relationship they have with Obama and Biden. Biden wandered through the plant a few times, looking exactly like Ted Knight from the Mary Tyler Moore Show, and said some good things about the company's obvious politically correct virtue level.

Obama gave Serious Materials a shout-out during a speech on the economy. Then the dynamic duo announced some tax credits for “green companies”. Only one window company was given their tax money back – Serious Materials.
Then Stossel showed the Company VP of Policy, hanging out with energy leaders in the Obama administration….and then he showed Cathy Zoi, who is in charge of Obama’s weatherization policy, talking about how they were going to have SWAT teams move in and weatherize entire neighborhoods with new storm windows, paid for by stimulus dollars.

Stossel eventually revealed that Serious Materials’ VP of Policy is married to Cathy Zoi. Well, shit. That takes some of the down-home, wholesome, green environmental goodness out of the equation, doesn’t it? Weren’t you happier not knowing this?

He brought on some panelists, Annette Meeks and Jonathan Blake, from the Freedom Foundation Of Minnesota. These two are familiar with the window industry, and knew that it was going through hard times. They started wondering why so much attention was being paid in the Mainstream Media, the Teleprompter Jesus Press Conferences, and press releases to one little ol’ window manufacturer. Then they found out that Cathy Zoe controls 16.8 billion stimulus dollars. That’s $16,800,000,000.00, if you like to see zeroes.

How in the heck did one window manufacturer happen to win this sweepstakes? Did it have anything to do with contributing thousands and thousands of dollars to the Obama campaign? And some other connections having nothing to do with their entitlement to your money?

(My biggest problem with Serious Materials is the little environmental savings counter on their website. You can see how many thousand pounds of carbon they’ve saved, how much energy they've saved, etc. I’ve saved far more carbon than that. So have Somali shepherds. How do we do it? By not manufacturing windows. Who and what exactly are they measuring against?)

The next guest was Denis Calabrese, who explained that Congress spends its day listening to lobbyists and donors, not debating the merits of specific proposals. They pick winners and losers, and the losers (at all the other window companies) don’t get the subsidies, the tax breaks, and the breaks on quotas. Tim Carney, author of “The Big Rip-off”, explained why Big Government just LOVES some Big Government. Why? Because the more a business is regulated, the harder it is for new competitors to enter a market. Carney gave example after example.

(This is why all sorts of lobbyists from Big Pharma and the insurance industry are showing up at Martha Coakley’s fund-raising banquets, BTW.) Both sides are cozying up to each other to stay in power.

THEN STOSSEL COVERED THE BUTTER VS. MARGARINE CONTROVERSY ! (It’s been one of my favorites for a long time.) The Butter industry was terrified of the margarine industry. They got Congress to pass legislation requiring margarine to be dyed PINK. Swear to God, it happened.

THEN HE HIT ANOTHER ONE OF MY FAVORITES. Go to Google, and put in the phrase “Guess who helped write the new tobacco bill”. I’ll be there. Typing fast as I can. No time for links. The alleged consumer protection in this bill was nothing but an industry protection bill. Philip Morris stock rose 35% immediately after Obama signed the bill.

THEN HE WENT OFF ABOUT BUILDING JETS AT BOEING AND LOCKHEED FACTORIES, jets we don’t need, jets that the military doesn’t want, simply to “protect jobs”.

Calabrese challenged Stossel to identify a single aspect of our so-called free enterprise system where our government wasn’t picking the winners and losers. Bill Gates and Company did very little lobbying until he got hauled into Congress for monopolistic practices. Then he hired a huge lobbying operation, and decided to spend a lot more time in Washington. His difficulties have ceased.

Then the focus switched to toys. Government, of course, had to get involved For The Children. They wrote a slew of regulations for testing that no small toymaker could ever afford. They regulated the sale of used toys, which meant that the toy resale industry was eliminated. (Don’t you know that Mattel and Hasbro partied hard when that regulation went into effect?) Goowill had to stop accepting used baby beds, strollers, play pens. They might not have been tested properly.

Anne Northrup, one of 5 commissioners on the Consumer Products Safety Commission, was brought out to explain how the process works. She evaluated a simple wooden locomotive, and immediately identified 5 or 6 tests that would have to be performed before it could be sold. She was surprisingly sympathetic to the plight of the small toy and resale industries and made some appropriate sounds. (Note to Mom: The Consumer Products Safety Commission has come out with a book of advice for people wanting to hold garage sales. Since the law is retroactive, it condemned a lot of products that were declared “safe” when they were manufactured. The handbook recommends scanning all items with an X-Ray Fluorescence machine. Swear to God, it says it. The machines cost $30,000.00)

Northrup went on to say that the Consumer Products Safety Commission isn’t going to send an inspector out to check your garage sale. (But guess what? This creates a chilling effect that makes you hesitate to sell and old item, or to purchase one. It IS illegal to sell this stuff. Check out a book called “Three Felonies A Day” when you get a chance. Chances are, you’re committing a large number of crimes without even knowing it. They’re not going to prosecute you unless they need to.)

The next segment was about the bad rap that capitalism has gotten during the last two years. Michael Moore’s movie came in for appropriate levels of abuse.

OK, THE GUY THAT STOSSEL SHOWED TESTIFYING BEFORE CONGRESS BEFORE EACH SEGMENT? THAT’S GEORGE MASON UNIVERSITY’S RUSS ROBERTS ! ! ! RUSS ROBERTS OF THE “CAFÉ HAYEK” BLOG ! ! I HAD NO IDEA WHAT HE LOOKED LIKE. HIT THE RUSS ROBERTS OR CAFÉ HAYEK LABEL AT THE BOTTOM OF THIS POST !

I love that guy. Russ Roberts is on Stossel. This is freakin’ great. Roberts explains that Capitalism requires prudence. And if you take out the potential for any kind of loss, you’re left with “socialism for the rich”. The taxpayers have to cover the losses. It’s almost always an after-the-fact bailout. Roberts went on to say that there was absolutely no evidence for a potential disaster if we didn’t bail out, Wall-Street or GM, or any other entity.

Marta Mossburg (spelling corrected on 1-16-10, see comment from Mr. MossBURG, below) of the Franklin Center, explained that most D.C. lobbyists have worked on Capitol Hill. If the tax code was only 10 pages long, instead of tens of thousands of pages long, the lobbyists wouldn’t be necessary. But then, Congress wouldn’t be able to sell tax indulgences in exchange for donations.

Lehmann Brothers wasn’t politically connected. They didn’t spend much on lobbying. They were allowed to go under. The others? They were too big to fail.

Russ Roberts – “Let’s let people fend for themselves. It’s called Capitalism. Why don’t we try it.”
I kind of miss the audience involvement. Yes, it was all hostile questions. Yes, many of the people asking the hostile questions were doofuses. But then, how many of the people who hold those Statist opinions….. never mind.

Stossel closed the program with a monologue about the Constitution and the Declaration Of Independence. They’re paper-thin. Then he showed a 3-foot tall stack of regulations about toy safety and manufacturing.

Stossel explained why Big Steel lobbied Washington/G.W. Bush to keep cheap foreign steel out of the U.S., and how they succeeded. Then he explained how this played hell with manufacturers who used steel. Plus, YOU had to pay more for anything made with the more expensive U.S. steel. But then, you don’t have a lobbyist.

If you made it this far, I’m amazed. Going to bed now. Good night. Remember to set your Tivo to record Stossel every week. There’s nothing else like it on television.

Al Gore - "Compel, Don't Sell"

Al Gore might be set to become the world's first Carbon Billionaire. Here's John M. Broder in the New York Times:


The deal (to purchase perpetual motion machines from a Gore company) appeared to pay off in a big way last week, when the Energy Department announced $3.4 billion in smart grid grants. Of the total, more than $560 million went to utilities with which Silver Spring has contracts. Kleiner Perkins and its partners, including Mr. Gore, could recoup their investment many times over in coming years.


And just how will The Goracle Of Music City make good on his investment?


Representative Marsha Blackburn, Republican of Tennessee, asserted at a hearing this year that Mr. Gore stood to benefit personally from the energy and climate policies he was urging Congress to adopt.
Mr. Gore says that he is simply putting his money where his mouth is.
“Do you think there is something wrong with being active in business in this country?” Mr. Gore said. “I am proud of it. I am proud of it.”


Al, if you are lobbying for government grants for your company, you are taking taxpayer money. If various Climate Warming/Cooling/Changing legislation passes, homeowners will be forced to use your voodoo gadgets. Local governments will be forced to pay for them.


This is called "Compel, Don't Sell".


You aren't "being active in business in this country" when you do this. You are participating in a theft when you force people to use your products. It's nothing to be proud of.

And on the seventh day, Donald Boudreaux rested....

George Mason University economics professor Donald Boudreaux has gone on a tear. The last few days on his Cafe Hayek blog have included some of the best posts I've ever read.

First, he has to correct Harold Meyerson's assertion that American manufacturing is declining. It isn't. We're combining parts from all over the world with our parts. That's what we do at my Jukt Micronics gig. If you're so inclined, you can go here to read an ancient post of mine about Harold Meyerson. Before this blog was two months old, I already knew I'd be needing a "Harold Meyerson" post label.

Professor Boudreaux then went to bed, but apparently slept fitfully. Perhaps he knew that there were still some mercantilist rent-seekers who hadn't been properly bitch-slapped. We will never know what motivated him, and it's not our place to ask the great man why, but The Professor got up early the next morning and explained to the English-speaking world that if you "protect" some of your citizen-manufacturers, all you're doing is making their products more expensive than they should be. This, in the long run, helps a small number of your wealthy citizen-manufacturers, but it hurts most of your citizen-citizens.

Later that afternoon, someone defiled Professor Boudreaux's comment field with disturbing news about what Beijing was doing to protect Chinese manufacturers. The Professor took off his academic robe, placed his chalk in the tray at the bottom of the board, and delivered a Karate Kid Crane Kick to the commenter. (I've added the commenter and his family to the prayer list at Broadway Baptist Church, and wish him a speedy recovery.)

Finally, before embarking on a much-deserved Sabbath day of rest, The Professor explains why there's no such thing as a free subsidy. Whether it's cotton, soybeans, corn, tobacco, or those things for which you can trade in a Clunker, someone is paying for every subsidy. And that would be you.

The posts about the Whole Foods boycotts are the dessert.

Brilliant, brilliant stuff. I want to go to George Mason U., and follow The Professor around while he teaches the multitudes. Maybe spend some time fishing on the Sea Of Galilee with him. Hold his coat while he heals some lepers. And then when Obama has him arrested for heresy, deny three times that I ever knew him. Then retire to my home village to write The Gospel of Saint Don.

It could happen.

Samizdata's "Quote Of The Day"

Samizdata's Quote Of The Day for July 13, 2009:

“It has always been one of libertarianism’s insights…..that massive concentrations of government power are more likely to be used to benefit other huge concentrations of wealth and power than help the needy or downtrodden…the powerful few who benefit from government action are more highly motivated to work the mechanisms of democracy to their benefit than are the masses who all pay a little – often too little in each specific case to feel it worth fighting, or even knowing about – and thus win in the democratic game of shifting property and wealth from person, or group, to another. If a government were restricted to its libertarian minimums of protecting citizens’ life and property from force and fraud, all a corporation could do is to try to sell us something and we could decide whether or not to buy. It couldn’t tax us for its benefit, raise tariffs on its competitors to make their products more expensive, subsidize bad loans or overseas expansion, or take formerly private property on the grounds that it will make more lucrative use of it than would the former owner.”

Brian Doherty, Radicals for Capitalism, page 589.

A Beginner's Guide To Protectionism

I've been going back and reading a lot of the older posts on Stephen Smith's "A Beginner's Guide To Freedom" blog.

Here are a few excerpts from a piece on Protectionism. Nothing in this section is new. Nothing in this paragraph would be news to anyone who took Economics 101 (which would rule out most of Congress). But Stephen writes so well I'm tempted to email all of his posts to The Teleprompter Jesus in hopes that maybe the central logic will sink in.

Protectionism is nothing more than an unrelated third party interfering with the voluntary exchange of goods and services between two parties. If I have a quarter, and Joe has a pencil, we may decide to enter into an agreement in which I buy the pencil for a quarter. If we decide to do this, it is only because we both stand to gain from the exchange - otherwise we wouldn’t do it. If I buy the pencil, it’s only because I value the pencil more than I value the quarter. Conversely, if Joe sells me the pencil, it’s only because he values the quarter more than he values the pencil. As a result, we are both better off by having made the transaction.

But for some reason, people accept the idea that government bureaucrats can and should step between Joe and me and take a cut of the proceeds. Some guy from Washington says, “You can’t buy your pencil from Joe for a quarter. I want you to buy your pencil from Fred. If you still buy the pencil from Joe, you have to give me 5%.” It’s really no more complicated than that.

But does it really harm us if we can't get that pencil for a quarter? Well, yes. It does.

Protectionism flies in the face of the division of labor. We all benefit by obtaining goods and services from the most efficient producers, no matter where they happen to be located. That frees up money that we can use to consume other goods and services, and it is this increase that raises our standard of living. Protectionism also ensures that capital remains tied up in less efficient industries instead of being freed up to be used in more efficient areas that would further increase our standard of living.

Stephen ends his post with a Milton Friedman parable that I hadn't heard before.

Milton Friedman used the following example which helps to clarify the true nature of protectionism. In a time of war, the enemy will often attempt to blockade a country to prevent the importation of goods and services. Protectionism is merely an effort to do to yourself in peacetime what your enemy would do to you in a time of war.
Keep that in mind the next time you hear some politician calling for additional restrictions on imports.

I wish I'd written that. Hit the top link to read the entire piece.