The Failure of Crony Capitalism (Henceforth Known as "CRAPitalism"): Q&A with Gene Epstein

"There's government failure and there's market failure," says Barron's economics writer Gene Epstein. "Government failure is far more prevalent." 

At FreedomFest 2011, Reason's Nick Gillespie sat down with Barron's columnist  Epstein to talk about his book Econospinning and the failure of what Epstein seens as widespread crony capitialism or "crapitalism." Characters such as former Countrywide Financial CEO Angelo Mozilo, says Epstein, don't really operate in a true profit-and-loss system. Rather, they make money through primarily through political connections and gaming a system they help to rig in the first place.

Held each July in Las Vegas, FreedomFest is attended by around 2,000 libertarians and advocates of limited government. Reason.tv spoke with over two dozen speakers and attendees and will be releasing interviews over the coming weeks. For an ever-growing playlist, go here now.

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About 6 minutes. Interview by Nick Gillespie. Camera by Jim Epstein and Zach Weissmueller. Edited by Alex Manning.

Comments

[KPres]

This stuff about cronyism is exaggerated. Most of our problems come from good old central planning. Accusations of cronyism is a red herring used by the statists when their programs screw everything up.

[Old Mexican]

Re: KPres,

Washington bureaucrats are not clever enough to centrally plan anything - they get their cues from the different lobbying groups, which include corporations (that provide the necessary regulations to regulate their competit... sorry, "the industry") and the pressure groups (which provide the political "flavor of the week.")

[Pro Libertate]

To be fair, large businesses are not the only constituency that has influence in Washington. In fact, sometimes they get hit pretty hard by various populist groups who carry votes as well as money.

[KPres]

Ben Bernanke doesn't print money because of lobbyists. Fannie and Freddie weren't created by lobbyists. The major programs were developed by academics and policy wonks who think they can outperform the market. You're talking about crumbs that fall from the table while ignoring the main course.

[Old Mexican]

Re: KPres,

Ben Bernanke doesn't print money because of lobbyists.

Probably not, but he's certainly no evil genius who knows exactly how much to print and when.

Fannie and Freddie weren't created by lobbyists.

Of course they were, back in the 30's. And so was the NRA (National Recovery Administration) - all these were the result of direct lobbying; certainly, many a politician in the Roosevelt regime took pride on the creation of these, but that does not mean they were extraordinarily clever.

The major programs were developed by academics and policy wonks who think they can outperform the market.

Some specifics were cleary added by those you mentioned, or at least they are more than willing to take the credit for them, but most policies are put in place through a semi-marketish sort of way, with different industries "suggesting" different regulations or regulatory bodies that affect THEIR markets specifically. There's NO WAY a single person or a body of clueless bureaucrats can come up with all these little pieces of regulation on their own. Who do you think came up with th FDA? You think it was the result of divine inspiration? Where do you think the Sherman Act came from? Or the Wagner Act? Or the Federal Reserve Act? Or the different tariffs, licensing laws and other obstructions to competition?

[R C Dean]

This stuff about cronyism is exaggerated. Most of our problems come from good old central planning.

Central planning is soil in which cronyism grows.

[Tony]

Crony capitalism is a failure of government. You can't blame private interests for maximizing their return however they legally can. But what do libertarians offer? Letting private interests be more free to influence government, of course.

Seems to me you need strict legal barriers in place to prevent this, and that's hardly the same thing as applauding legalized bribery as free speech.

[Isaac Bartram]

Yes, Tony, exactly, we need need strict legal barriers in place. Against politicians "helping" business. No matter how many lobbyists ask for them.

Glad to see that you've come to agree with us. 🙂

[Old Mexican]

Re: The Idiot Has Spoken

But what do libertarians offer? Letting private interests be more free to influence government, of course.

Yep, the idiot has spoken.

[Pro Libertate]

If the government were stripped down to the minarchy contemplated in the Constitution, why would most people waste their time lobbying the federal government?

[Tony]

Right, since they could get away with what they want for free.

[Strawman]

You are actually the idiot. He's right.

[KPres]

That's an ironic handle you got there, given that Tony was throwing out a strawman.

[Old Mexican]

Re: Strawman,

You are actually the idiot. He's right.

No, he's not right. You haven't learned anything about libertarianism nor do you seem to care, yet you have the gaul to opine? Who's the idiot?

[Johnny Walker]

You could actually try to explain your viewpoint.

... just a thought

[Dylan]

The gaul to opine? Sacrebleu! I think you meant "gall".

[MJ]

"Letting private interests be more free to influence government, of course."

How about letting private interests be free so they do not have incentive to influence the government? This is what leftists refuse to acknowledge, because they are blind to the fact that increased government powers create incentives for corruption, or because such corruption is a desirable feature to them.

[Strawman]

The assumption that private interests will not be corrupt or abusive once the adult in the room (government) is gone is what makes me laugh the most about libertarians.

[Old Mexican]

Re: Ridiculously Stupid (to the point of pity) Strawman,

The assumption that private interests will not be corrupt or abusive once the adult in the room (government) is gone is what makes me laugh the most about libertarians.

The assumption that they are NOT because of government is what makes me laugh about stupid statists like you.

Of course there will be corrupt people - they will not cease to exist. However, the idea that people will be more corrupt sans government belies the origin of government, which would supposedly be populated by the same people that require it to be less corrupt. See the circular thinking, you stupid sack of shit?

[Johnny Walker]

Jesus fucking christ. Why are you two acting like assholes. If he's a troll, then you have to learn to ignore him. Your making yourself sound as bad as him...

[Ray Pew]

The assumption that private interests will not be corrupt or abusive once the adult in the room (government) is gone is what makes me laugh the most about libertarians.

The assumption that ONLY government acts in an "adult" manner is what makes me laugh most about you.

[MJ]

The assumption that government is any more the adult in the room than any other institution is what makes me laugh at leftists.

[Strawman]

When african americans were oppressed during the 50's, 60's and the governor of Alabama stood in front of Alabama State University and in a vulgar manner stated that no blacks would attend his university; WHO WAS the ADULT in the Room? Was it the "Free Market"?

[Strawman]

No Answer...Ah ???

I thought u libertarians would bring up the point that the Montgomery Bus company changed their practices due to the fact that african americans STOP riding the bus in protest...A FREE MARKET factor???

[MacKlingon]

In a word, YES

[MJ]

The Governor of Alabama was acting as an official of the government of Alabama on a policy about the a College run by the state of Alabama.

I am not sure why you think that is a good example of the government being "adult" compared to the private sector. In fact, it clearly undermines it.

[Johnny Walker]

I was confused at first, but obviously someone else has just used his name to post this... he's not registered so anyone can use it...

A counter point to this would be that private businesses continued to enforce segregation until civil rights act was actively enforcedthe vigils rights

[Johnny Walker]

Umm... George Wallace was the government...

[rvastar]

Was it the "Free Market"?
---

What does the "free market" have to do with a PUBLIC university?

[tj66]

Actually I can blame them for gaming the system. They should provide real value - gaming the system, legally or not, is a moral failing. This type of behavior erodes trust, undermines the free market system and encourages Governments to interfere.

[cynical]

"Letting private interests be more free to influence government, of course."

Yes, but we also make it pointless to do so.

[Restoras]

CRAPitalism. Love it. Better hurry up and copyright it.

[Pro Libertate]

Fapitalism remains available.

[Strawman]

Just as John Stossell and other libertarians says that Insider-trading is OK...what's the difference with this ?

[KPres]

Government operates through the threat of violent force.

[Old Mexican]

Re: Really Stupid Strawman,

Just as John Stossell and other libertarians says that Insider-trading is OK...what's the difference with this?

The difference is that cronyism involves the government whereas "insider trading" is a totally bogus and made-up "crime."

They're totally different things, yet you stupidly conflate them because you lack brains. Satisfied, you piece of dog poo?

[Strawman]

you must be the the site-troll.

So, when a wall st deal maker tells his nephew about the deal...and books a trade that makes money...guaranteed money...that's just a bogus crime.

[Old Mexican]

Re: Strawman,

So, when a wall st deal maker tells his nephew about the deal...and books a trade that makes money...guaranteed money...that's just a bogus crime.

YES, it is a bogus crime, you imbecile. The deal maker has every right to tell his nephew anything he wants, as the decision to do anything about it lies squarely on the nephew's shoulders, not the trader's. The nephew may decide not to do anything, so where would the "insider trading" be then? You assume that just because government forbids it, then it must be "bad" - you're an idiot. Not only that, you're a boring idiot, not even amusing.

[Strawman]

Hey Troll...Remember...you're talk'n 2 strawman

[Ray Pew]

I would ask Epstein to describe a "market failure". How does the undirected organization of society "fail" in attaining a goal it never proposed to attain?

[Tony]

Why should we be at the mercy of something that doesn't even claim to have human well-being as a goal? Add up enough "market failures" and one might start questioning just what good the market is for.

[Ray Pew]

Why should we be at the mercy of something that doesn't even claim to have human well-being as a goal?

Because you have to argue that voluntary human action should not be allowed. It is no different than positing some end, then looking at "society" and seeing that this end has not been acheived and claiming that this is evidence of "societal failure".

Add up enough "market failures" and one might start questioning just what good the market is for.

You're back to the original question: What "market failure"?

[Tony]

Because you have to argue that voluntary human action should not be allowed.

Some voluntary human action should not be allowed. We call them crimes. I'm not sure what that has to do with anything. Either the market works as you claim it does, rationally for greater human good, or it fails to do so (market failures). If you're saying the only way to be free is to live under the whims of an arbitrary and unfair market, then you're contradicting yourself.

[Ray Pew]

Some voluntary human action should not be allowed. We call them crimes. I'm not sure what that has to do with anything. Either the market works as you claim it does, rationally for greater human good, or it fails to do so (market failures). If you're saying the only way to be free is to live under the whims of an arbitrary and unfair market, then you're contradicting yourself.

Your argument is disingenuous, since 1) no libertarian supports criminal activity (though we will disagree with what constitutes a "crime) and 2) you are not proposing that government intervene to protect the rights of individuals. You are proposing the complete command of the economy in order to coordinate it towards your ends, regardless of the negative externalities and deprivations of liberty that might occur.

[cynical]

"Why should we be at the mercy of something that doesn't even claim to have human well-being as a goal?"

I dunno, why should we be at the mercy of something that deliberately lies about having human well-being as a goal but proves the opposite every day?

[Tony]

We talk about the federal government a lot, but think about how much government handouts come from the states--as they are currently in a race-to-the-bottom competition to attract businesses who can just as easily go overseas. How is a market free of government interference supposed to happen at all in this country? With slackening federal standards it seems all we have is increasingly lavish giveaways from states in competition with each other.

[Isaac Bartram]

You're right, Tony, we should spend more time on the states and the "economic development" policies.

Oh, wait, that's what's in all those threads about Kelo and the subsidies and eminent domain abuse for Ratner's Atlantic Yards project in Brooklyn.

Over the years Reason magazine has had scores, if not hundreds, of articles criticising state subsidies to lure business as well as the plethora of obstacles that states put in the path of businesses trying to get estavlished.

[SpatialOrientation]

Ending the unholy alliance between government and the private sector is of the utmost importance. People that rant about the failure of "free markets" are really talking about corporatism. Let's end CRAPitalism and get back to capitalism!

[Barack Obama]

Ending the unholy alliance between government and the private sector is of the utmost importance.

[Nicholas Bromley]

How come when one of the Reason correspondents comes along and offers an insightful article or interview, it's followed by a bunch of silly comments by the readers? It aches me to click on the comments link sometimes. Aches me to my bone.

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