Why Cronyism Is Always Bad


We’ve talked about this many times before but it’s always worth stressing and repeating. When the government, any government, screws around in the market, in any way, it distorts the market. It makes it less efficient and it makes everything a consumer buys more expensive. Here’s Charles Koch via  John Hinderaker in Power Line.


In today’s Wall Street Journal, Charles Koch explains concisely why corporate cronyism, a hallmark of the Obama administration, is bad–not just when it’s the other side’s cronies, but bad, period:

“We didn’t build this business—somebody else did.”

So reads a sign outside a small roadside craft store in Utah. The message is clearly tongue-in-cheek. But if it hung next to the corporate offices of some of our nation’s big financial institutions or auto makers, there would be no irony in the message at all.

It shouldn’t surprise us that the role of American business is increasingly vilified or viewed with skepticism. In a Rasmussen poll conducted this year, 68% of voters said they “believe government and big business work together against the rest of us.”

Businesses have failed to make the case that government policy—not business greed—has caused many of our current problems. To understand the dreadful condition of our economy, look no further than mandates such as the Fannie Mae and Freddie Mac “affordable housing” quotas, directives such as the Community Reinvestment Act, and the Federal Reserve’s artificial, below-market interest-rate policy.

Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.

With partisan rhetoric on the rise this election season, it’s important to remind ourselves of what the role of business in a free society really is—and even more important, what it is not.

The role of business is to provide products and services that make people’s lives better—while using fewer resources—and to act lawfully and with integrity. Businesses that do this through voluntary exchanges not only benefit through increased profits, they bring better and more competitively priced goods and services to market. This creates a win-win situation for customers and companies alike.

Only societies with a system of economic freedom create widespread prosperity. Studies show that the poorest people in the most-free societies are 10 times better off than the poorest in the least-free. Free societies also bring about greatly improved outcomes in life expectancy, literacy, health, the environment and other important dimensions.

So why isn’t economic freedom the “default setting” for our economy? What upsets this productive state of affairs? Trouble begins whenever businesses take their eyes off the needs and wants of consumers—and instead cast longing glances on government and the favors it can bestow. When currying favor with Washington is seen as a much easier way to make money, businesses inevitably begin to compete with rivals in securing government largess, rather than in winning customers.

We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.

We are on dangerous terrain when government picks winners and losers in the economy by subsidizing favored products and industries. There are now businesses and entire industries that exist solely as a result of federal patronage. Profiting from government instead of earning profits in the economy, such businesses can continue to succeed even if they are squandering resources and making products that people wouldn’t ordinarily buy.

Because they have the advantage of an uneven playing field, crony businesses can drive their legitimate competitors out of business. But in the longer run, they are unsustainable and unable to compete internationally (unless, of course, the government handouts are big enough). At least the Solyndra boondoggle ended when it went out of business.

By subsidizing and mandating politically favored products in the energy sector (solar, wind and biofuels, some of which benefit Koch Industries), the government is pushing up energy prices for all of us—five times as much in the case of wind-generated electricity. And by putting resources to less-efficient use, cronyism actually kills jobs rather than creating them. Put simply, cronyism is remaking American business to be more like government. It is taking our most productive sectors and making them some of our least.

The effects on government are equally distorting—and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.

Subsidies and mandates are just two of the privileges that government can bestow on politically connected friends. Others include grants, loans, tax credits, favorable regulations, bailouts, loan guarantees, targeted tax breaks and no-bid contracts. Government can also grant monopoly status, barriers to entry and protection from foreign competition.

Whatever form these privileges take, Americans are rightly suspicious of the cronyism that substitutes political influence for free markets. According to Rasmussen, two-thirds of the electorate are convinced that crony connections explain most government contracts—and that federal money will be wasted “if the government provides funding for a project that private investors refuse to back.” Some 71% think “private sector companies and investors are better than government officials at determining the long-term benefits and potential of new technologies.” Only 11% believe “government officials have a better eye for future value.”

To end cronyism we must end government’s ability to dole out favors and rig the market. Far too many well-connected businesses are feeding at the federal trough. By addressing corporate welfare as well as other forms of welfare, we would add a whole new level of understanding to the notion of entitlement reform.

If America re-establishes the proper role of business in society, all kinds of benefits will accrue. Our economy will rebound. Our liberties will be restored. And when President Obama tells an entrepreneur “You didn’t build that,” everyone will know better.

Too many people think cronyism is only bad when a government-subsidized business goes broke and the taxpayers lose money on their investment, as with Solyndra. Koch makes an important point, which is one I have also made from time to time: in some ways, Solyndra represents a best-case scenario. It is even worse when government subsidies allow a favored business to survive, and it is the other guy, the one without political influence, who goes out of business. Government largesse inherently distorts the market and hurts consumers as well as non-favored businesses and their employees and investors. And, of course, taxpayers.

Why Cronyism Is Always Bad | Power Line.



Green-tech bust Solyndra busted for abandoning toxic waste

Image representing Solyndra as depicted in Cru...

Image via CrunchBase


Ah, good old Solyndra. Just when you think its gone away with the ½ billion dollars it scammed from its friends in the administration, here comes some more good news. Apparently they are refusing to clean up the toxic mess they left behind at their Miltipas plant. If they aren’t forced to clean it up, guess who is going to have to do it? Yep, the taxpayers, again. From Hot Air.


So much for the “green” in green-tech stimulus.  When Solyndra went bankrupt and flushed over a half-billion dollars in taxpayer money down the drain, it didn’t leave much behind, except for some expensive glass tubes … that they destroyed rather than sold.  They also left something else behind for taxpayers as a memorial to the wasteful spending that Solyndra now exemplifies, and somehow it’s both ironic and fitting (via Katie Pavlich):

Three months ago, CBS 5 caught Solyndra tossing millions of dollars worth of brand new glass tubes used to make solar panels. Now the bankrupt solar firm, once touted as a symbol of green technology, may be trying to abandon toxic waste. …

It’s not just the leftover hazardous materials, but also the machinery used to apply them to the glass tubes. “Certainly those tools will need to be decontaminated, cleaned up, handled correctly as they are taken apart,” he said.

Swardenski told CBS 5 the disposal process is going smoothly in Fremont, but what about nearby Milpitas? Solyndra leased a building on California Circle for the final assembly of its solar panels. But the cleanup at the leased building in Milpitas is in limbo, because Solyndra doesn’t want to pay.

CBS 5 found the building locked up, with no one around. At the back, a hazardous storage area was found. There were discarded buckets half filled with liquids and barrels labeled “hazardous waste.”


More including Video at Green-tech bust Solyndra busted for abandoning toxic waste « Hot Air.

In other news:

I see that windmills stirring the air are leading to increased surface temperatures around the wind farms. Of course, you realize that the weather service stations are at ground level so this will contribute to the global warming climate change hysteria.

Happy May Day to the occupy movement and the rest of the degenerates riff-raff they have accumulated.



Solyndra, Once More, with Gusto!

English: Official portrait of United States Se...

Image via Wikipedia

This nonsense just keeps occurring, well, coming to light would probably be a better phrase. This one was brought to my attention by my friend, LoopyLoo through her My Blog.

I have noted in energy publications that there is a huge capacity in solar panel construction with US and European companies being hurt the worst, even China has overproduction to go along with their low labor cost. The thing is that was foreseeable with governments jumping on the bandwagon and throwing huge wads of cash at it.

The other thing is, as I have been saying being a scientist does not make you a venture (or any other kind of) capitalist. Just because something can be done doesn’t mean it should be, especially on an industrial scale. That’s why Steven Chu was a poor choice for Secretary of Energy. He’s not necessarily a bad (or good) person but, he’s decidedly a square (or at best hexagonal) peg in a round hole.

The video is from CBS News:


All in all, I think we need for the government to be the government and the market the market, and if we’re lucky; never the twain shall meet.

Solyndra Part 5429? (I’m not sure either)

Seal of the United States Department of Energy.

Image via Wikipedia

I know I’ve written four times about this but, I choose not to write about it every day, I (and you) get bored with it. But Solyndra, like Fast and Furious, and Old Man River, just keeps rolling along.

This installment is from the Washington Post via Hot Air and Melissa Clouthier and details how layoff announcement was delayed till 3 November 2010 at the cost of $40 Billion taxpayer dollars.

The Washington Post broke this story earlier this morning.  Does anyone want to argue that Solyndra isn’t a scandal now?

“The Obama administration urged officers of the struggling solar company Solyndra to postpone announcing planned layoffs until after the November 2010 midterm elections, newly released e-mails show. …

“Solyndra’s chief executive warned the Energy Department on Oct. 25, 2010, that he intended to announce worker layoffs Oct. 28. He said he was spurred by numerous calls from reporters and potential investors about rumors the firm was in financial trouble and was planning to lay off workers and close one of its two plants.

“But in an Oct. 30, 2010, e-mail, advisers to Solyndra’s primary investor, Argonaut Equity, explain that the Energy Department had strongly urged the company to put off the layoff announcement until Nov. 3. The midterm elections were held Nov. 2, and led to Republicans taking control of the U.S. House of Representatives.”

Read the Article.

About the only thing I find even slightly humorous about this debacle is that Hot Air commenters are referring to Michelle Malkin referring to Obama as Icarus and recalling his fate. I’m reasonably certain at this point that if the Republicans had won the Senate, impeachment would be in the air.

But at least its only a year until elections.

Solyndra Part IV

First PumaBydesign001 has the video of Washington’s reaction.

Just about what we’ve come to expect.

Scott Walker at Philanthropy Today has an article up in connection with Solyndra where he writes about some of the odd characteristics of the Kaiser Foundation.

For example, it turns out that the “George Kaiser Family Foundation” isn’t exactly a foundation as conventionally understood. Legally speaking, it’s not a “private nonoperating foundation” like, say, the Ford Foundation or the Charles G. Koch Charitable Foundation. Instead, it’s a “supporting organization” of the Tulsa Community Foundation.

That fact has several consequences:

– George Kaiser can use a much higher proportion of his donations to lower his personal income tax bill.

– The Kaiser Foundation can own big chunks of for-profit companies like Solyndra, whereas it’s not clear a standard foundation could legally do so.

– Unlike standard foundations, the Kaiser Foundation has no legal requirement to give away at least 5 percent of its assets every year (and so far it hasn’t come close to giving that much away – in 2009, the last year for which figures are available, it contributed just over 1 percent to charities).

You really should read the rest, and his links.

Wapo says Secretary Chu is getting ready to fall on his sword.

Bloomberg says Solyndra should have a bankruptcy trustee because they won’t answer questions.

Hot Air’s Green Room and the Scandal of Tommorrowland.

Megan McArdle, explaining why the federal loan guarantee to the now-bankrupt solar company Solyndra is more venture socialism than venture capitalism, concluded:

[T]his isn’t much like a VC. Or anything else that makes financial sense in the private sector. It’s like… the government giving money to companies that sound whizzy.

Instapundit Glenn Reynolds added: “A more cynical explanation is that the ‘sound whizzy’ is just meant to be a distraction from what’s really no more than a payoff to political supporters.” When the history of the Solydra debacle is fully written, Prof. Reynolds may well be correct about the political payoff angle. However, our sprawling federal government offer myriad opportunities for political payoffs, so it’s worth examining why the Obama administration would throw hundreds of millions of taxpayers’ dollars at things that “sound whizzy.”

Read the rest.

If you’ve forgotten, here is what I’ve said.

Solyndra, and

Solyndra Part II, and

Solyndra (et. al.) Part III.

In other news: PumaBydesign 001 also reports that New Yorkers are getting pretty damn tired of #OccupyWallStreet even if Frances Fox Pivens drops by.

Have a fun rest of Monday.

Solyndra (et. al.) Part III

On 140 acres of unused land on Nellis Air Forc...

On 140 acres of unused land on Nellis Air Force Base Image via Wikipedia

The Solyndra thing just keeps going on. I notice today that DOE has made some other Solar energy loans.

DOE announced a $737 million loan guarantee to help finance construction of the Crescent Dunes Solar Energy Project, a 110-megawatt solar-power-generating facility in Nye County, Nev. The project is sponsored by Tonopah Solar, a subsidiary of California-based SolarReserve.

The Energy Department said the project will result in 600 construction jobs and 45 permanent jobs…

The Energy Department also announced that it had finalized a separate $337 million loan guarantee to Sempra Energy for a 150-megawatt photovoltaic solar-generation project in Arizona.

The project will result in 300 construction jobs, DOE said.

Let’s see, that totals 260 Megawatts of power which is enough power to power the houses (only) in Brooklyn. But only in the daytime for $1.074 Billion. Oh, and it will create a whole 45 permanent jobs.

Could there be Democratic connections in this? Of course there could. Andrew Stiles at The Corner has the story via Ben Domenech’s The Transom.

It gets messier and messier.

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