US Rep. Paul Ryan, R-Wis., gestures as he speaks during a gala prior to the start of the Virginia GOP Convention in Roanoke, Va., Friday, June 6, 2014. (AP Photo/Steve Helber)
Addressing first principles was not the only way in which Rep. Paul Ryan’s speech Tuesday was more than the standard stump speech. Acknowledging that “the progressives were right about something,” Ryan went after crony capitalism, as well.
Speaking at the Hillsdale College Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship, Ryan chided those who “think anything business does is right,” calling the belief “another fallacy popular in our ranks.”
“In fact they’re two sides of the same coin,” Ryan said. “Both big government and big business like to stack the deck in their favor.”
To a large extent, these relationships are driven by the regulatory state. As the government continues to grow, businesses find it in their economic interest to spend more and more time courting political favor in order to be able to persuade lawmakers to pass laws that create barriers to entry for their competitors. When it is harder to start a new business, existing businesses have less competition and, generally, better profit margins.
“[B]usinessmen don’t spend all their time hustling in the marketplace. They spend more and more time dutifully lining the halls of Congress, hoping to line their pockets,” Ryan said. “Both businessmen and bureaucrats take part in this culture of double standards.”
This is the heart of crony capitalism, as Ryan explained.
“Bureaucrats prefer to work with the big boys. They’re more predictable — and easier to control. So government tips the scales in their favor, instead of letting competition sort things out. And big business is a willing accomplice, because regulation keeps the competition out. Many times they don’t oppose new regulations; instead, they help write them.”
The cronyism Ryan decries was what drove many of the dramatic flops that have become household names: Solyndra, Fisker, and Tesla come to mind. These businesses sent executives to lobby Congress for tax breaks, grants, and taxpayer subsidized loans, effectively using the government to create a barrier to entry for their competitors. Rather than ensuring an equal playing ground for economic competition, the government is picking sides, helping some companies while hurting others.
While this might be a market of sorts, it certainly isn’t a free one.
“Neither the founders of American nor of free market economics would recognize in this stratified system a truly open market of commerce,” Ryan declared. “It isn’t open. It isn’t equal in opportunity. It isn’t producing equitable profit growth or hope for those at the bottom of the ladder. It isn’t driven by satisfying the needs of people; but by experts, calculus, wealth and preference.”
Let’s hope that Ryan and others like him will be able to help tear down that system.
