A Few Shiny Pebbles

I wish Senator Clinton would read How Capitalism Saved America, by Thomas DiLorenzo, who, unlike Senator Clinton, has a deep insight about the Robber Barons—or, at least read Chapter 7, which is on the Ludwig von Mises Institute Web site. It has a special pertinence to Senator Clinton’s May 29, 2007 speech, "Modern Progressive Vision: Shared Prosperity", (I will mention as an aside that, according to Senator Clinton’s damning and repetitious references in this speech to the last six years, up until the turn of the century/millennium everything was peachy-keen, but then that awful Bush person got elected and now simply everything is going to Hell in a handbasket.)

Now, I’d like to discuss the “robber baron” issue. In her speech, Senator Clinton said [emphasis mine]:

The genius of the American economy in the 20th century was that it helped to counter that tendency for people to push as far as their own interests would take them so that we created a leveler playing field that benefited everyone. Unfortunately, for the past six years it's as though we've gone back to the era of the robber barons.

I know something about the history of the “Robber Barons” in America, but I thought I might look it up to see if I had missed something. I had. A really interesting thinker, Thomas DiLorenzo, a professor of economics at Loyola College and a member of the senior faculty of the Mises Institute, wrote the bookmentioned above, in which he had a chapter entitled “The Truth About the ‘Robber Barons’” (which is well-worth reading in its entirety). In it, he wrote something we should all think about when we hear Progressives (or any other Leftist Collectivists) speak on economic matters. (The Progressives and other Collectivists should think about it too—but they won’t.) DiLorenzo started with a quote [emphasis mine]:

“Free-market capitalism is a network of free and voluntary exchanges in which producers work, produce, and exchange their products for the products of others through prices voluntarily arrived at. State capitalism consists of one or more groups making use of the coercive apparatus of the government… for themselves by expropriating the production of others by force and violence.” — Murray N. Rothbard, The Logic of Action (1997)

Then, as he talked about the robber barons, he wrote [emphasis mine]:

As common as it is to speak of "robber barons," most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction—the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.

DiLorenzo goes on to point out that some men lumped in with the robber barons don’t belong there, but his argument is developed in detail and deserves to be read at the Mises Institute site.

Now, Senator Clinton and other Collectivist true believers want to substitute government policies for the forces of the free marketplace. Collectivists are pre-eminently state capitalists, empowering political entrepreneurship rather than market entrepreneurism. They want to centralize economic policy and funnel the largesse and power of the government to those political entrepreneurs that they choose. This is favoritism, and it produces policies, rules and regulations that penalize the other companies and industries by turning the government forces against them, through mandates, import and export quotas, tax penalties, and other mechanisms that allow the chosen favorites to flourish and their competition to do poorly or fail. Because everything about the government is open-ended—the government has a relatively blank check to back the side it wants to back, to set the Justice Department, the IRS, and other regulatory bodies against the side it wants to impede or destroy—the government usually wins.

DiLorenzo makes an interesting point about this ability of the government to back political entrepreneurship [emphasis mine]:

Most historians also uncritically repeat the claim that government subsidies were necessary to building America's transcontinental railroad industry, steamship industry, steel industry, and other industries. But while clinging to this "market failure" argument, they ignore (or at least are unaware of) the fact that market entrepreneurs performed quite well without government subsidies. They also ignore the fact that the subsidies themselves were a great source of inefficiency and business failure, even though they enriched the direct recipients of the subsidies and advanced the political careers of those who dished them out.

Political entrepreneurs and their governmental patrons are the real villains of American business history and should be portrayed as such. They are the real robber barons.

State capitalism upends the basis of capitalism. By turning money over to political entrepreneurs for policy reasons rather than free market forces, they remove the relationship between hard, clever work and reward. Instead, they create a situation where the reward (of money, power, and strength over competition) comes from the government, and not from the actual value of the work done or the method followed.

Throughout Senator Clinton’s speech she emphasizes her wish to use the government to create a policy of “fairness”—that completely un-definable term—and government control, including forcing some industries to “invest”—i.e., be taxed—in projects dictated by the central government. Read the following excerpt from her speech, remembering that when she uses the word “investment” she means to tax people and spend the money gained to have the government subsidize governmentselected projects and companies. [Emphasis mine]:

Today I want to focus on how we ensure both strong economic growth and economic fairness. Now, we have seen for more than a century that fairness doesn't just happen. It requires the right government policies. [. . .] [The Bush] administration's theory about how we should manage our economy: leave it all up to the individual. [. . .] They call it the ownership society. But it's really the "on your own" society. [. . .] It's time for a new beginning, for an end to government of the few, by the few and for the few, time to reject the idea of an "on your own" society and to replace it with shared responsibility for shared prosperity. I prefer a "we're all in it together" society. Now, there is no greater force for economic growth than free markets, but markets work best with rules that promote our values, protect our workers and give all people a chance to succeed. When we get our priorities in order and make the smart investments we need, the markets work well.

Clearly Senator Clinton believes that the country has changed enough so that her ideas will be welcomed by enough people to matter. I hope that she is wrong. It seems to me that she is declaring her intention to do exactly what DiLorenzo rightly condemned. I repeat his opinion [emphasis mine]:

Political entrepreneurs and their governmental patrons are the real villains of American business history and should be portrayed as such. They are the real robber barons.

Senator Clinton, your State Capitalism and Political Entrepreneurship are the essence of a “government of the few, by the few, and for the few”.

Well, the battle is enjoined. We all have a clear choice to make in 2008.

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