D.C. – Corporate Relationships & the Glaring Crony Socialism


When DC and the corporate world form close ties, it means each is interdependent on the other – the politicians are bought. The corrupt relationship has been labelled crony capitalism, crony corporatism and, most appropriately, crony socialism.The end result is the people lose their rights as the elite take control over the money and the power in the marketplace.

Light-Squared, the 4G network that was approved despite their inability to put out a GPS system that does NOT interfere with military communications, is one such company. They were given the contract despite warnings from the military. It also appears that their competitor was forced into bankruptcy by Obama’s regulatory agencies. Read here: Crony Socialism

The company is run by and invested in by major Obama donors.

Tuesday, the CEO of Light-Aquared, Sanjiv Ahuja, abruptly resigned over the revelations of his closeness and his company’s proximity to the White House and Obama high-ranking officials.

While the company was undergoing review, one they should have failed, emails and documents revealing these close political ties were exposed by the Daily Caller. Ahuja, for instance, gave the maximum allowable to the DNC. He wanted to attend a meeting with Obama on the same day he was to attend an Obama fundraiser and he did get the meeting.

Ajua did not mention the revelations as he resigned, but it was hardly necessary.

As an aside, crony capitalism is an oxymoron AND CRONY SOCIALISM  is a far more apt term.

Capitalism places capital at risk, not that a person is motivated by capital.

Capitalism exists in self-organizing free markets controlled by mutual self interest, price signals, competition and capital risk. The unplanned organization of free markets has provided a more efficient economy, and thus, greater prosperity, than any form of command economy ever attempted. The rules are spelled out in advance and can be counted on to not be betrayed by government as they have been in the case of GM where investors were put to the back in favor of unions, something never before done.

Spontaneous order so necessary to free markets cannot develop if force and fraud are allowed to influence the marketplace, and especially if the force and fraud are perpetrated by government, as there is no recourse to that abuse.

When government enters into public-private partnerships, or otherwise intervenes on behalf of one competitor in the marketplace at the expense of another, that spontaneous order is destroyed and replaced by command elements driven not by mutual self-interest but rather by cronyism or political agendas. In every case, the efficiency of the economy, and thus overall prosperity, suffers.

Public-private partnerships use the force of government to command resources, artificially create demand, guarantee profit or divert risk to the public as in the case of the Volt, the GM bankruptcy in general, and all the bailouts Obama is tied inextricably to the unions. Under these conditions, malinvestment, such as wasteful allocation of resources and careless risk of capital, is virtually guaranteed. These questionable ventures were not attempted by private investors for good reasons, and even with the scales tipped in their favor by government influence, they nearly always fail.

We see this in the series of bankruptcies of “green energy” companies like Solyndra, where even subsidies and mandates fail to keep a business afloat in the face of market realities and where we knew they were failing when we continued to float them loans.

The catastrophic rise and fall of the housing bubble was in part fueled by the belief that government would not let Fannie Mae, Freddie Mac or large banks fail. The belief that loan risk could be transferred to the public led lenders to make loans they would never have considered with their own money.

We see this crony socialism in the form of public-private partnerships SUCH AS LIGHT-SQUARED in which the risk of failure is assumed by the public through grants and their competition was forced out by the government. Risk is one of the important controls in a free market in discouraging malinvestment. When investing one’s own money, ventures are not undertaken based on hope or vision without careful planning and reasonable expectation of success, but the bar is much lower if all or part of the potential loss is assumed by someone else.

Government taking control of winners and losers in the marketplace is socialism.

In all these cases, the public is persuaded to allow these improper government interventions into the marketplace on behalf of campaign donors, political allies and other cronies with the promise of some public good, and it is that fig leaf of collective social purpose that makes this corrupt process properly called CRONY SOCIALISM.