Opinion | Crony capitalism, big government should be removed from America’s business sector
Published: Friday, September 28, 2012
Updated: Friday, September 28, 2012 03:09
Capitalism is the cooperation of rational self-interested individuals, each flourishing by producing what he or she is best suited for and exchanging this product with others in a free market.
Before the 18th century and capitalism, most of the world was impoverished, and there existed only a few wealthy elite. The rise of capitalism gave people the opportunity to gain wealth by creating valuable services and products that others were willing to buy.
Nations where capitalism wasn’t established remained impoverished. So why does capitalism now have a negative connotation?
Why are more and more Americans accepting a mindset that preserves poverty — the mindset that one person’s wealth comes from making someone else poor?
Americans are confusing capitalism with crony capitalism. Crony capitalism is a symptom of big government. The best way to curb crony capitalism is to limit the government.
Let’s examine the relationship between crony capitalism and big government.
The Renewable Fuels Standard, also known as the ‘food-to-fuel’ or ethanol mandate, requires a certain amount of corn to be sold for ethanol production. This past summer we had the worst drought in fifty years that threatened our corn crop.
Normally, the price of corn would equate with supply and demand, but demand has been distorted by the ethanol mandate. Not only does this mandate cause price volatility, making it even harder for poor people around the world to buy corn, but it is also causing a shortage.
Economist Murray N. Rothbard stated, “shortages are anywhere and everywhere creatures of government.” The government’s ethanol mandate creates an artificial market that most likely wouldn’t exist in a free market. If it can’t exist in a free market, that means people do not see its value and are not willing to pay for it.
Because the government mandates that a certain amount of corn be used for ethanol production, the low supply of the corn crop, due to the drought, is magnified. Not only does the ethanol mandate show how the government interferes in the economy, it’s also an excellent example of crony capitalism.
Ethanol producers colluded with the government to create this artificial market. Congressmen from corn-producing states also benefit from this cronyism as they appear more re-electable to their corn farming constituents, since the corn farmers now have a guaranteed buyer, the ethanol producers.
Further economic interference is the result of this collusion. Not only does it distort supply and demand, but the government’s support of ethanol producers and corn farmers is at the expense of other producers such as beef and pork farmers, who must now pay more to feed their herds.
The government picked the economic winner, corn farmers, and the losers, beef and pork farmers. Britain’s National Pig Association (NPA) has declared that pork shortages are unavoidable. And prices for food in general are predicted to reach record highs across the world in 2013.
The government shouldn’t have the power to control and plan the multiple sectors of the economy. Such power was never intended by the Constitution. This power leaves the consumer with no choice as ethanol is put into our gasoline by a mandate from the unelected Environmental Protection Agency (EPA).
Obviously this is not true capitalism; our individual freedom to decide to purchase or not purchase based on free market price is taken away.
In Ethanol Vs. the World, an article appearing Aug. 11, 2012 in The Wall Street Journal, it states that the “USDA’s world agricultural outlook board estimated that global corn consumption will be off by 38.9 million tons, with the U.S. problems responsible for three-fourths of the shortage.”
It went on to mention how ‘global bureaucracies’ have asked us to stop this mandate.
The executive branch created the EPA. Thus, it can be assumed that the executive branch has authority over it. Does President Obama have the authority to get rid of this mandate or at least temporarily relax it for this year?
If so, why hasn’t he?
I hope he wouldn’t risk a global shortage because he’s afraid to take away the ethanol ‘entitlement,’ as I like to call it, and upset corn farming states that would be crucial for his re-election.
Capitalism isn’t one person’s wealth coming from making someone else poor. That’s crony capitalism. The ethanol producers gain wealth at the expense of other producers, consumers’ pocketbooks, and individual’s economic liberty. Furthermore, this wouldn’t be happening if the government interference was limited.
This election I will be voting for the candidate who understands the difference between capitalism and crony capitalism.