The Crony Capitalist State

This was originally written as a column for the Star-Exponent.

The Administrative State is on the march. It extends itself into nearly every part of our lives. In business especially so.  It is slowing the economy, creating uncertainty for business owners, and increasingly partnering with the largest business entities to crowd out competitors.

There has long been a narrative, nearly 200 years old now (and really much older than that), that business is at odds with the worker. If this is so who is it who buys the goods and services from businesses? Are businesses not responsive, to the degree a competitive environment exists, to the consumer—the “worker?”

The narrative is perpetuated by a compliant media which is controlled by large businesses which have partnered with the state. A classic case is NBC.

NBC is owned by General Electric, one of the largest crony capitalist entities on the planet. Jeffery Imelt the CEO of GE has worked the White House and Treasury masterfully over the last 4 years to gain benefits for his massive operation.  Is it any surprise that we find a consistently statist drumbeat from the media outlet owned by GE?

Despite the emergence of the new media, of which this site is a part, many people still rely on old media, i.e. the traditional broadcasters and newspapers owned by highly centralized and connected corporations. As such the narrative that business is out to get the American public is constantly put forward. There needs to be a law to address this law or that law.  Unregulated markets are the problem. We must have more government to save the American people from those greedy capitalists!

But the impact of regulations comes down hardest on the upstart companies—the innovators with few connections in Washington. The big boys with lobbyists doing the Pennsylvania Avenue Shuffle and huge compliance departments benefit.  These new regulations represent imposing  barriers to entry for smaller competitors. Regulations, often written with big businesses, often seek to freeze out new entrants to the marketplace.

Of course we are told by the media outlets owned by these large corporations that government is stepping in to help everyday folks.

Don’t get me wrong. There are many people in government who actually believe that they are helping the public, and at times there are instances where limited regulations which establish simple rules of the road for business do indeed help nearly everyone. However there is a reason why health care industry stocks went up when Obamacare was passed. There is a reason why pharmaceutical companies have little problem with the FDA by and large.  There is a reason why one will often hear large companies calling for “common sense regulation.” They are consolidating their positions in the marketplace.

Government prefers to work with large business for a number of reasons.

Big business can be leaned on. In exchange for government created barriers to entry, large corporations will in turn listen to the will of the regulators.

Small upstart companies are much more difficult to deal with for governments. Wily small business must operate in highly competitive environments generally and are more interested in in expanding and growing, in other words, playing offense, than solidifying their already large market share and holding on, playing defense.

The truth is the Welfare State, the Administrative State, the Regulatory State, whatever one wishes to call it, has become a Crony Capitalist State, where the big boys are too big to fail, but the rest of business is almost encouraged to.

Lip service is paid to the idea that small businesses are the engine of our economy (which they are). Lip service is paid to the idea that small business is the place from which innovation blooms (which it often is). But the entrepreneur in this country is increasingly discouraged. Creating something new and fresh is discouraged.  For administrators small business types are problem children, they are always shaking things up, which is such a pain. I mean can’t these “entrepreneurs” find a job at some giant faceless corporation with which the government has a “relationship”?  It would be so much better for society.