Big Business Is Big Politics
Don’t underestimate the danger of crony capitalism.
In a recent piece in Foreign Policy titled “Big Business Isn’t Big Politics,” an excerpt from the new book Big Business: A Love Letter to an American Anti-Hero, the economist Tyler Cowen makes the case that our fears of crony capitalism are “misplaced.”
In one sense Cowen is correct. Big business isn’t a boogeyman to be feared. Indeed, the opposite is generally the case. It often makes our lives better by providing goods and services we need and want. However, to dismiss the influence of large private interests is a mistake.
While Cowen dismisses cronyism, he does cite the sugar and dairy lobbies, the defense industry, and companies operating within the Medicare system as exhibiting some crony capitalist behaviors—albeit with a popular mandate in the case of Medicare. But the problem goes far beyond those sectors.
Energy companies of all kinds enjoy special deals. Whether it is guarantees of government indemnification in the event of oceanic oil spills, government financing for nuclear reactor construction, or taxpayer-financed cleanup of failed coal plants, legacy energy companies have long been able to count on allies in government. The green energy sector, meanwhile, survives because of crony capitalism in the form of heavily lobbied-for subsidies. Solar power companies, for example, enjoy the continued subsidization of roof panels. Meanwhile, two of the Big Three auto manufacturers were bailed out by taxpayers during the last recession—a special deal if there ever was one. Aerospace companies also enjoy a cozy relationship with the government. “Boeing’s bank,” as the taxpayer-underwritten Export-Import Bank of the United States is sometimes called, was just reinvigorated with bipartisan support in the Senate.
This list could go on. Nearly every part of the U.S. economy is infected with crony capitalism. There is very little true free enterprise.
The core of Cowen’s argument seems to be that if lobbying (a core driver of crony capitalism) is so effective, corporations would be spending more on it. “Corporations spend about $3 billion a year lobbying the federal government,” he writes. “That sounds like a lot of money, but it is very little in comparison to the approximately $200 billion they spend each year on advertising. To put the $3 billion in perspective, that is about equal to how much General Motors spends on advertisements during a year; Procter & Gamble is higher yet, spending $4.9 billion a year on advertising.”
But perhaps the reason for this relatively low level of spending on lobbying is not that lobbying is ineffective or that political influence isn’t important but that private interests don’t have to spend more. Influence may be relatively cheap—which is concerning indeed.