Today’s socialists sometimes claim they’re not against all capitalism, just crony capitalism. They point to the bank bailout (aka the Troubled Asset Relief Program, or TARP) of 2008 as a prime example.
After the market discovered that subprime mortgages were bundled together with traditional safe mortgages and called AAA securities, the government solution was to bail out the biggest banks for their bad decisions. The result? Furor erupted on both the right and the left.
From the right came the Tea Party movement. I know because I was there. I spoke at the very first Tea Party rally at Faneuil Hall in Boston in December 2007. This was one year before the election of President Obama. Those on the left and in the media often portray the genesis of the Tea Party movement as a protest against Obama. This is false. The citizens at the first Tea Party rallies came together because they were worried about the accumulation of government debt, the housing collapse, and the concern that we’d transfer trillions from responsible citizens to irresponsible ones.
From the left came the Occupy Wall Street movement, upset that the nation’s wealthy were using a government bailout to protect themselves from bad decisions.
Both left and right were correct: the bailout was the very definition of crony capitalism. For a decade, the big banks had been allowed to reap enormous profits, but now that their bad decisions were coming home to roost, the taxpayer was being forced to cover their losses. What other industry could bring down the economy through malfeasance and get nearly a half trillion in loans to make sure the key players survived?
Some of today’s socialists claim that the capitalism they oppose is precisely this kind of crony capitalism. Bernie Sanders, to his credit, voted against the $350 billion bank bailout, although he did vote for a $15 billion bailout of the automotive industry. It’s difficult to understand how bailing out banks is crony capitalism but bailing out the billion-dollar car industry is not. Consistency, though, has never been a big concern for the left.
Progressives are right to decry crony capitalism. However, they should recognize that socialism is just another form of cronyism. Byron Schlomach, director of the 1889 Institute, a free-market think tank in Oklahoma, writes, “crony capitalism is more akin to socialism than it is to free enterprise. . . .” He is absolutely correct in this observation.
Schlomach explains:
Privilege and prosperity of elites side-by-side with unemployment and economic stagnation perfectly describes socialist economies like Cuba and Venezuela. There, government officials and their favored cronies do well while the masses languish. Then-expatriated Soviet historian Michael Voslensky’s 1984 book “Nomenklatura” described the privileged class of party elites in the Soviet Union, who enjoyed lives of relative ease and luxury. He pointed out that every sort of class exploitation Marx and Lenin accused the capitalist system of committing occurred in the Soviet Union, in spades, and was committed by communist leaders.1
When Alexandria Ocasio-Cortez complains about special tax breaks for Amazon, she needs to understand that she is complaining about markets not being free enough. As Schlomach explains: when “government rewards some businesses and not others with tax breaks or outright subsidies, it is a socialistic practice. Whether or not they actually succeed, government officials are attempting to control the flow of resources in our economy with state and local economic development deals. By definition, this is socialistic, because socialism involves, after all, government control of resources.”
Today’s socialists compound their error by failing to realize that socialism also grants privileges to a new class of elites: government planners. As Schlomach explains: to “those who see socialism as a counter to the elitism they see in capitalist economies, think again. History teaches that, due to socialism’s centralized nature, there is no place more replete with cronyism than one practicing socialism.”2 In other words, there is no bigger elite than a government elite.
Another rallying cry of the new socialists is that “the rich” aren’t paying enough in taxes. In the shining face of increased prosperity, reduced poverty, and record-low unemployment in America, Bernie and the gang are reduced to using “income inequality” as their evidence of capitalist failure. After all, it is unfair that we can’t all live like Beyoncé and Jay-Z.
Our socialist friends conveniently ignore the fact that our top 1 percent of income earners already pays nearly 40 percent of our income tax revenue and the top 10 percent pays nearly 70 percent of the total.3 And yet Bernie and other liberal millionaires and billionaires like Warren Buffett, Howard Schultz, and Bill Gates frequently whine and opine that they should be paying more to the U.S. government. They wring their hands in frustration at the injustice of their inability to pay more money.
Fortunately, Adam Brandon, president of FreedomWorks, gave these wealthy victims a simple solution to this vexing problem with a link to the donation page PayYourFairShareFirst.com. He wrote in the Washington Examiner, “Why wait for Congress to demand more money? The federal government has a donation page available right now for these economic altruists to lead by example.” FreedomWorks even tweeted the website link to Gates, Buffett, Bernie, and the gang to ensure that they were fully aware that there was nothing standing in their way of paying more to Uncle Sam. Not one of them responded to the opportunity.
As Brandon wrote,
Is it possible they are not being sincere? After all, Bill Gates led Microsoft while it moved profits offshore to dodge billions of dollars in taxes. Howard Schultz cofounded a venture capital group that invested in a financial firm that helped wealthy people dodge hundreds of millions in taxes. For decades, Warren Buffett avoided paying billions of dollars in taxes by taking advantage of what is now called the “Buffett Loophole.” . . . Remind me again, which political party is the party of big business? Sorry, Sen. Elizabeth Warren, but the “robber barons” of the 21st century are voting Democrat, not Republican. When big business colludes with Big Government, it happens at the expense of the rest of us. . . . Yet, Democrats want to force millions of families into a complicated tax code that wastes time and hard-earned money. Why? Because they feel guilty for being rich. The solution to their guilt is a therapist, not a tax hike. Regular families can’t afford teams of lawyers and lobbyists dedicated to avoiding taxes. We work hard and play by the rules. If Democrats want to punish themselves with extra taxes, they can make a voluntary donation to the federal government and leave us out of it.4