With the election past, it is a good time to remind ourselves that crony capitalism doesn’t belong to one party or the other.
President Obama is a Keynesian in economics. But so is Mitt Romney. The latter’s named chief economic advisors during the campaign were prominent Keynesians Glenn Hubbard of Columbia and Greg Mankiw of Harvard, both former chairs of George W Bush’s Council of Economic Advisors. Yes, Obama goes further than Romney in thinking that printing money, borrowing, and spending is an effective economic tonic, when it is actually the source of the current trouble. But there was only a difference of degree.
This matters more than it might at first appear. Keynesianism is not only the source of our wounded economy. It also feeds crony capitalism by providing virtually free money to government and by justifying government excesses. In effect, Keynesianism is to crony capitalism as Marxism is to Communism. The former is the dominant economic theory that stands behind the system. If we want to get rid of crony capitalism, we have to get rid of Keynesianism.
The most radical Keynesian (far more radical than even Keynes himself) is Fed Chairman Ben Bernanke, first appointed by Bush, then reappointed by Obama. Not surprisingly, Glenn Hubbard said that Bernanke had done a good job during and after the Crash and deserved reappointment in early 2014. Mitt Romney had said he wouldn’t reappoint Bernanke, but with Hubbard as his chief advisor who knows? Of course Bernanke presumably didn’t endear himself to Romney by launching a massive new round of money printing close to the end of the campaign, when a “coup de whiskey” for the stock market would be very useful to Obama.
It is also interesting in retrospect to consider further Romney’s remark about 47% of the populace being beholden to government. A real populist, determined to put the people back in charge and the crony capitalists in their place, would have said that politicians are trying to make 47% of the populace beholden to government. It is the politicians who are trying to turn “helping programs” into vote buying schemes, not the people.
Romney remarks about the GM bail-out also went astray, at least from a tactical point of view. Both Bush and Obama bailed out GM because they knew that the auto workers were concentrated in swing states such as Ohio. This does seem to have carried Ohio for Obama, because his blue collar male vote was much higher there than elsewhere.
What was different about Obama’s bail out compared to Bush’s was that the latter violated bankruptcy law, gave the company to the unions, and completely stiffed both non-union workers, who were cast aside with no jobs and no accumulated benefits, and the mom and pop holders of the bonds, many of whom had invested much of their retirement savings in GM bonds thinking that they were safe. This is one of the most scandalous examples of brutal crony capitalism in American history, but Romney left this part of the story largely untold.
Nor was anything much said about the crony capitalist background of the Stimulus Bill or Obamacare. Indeed it is interesting that the Obama campaign deliberately avoided any mention of stimulus or Obamacare and so at the end did Romney.
The story of the GM bail-out isn’t necessarily over. Much of GM sales has been driven by sub-prime car loans supported by the Fed’s ultra low rates and other government backing. If GM slides toward bankruptcy again, which is quite possible, President Obama will presumably want to bail it out again. In that case, what will the House Republicans do?