Aug. 20, 2010
GUEST COLUMN: Crony Capitalism in West Virginia: The Looter vs. the Entrepreneur
By Delegate Pat McGeehan
Special to Huntingtonnews.net
All of us likely remember the notorious slogan “Open For Business”, plastered on every welcome sign near our borders. For a short time, it was as if we could fool new commerce into believing West Virginia had finally adopted free markets. Coming back to reality, the short-lived motto should have included a disclaimer in parentheses: (If You’re Connected).
Nothing illustrates the point more than a very unfortunate discussion that recently unfolded throughout West Virginia televisions. Perhaps “unfortunate” is a bad adjective to use. Intellectually-bankrupt might be a better way of describing the dialogue between Jim Justice and host Bray Cary on last Sunday’s episode of Decision Maker. The owner of the Greenbrier Resort spent most of the segment criticizing the Republican Members of the House of Delegates for being “Anti-Business”. Host Bray Cary was at most, in agreement—and at the least, complicit with his guest’s view. Let’s sum up the complaint: Mr. Justice is mad because House Republicans—myself included—prevented one million dollars of government loot from being dropped into his bank account and blown on a golf tournament. From his position, this may be understandable. But he and his host make an awfully illogical leap. In bizarre fashion, they weirdly asserted this shortage of corporate welfare as a prime cause for West Virginia’s repeated last place rankings for “business climate”. Anti-business, no. Anti-cronyism, yes.
Of course, this characterization is utterly absurd. But to understand the flawed and foolish nature of the argument forwarded by the looters, we must understand the difference between political plunder and the market entrepreneur. Put another way, we must understand what it means to be a “Crony Capitalist”—for there is a vast and often untold distinction between market entrepreneurship and politically-connected profit. This Crony Capitalism is not merely the heart of the Jim Justice theme song—but this ideology has been one which has plagued our history here in the Mountain State.
The market entrepreneur emerges from trial and error. Left free to peacefully act, those gifted individuals who risk their own property to serve the sovereign consumer are rewarded with profits. They command more capital and can continue their service to the consumer. Those who fail at forecasting consumer tastes and preferences take losses—and capital is placed into the hands of those entrepreneurs who better demonstrate the ability to boost society’s standard of living. Under the Rule of Law everyone profits, for this realm of liberty and property confers a social benefit. As voluntary exchange continues and the division of labor becomes more efficient, capital progressively accumulates, causing resources to become more plentiful. Because of this abundance, everyone’s life is made better and better. A middle class becomes common—and little by little, more and more poverty is attacked and beaten. In the long term, this umbrella of voluntary exchange rewards people, not by the foundation of who you know—but rather through the merit of what you offer. This standard of liberty and property is the only real and moral law which exists—and as such, it is also the only path towards economic prosperity.
The more our government manipulates and perverts the laws of property and liberty, the farther we will be from prosperity—and the Justice / Cary discussion is simply descriptive of the economics of poverty. At the epicenter of this dialogue, lies the one common denominator which defines crony capitalism: coercive exchange—or private individuals utilizing force, normally in the form of some sort of government privilege. As long as you are part of the clique doing the taking, this can be very financially rewarding.
The political entrepreneur partners with government officials, aiming to profit not from their bold offer on the market of choice, but merely by employing friendly bureaucrats to steal the freedom to choose. This much is self-evident— no matter how careful our government targets the beneficiary of its redistribution racket, this stolen property will always be funneled into less productive places—as is the case with Jim Justice’s would-be loot.
But this forceful redistribution is not the only category by which Crony Capitalism rears its ugly face in West Virginia policy. Regulations have the same effect and we need to look no further than the Greenbrier to see more corporate welfare at play. Heavy licensing from our many bureaucracies restricts the supply of service, enabling the favored few to gain a “monopoly-privilege” or a grant by government to act in a manner in which no one else can. The Greenbrier now operates the only stand-alone Casino in West Virginia, uniquely permitted to operate without the cost of horse or dog racing, gaining a leg-up even on in-state operators. This restriction artificially increases the value of the service provided—adding yet another government perk to the looters balance sheet.
However, we can see examples of crony capitalism throughout a multitude of industries and firms in West Virginia—all of them weakening our economy by diverting resources to places they would otherwise not be, and all the while, keeping outside investment on the other side of our borders. Every year, government bureaus and departments issue directives and orders—not to enforce the Rule of Law—but to enforce arbitrary crony law. The Insurance Commission, the Bureau of Labor, the Public Service Commission, the Health Authority: All of these hired guns and thugs consult with the established and most connected firms, regulate away competition, and justify their own bureau’s expansion with the help of their private cohorts. Price-fixing and regulation pumping destroys jobs that would have otherwise been created, and our economy further declines. Favored firms profit, not from satisfying the customer, but by denying the consumer their greatest asset: the ability to choose.
But faltering economic growth is not the only consequence; corruption is another innate attribute, for it is inherently corrupt to steal through force, rather than persuade through cooperation. The crony capitalist either steals your property or he steals your choice. The government cannot be complicit—the foremost duty of constitutional government is to protect your freedom, not to restrict it. Our government’s failure to follow this recipe is the reason for our last place finishes in the Mountain State.
John Adams once wrote: “A government of laws and not of men.” Somehow, when he penned this famous line, I don’t think he had the path we have followed in mind.
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GUEST COLUMN: Crony Capitalism in West Virginia: The Looter vs. the Entrepreneur
By Delegate Pat McGeehan
Special to Huntingtonnews.net
All of us likely remember the notorious slogan “Open For Business”, plastered on every welcome sign near our borders. For a short time, it was as if we could fool new commerce into believing West Virginia had finally adopted free markets. Coming back to reality, the short-lived motto should have included a disclaimer in parentheses: (If You’re Connected).
Nothing illustrates the point more than a very unfortunate discussion that recently unfolded throughout West Virginia televisions. Perhaps “unfortunate” is a bad adjective to use. Intellectually-bankrupt might be a better way of describing the dialogue between Jim Justice and host Bray Cary on last Sunday’s episode of Decision Maker. The owner of the Greenbrier Resort spent most of the segment criticizing the Republican Members of the House of Delegates for being “Anti-Business”. Host Bray Cary was at most, in agreement—and at the least, complicit with his guest’s view. Let’s sum up the complaint: Mr. Justice is mad because House Republicans—myself included—prevented one million dollars of government loot from being dropped into his bank account and blown on a golf tournament. From his position, this may be understandable. But he and his host make an awfully illogical leap. In bizarre fashion, they weirdly asserted this shortage of corporate welfare as a prime cause for West Virginia’s repeated last place rankings for “business climate”. Anti-business, no. Anti-cronyism, yes.
Of course, this characterization is utterly absurd. But to understand the flawed and foolish nature of the argument forwarded by the looters, we must understand the difference between political plunder and the market entrepreneur. Put another way, we must understand what it means to be a “Crony Capitalist”—for there is a vast and often untold distinction between market entrepreneurship and politically-connected profit. This Crony Capitalism is not merely the heart of the Jim Justice theme song—but this ideology has been one which has plagued our history here in the Mountain State.
The market entrepreneur emerges from trial and error. Left free to peacefully act, those gifted individuals who risk their own property to serve the sovereign consumer are rewarded with profits. They command more capital and can continue their service to the consumer. Those who fail at forecasting consumer tastes and preferences take losses—and capital is placed into the hands of those entrepreneurs who better demonstrate the ability to boost society’s standard of living. Under the Rule of Law everyone profits, for this realm of liberty and property confers a social benefit. As voluntary exchange continues and the division of labor becomes more efficient, capital progressively accumulates, causing resources to become more plentiful. Because of this abundance, everyone’s life is made better and better. A middle class becomes common—and little by little, more and more poverty is attacked and beaten. In the long term, this umbrella of voluntary exchange rewards people, not by the foundation of who you know—but rather through the merit of what you offer. This standard of liberty and property is the only real and moral law which exists—and as such, it is also the only path towards economic prosperity.
The more our government manipulates and perverts the laws of property and liberty, the farther we will be from prosperity—and the Justice / Cary discussion is simply descriptive of the economics of poverty. At the epicenter of this dialogue, lies the one common denominator which defines crony capitalism: coercive exchange—or private individuals utilizing force, normally in the form of some sort of government privilege. As long as you are part of the clique doing the taking, this can be very financially rewarding.
The political entrepreneur partners with government officials, aiming to profit not from their bold offer on the market of choice, but merely by employing friendly bureaucrats to steal the freedom to choose. This much is self-evident— no matter how careful our government targets the beneficiary of its redistribution racket, this stolen property will always be funneled into less productive places—as is the case with Jim Justice’s would-be loot.
But this forceful redistribution is not the only category by which Crony Capitalism rears its ugly face in West Virginia policy. Regulations have the same effect and we need to look no further than the Greenbrier to see more corporate welfare at play. Heavy licensing from our many bureaucracies restricts the supply of service, enabling the favored few to gain a “monopoly-privilege” or a grant by government to act in a manner in which no one else can. The Greenbrier now operates the only stand-alone Casino in West Virginia, uniquely permitted to operate without the cost of horse or dog racing, gaining a leg-up even on in-state operators. This restriction artificially increases the value of the service provided—adding yet another government perk to the looters balance sheet.
However, we can see examples of crony capitalism throughout a multitude of industries and firms in West Virginia—all of them weakening our economy by diverting resources to places they would otherwise not be, and all the while, keeping outside investment on the other side of our borders. Every year, government bureaus and departments issue directives and orders—not to enforce the Rule of Law—but to enforce arbitrary crony law. The Insurance Commission, the Bureau of Labor, the Public Service Commission, the Health Authority: All of these hired guns and thugs consult with the established and most connected firms, regulate away competition, and justify their own bureau’s expansion with the help of their private cohorts. Price-fixing and regulation pumping destroys jobs that would have otherwise been created, and our economy further declines. Favored firms profit, not from satisfying the customer, but by denying the consumer their greatest asset: the ability to choose.
But faltering economic growth is not the only consequence; corruption is another innate attribute, for it is inherently corrupt to steal through force, rather than persuade through cooperation. The crony capitalist either steals your property or he steals your choice. The government cannot be complicit—the foremost duty of constitutional government is to protect your freedom, not to restrict it. Our government’s failure to follow this recipe is the reason for our last place finishes in the Mountain State.
John Adams once wrote: “A government of laws and not of men.” Somehow, when he penned this famous line, I don’t think he had the path we have followed in mind.
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