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Guest Post: The Perfection Of Crony Capitalism: Use Regulation To Destroy Competitors
Submitted by Charles Hugh Smith from Of Two Minds
The Perfection Of Crony Capitalism: Use Regulation To Destroy Competitors
Crony capitalism uses its wealth to impose government regulations designed to hinder, cripple and destroy small business competitors.
In the U.S. we now have the perfection of cloaked crony capitalism: corporate cartels use their vast concentrations of capital and revenue to buy the political leverage needed to write regulations specifically designed to eliminate competition.
Recall that the most profitable business model is a monopoly or cartel protected from competition by the coercive Central State. Imposing complex regulations on small business competitors effectively cripples an entire class competitors, but does so in "stealth mode"--after all, more regulations are a "good thing" (especially to credulous Liberals) which "protect the public" (and every politico loves claiming his/her new raft of regulations will "protect the public.")
This masks the key dynamic of crony capitalism: gaming the government is the most profitable business model. Where else can you "invest" a few hundred thousand dollars (to buy political "access" and lobbying) and "earn" a return in the millions of dollars, and eliminate potential competitors, too? No other "investment" even comes close.
The ever-expanding galaxy of regulations that business owners have to meet is a function of the corruption of government, i.e. corporations lobbying the government to pass laws and regulations (usually written by industry lobbyists to the specifications of their clients) specifically designed to eliminate competition by raising the costs of compliance amd imposing heavy fines via enforcement.
As an example, let's take a slice of American mythology, the family farm, that is under increasing pressure from just this sort of Corporate-State crony capitalism. Consider the family-owned small to medium size farmer who understands that the farm is a nature-based system that requires certain practices to maintain the health of the farm and the quality of your produce/meat/milk.
Suddenly a number of corporate agribusiness farms (i.e. concentrated animal feeding operations--CAFO) spring up nearby where thousands of pigs/cows are crammed into huge barns and the operation is run like a factory, enabling the CAFO to produce meat or milk at a significantly cheaper cost or production.
What's left out of the equation is the pollution to the environment and any associated health costs and damages to the values of the neighboring properties (Of course, these CAFOs are never sited near an affluent neighborhood).
In addition, the quality of the meat is suspect, as all the potential disease outbreaks that come with monoculture practices and crowded conditions can only be suppressed with constant, massive quantities of antibiotics. This is the perfect condition--animals packed together, plentiful manure, constant use of antibiotics--to create super-bugs that are resistant to antibiotics. Life being what it is, opportunistic and adaptive, eventually these resistant bacteria find a new and unprotected host, human beings.
A small family farm cannot duplicate these risk factors; only CAFOs can generate this kind of bacteriological danger to the populace.
These kinds of systemic costs created by the CAFOs are transferred to the taxpayer, including the local farmer who has to compete with the CAFO.
Since government in the U.S. is always for sale, and since the revolving door between the legislative and regulatory agencies and the lobbying industry is always spinning, it's straightforward to hire "the right people" and "express your concerns" to the corrupt politicos.
Here are some examples of the crony-capitalist favors corporate lobbying and campaign contributions can buy:
1) The government may give massive direct subsidies to the CAFO, depending how effective the "farm" lobby is (most farm subsidies go to large agribusinesses and not to small farmers).
2) The government will pass regulations that apply to the farmer's operations but require an entire new layer of compliance, reporting etc. that is beyond the financial capability of small operations.
3) The government may initiate enforcement actions against the farmer for non-compliance and if he's not rich, he will get steamrolled by the government regulators because he can't hire adequate legal representation.
4) The government often will not penalize the CAFO on the same relative basis, if it is part of a large corporation which have the resources to fight the government in the courts (i.e. the enforcement personnel don't have the necessary resources to do long protracted battles with Panzer divisions of corporate lawyers);
5) When there's an incident of blatant government over-reach or corporate favoritism that gets press coverage, the government agency will say they will "revamp the system" which is a code-phrase for passing even more regulations that secures them even more power.
In other cases, the regulatory agency was hampered from doing its job due to corruption/lobbying/political pressure from powerful corporate players.
As the regulatory thicket expands in complexity and scope, many of the regulations will not be adequately enforced because enforcement is now beyond the capability of the agency tasked with enforcement and monitoring. But the small/medium farmer will have to comply with them anyway, and if they don't, then that leaves a door open for corporate-directed regulators to take them down later with heavy fines for non-compliance.
6) The government gets complaint tips from a CAFO about the independent farmer, so he's subjected to a rigorous compliance inspection, whether or not the complaint is legitimate. It's like the vehicle inspections you get if you're caught "driving while black"-- with enough effort, some violation somewhere can be trumped up into a fat fine.
7) The regulations become so complex that prosecutors are reluctant to bring then to court because they're worried that a jury may not understand them. As a result, criminal cases are rarely brought against CAFOs and other corporate cartels.
After a few cycles of crony capitalism, competition has been destroyed, and you end up with something like America's "sickcare" system: no matter where you go, there's only two health insurance providers and their pricing is (surprise!) always about the same (it's called price fixing; that's the way cartels work).
Regulations don't arise unbidden; they arise to accomplish two tasks:
1. Enforce crony capitalism by eliminating or crippling competitors and establishing highly profitable cartels or quasi-monopolies protected by a bought-and-paid-for Central State.
2. They justify the budgets and payrolls of government agencies at all levels of government. A few years ago I mentioned a town that was trying to add a commuter train stop to an existing rail line. The process involved something like nine agencies, and as a result it has yet to be approved, a decade later. But the application did create a decade of justification-for-our-budget for agencies that might have been revealed as wasteful friction without the make-work application to diddle over for a decade.
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United Metropolitan Improved Hot Muffin and Crumpet Baking and Punctual Delivery Company.
How to use regulation to prevent taxi competition in Washington DC. Great example by John Stossel. Watch starting at 12:41.
http://www.youtube.com/watch?v=nBiJB8YuDBQ
Not really. Any progressive with balls wanted Single Payer; not just the liberal parrots over there at MSNBC who paraded this disgusting 2000 page bill when it passed (that had provision to curb silver/gold ownership...WTF?).
Obama/Romney/HeritageCare was a trade off with insurers: we'll give you elimination of Pre-Existing Cnditions, and people under 26 are insurered under their parents, and no one can get rejected at ERs.........in exchange for setting the costs in the market, enforced by the government-run "connector". The insurers can also still be publicly traded, which to me, is a fucking crime. Pure and simple.
It would of made the insurers more transparent, and actually provided REAL compeititon with those same providers. Single payer has its own issues, but its better than the system we have place now and Heritage/Obama/RomneyCare, where basically my premium goes into a bottomless well that gets snatched up by the CEO of a Health Care Insurer towards his campaign for Governor (See: Charlie Baker in MA).
The governmnt that is currently installed does NOT want to impliment price control in any industry, especially rent and health. Why?
It would force them to admit that wide spread inflation, and potential hyper inflation, is affecting the USD.
As the Bernank said, "Americans should just go on living their lives".
Correct, Obama Bin Caven, is not a leftist. He just plays one on TV.
We've known for a long time we've had to get the money out of politics and things have only gotten worse. MUCH worse. Expecting politicians to do anything about crony capitalism is exactly like expecting an alcoholic to pour the vodka down the sink.
This British Tax Driver sums up the bullshit corrupt political "class" very well:
http://www.youtube.com/watch?v=O2KeBfy34mQ
C'mon, we all know the way around this. Put Teneo on retainer and have an expresident and his secretary of state wife navigate the waters for you.
Ask Corzine. Well, if you can find him. He's currently vetting justices for the new global supreme court at an undisclosed location and under attorney / client privilege.
This article is pretty much useless. Mr. Charles Hugh Smith, you must cite specific, recent examples and name names to have anything of value. I agree with your thesis, but it must be backed up by rigerous research.
And spell-checking, Burgess. Don't forget "rigerous" spell-checking.
'Big' does not mean 'normal'. The largest financial entities portray themselves, with the willing connivance of regulators, as 'normal' in terms of size. They are anything but, and due to their massive size they take up all the oxygen. It's the thousands of little guys trying to hammer out a return for their clients that are 'normal-sized'. One regulator for all is inherently wrong and biased. Small guys get smothered in bureaucracy that large entities can weather with ease.
A friend of mine recently went under because of a regulatory 'review'...no charges, no wells, no nothing. Eight LPs with only one showing trouble, and no investor complaints. But he was small, so he was squished out of existence entirely...they even insisted on a 'liquidator' and not a 'restructuring' expert to oversee the intended unwind. The big guys didn't like him and they put him to sleep. Protecting investors? I don't think so.
Made me laugh.
What a brainwashing article.
What you've got is competition.
It is somehow strange that US citizens living in the US are so inept at distinguish between competition and concurrence.
Competition is a selection process.
One has several options, one gets them to compete one against the other. At the end, one has one's choice as delivered by the competition process.
Competition has a start and an end.
Eliminating concurrence is the goal of competition.
I know that US citizens have made up a rigged sports competition scene in order to hide certain sides of competition but still...
Simple bottom to top tournament table: 8 competitors, numbered 1 to 8.
Three stages: quarter finals, semi finals, final.
quarter finals has four competition events, pitting two concurrents each time 1vs2, 3vs4 etc.
Semi final, two events, final, one.
Any of the competitor that manages to follow this directive: eliminate the concurrence wins the competition.
If you issue than the smaller number overcomes the larger number
you've
quarter final: 1 beat 2; 3 beat 4; 5 beat 6; 7 beat 8
semi final: 1 beat 3; 5 beat 7
final: 1 beat 5
One winner, seven losers. The winner succeeded in carrying out the directive: eliminate the concurrence.
All the others failed.
US citizens rigged the sports competition scene to remove certain unpleasing features but yet...
You cant have escaped viewing a classical bottom to top tournament for competition's sake.
The goal of competition is to eliminate the concurrence.
It is how competition progresses.
You're a confirmed idiot, but I gave you the up arrow just so you wouldn't cry. We're moving into state capitalism (call it what you want) with the squids calling the shots to eliminate competition in the sectors they want to control. They've always been lurking, like trolls.
That's what I want, a final winner. I so want a monopoly to exercise tyranny over me. I don't want any choice in the marketplace.
Continuation:
manipulation of the rule.
Competition is a quantifying process.
One measures the competitiveness of competitors.
Measuring requires a rule. One can measure nothing without a rule.
It follows that the greatest competitive edge one can give to oneself is to manipulate the rule.
Makes that the yardstick measures more when applied to oneself and less when applied to others. Turning the table is permanent in competition.
Intrinsic feature by the way, competiting against oneself changes nothing.
So here's another US citizen who laments that competition works as competition is supposed to work.
Competition was characterized in the 1900s. The 20th century proved the characterization valid through multiple applications (marketing, professional sports etc...)
HOw can corporations receive the plea when they read a guy wanting competition when he has competition?
Identical to what happened in Wiemar Germany and exactly what to expect to happen in US.
This was the primary essence of the creation of the Fed almost 100 years ago. It was sold to the American public by politicians as protection from the banking Money Trust. In fact, it was created under the highest levels of secrecy by leading members of the Money Trust as an official banking cartel to protect their interests.
If you don’t have time to read The Creature From Jekyll Island or What’s The Matter With Kansas, watch this video. It’s an amazing portrayal of just how easy it can sometimes be for the power elite to use people’s desperation and frustration as a weapon against them, duping them into acting against their best interests.
http://www.truththeory.org/fiat-empire-why-the-federal-reserve-violates-the-us-constitution/
Good documentary, thanks for the link
Excellent piece by C.H.S
One of the Biggest crony socialists is Harry Reid who should be doing a perp walk. He bailed out buddy Kirk Kerkorian and Dubai World to bail out the building of City Center by squeezing banks to finish off $1 billion in loans. MGM is Reid's biggest donor and he campaigned on creating jobs at City Center. Except City Center is now worth $350 million according to Steve Wynn.
Reid also changed his backing from MagLev to DesertXpress high spped rail to benefit his scum chum Sig Rogich (who conveniently ran Republicans For Reid). DesertXpress can't even make it over the mountain to LA.
There's a whole lot more of Reid's crony corruption here. http://www.futurnamics.com/reid.php
Once again.... if anyone gets the time, look up the major US institutional owners of the largest corporations that control all key sectors. It's the same suspects from Wall Street, the largest US megabanks (along with some Blackrock types) that also own the FED, with some of the large European banks for good measure. The more you look, the more you realize the worse it is. From the lobby angle alone this is a huge force multiplier for the squids.
This includes the media conglomerates, big agriculture, etc. Little wonder the squids have control of government and our lives, they own everything and are writing all the laws. That's how we have come to a place where the private Fed is now monitoring the internet to find out who doesn't like them.
the most profitable business model is a monopoly or cartel protected from competition by the coercive Central State.
Call it for what it is - FASCISM
The most regulated industries:
* Financial
* Legal
* Medicine
* Defense
* Major sports
* Media
They are also the most lucrative for their principals.
Good thing McCain Feingold passed and took all the evil money out of politics..............
No wonder the growth of System D (underground economy) is assured.
Citizens United vs FEC sealed our fate, as a nation. Corporate Socialism/Crony Capitalism - whatever you choose to call it - will be REALITY for the remainder of my days.
Problem: By definition, half the population has an IQ of less than 100. Nothing you can do about that - unless you are an advocate of eugenics or, believe in compulsary public education that starts early and, runs 10 months of the year. Cognitive Challenging, between the ages of 1 and 4, is the single biggest influence on intelligence. No, it aint genes.
Exploitation of this problem is best described as "Advantage - GOP". The assault on Public Ed began under Reagan. Courting the Bible Thumpin' Fools - who represent America's Best source for cheap labor moving forward - was also initiated by ReaganCo. The most brilliant political mind of my life - Peggy Noonan - actually legitimized the Politics of Self Identity thus, ensuring that it was OK to vote for someone who was Ignorant Just Like You.
Reagans pepole also behind; The intentional bankrupting of the Family Farmer; The hobbling of DEP Pollution enforcement; ending anti-monopoly enforcement; underfunding the SEC; the general trend towards the privatization of everything that was once public domain.
Yeah, I could go on, but, you all get the point. By the way, if no one likes the Status Quo, may I suggest working on a campaign; becoming a candidate; getting involved with candidate recruitment. Trust me, once you do, you'll understand how we landed at the bottom (hopefully) of the hole we're in now.