Wednesday, July 11, 2012


"The most dangerous enemies of capitalism today are capitalists."

Two bills faltered in congress recently, both bills that big corporate interests liked, but that Republicans, apparently driven largely by the Tea Party conservatives elected in 2010, opposed. Donna Cassata at the Associated Press seems confused by this:
Republicans like to tout themselves as the best friends of business, and the rhetoric only grows louder in an election year. They talk forcefully about their job-creation agenda and determination to undo the burdensome regulations they say arise out of President Barack Obama's policies.

Yet when it comes to many of industry's top legislative priorities, conservative Republican lawmakers and like-minded groups including the Club for Growth and Heritage Action have thrown up roadblocks to tasks that had been easy before the 2010 elections sent a large class of conservative tea party insurgents to Congress.
This was part of a news piece, not opinion. She does go on to quote some more conservative congressmen, but the main body and first half of the piece is all about how businesses just want this and those stupid Tea Partiers are ruining everything. How can this be? Republicans are all for big business, darn it!

The two bills in question are the Law of the Sea Treaty (LOST) and the Import/Export bank reauthorization. LOST would partly cede sovereignty over coastal waters to an international body, and it would give environmentalists more power to control nations, as Greenpeace International's Executive Director Thilo Bode said:
"Global warming is likely to have a big impact at sea…. Solving the environmental problems facing the oceans…is one of the greatest challenges facing humankind…. No single action or region can do this alone: It will require comprehensive international cooperation as required by the United Nations Convention on the Law of the Sea."
It would also undermine national security with several rules (such as requiring submarines to travel on the surface, flying their flag in territorial waters), and leave disputes over territorial water to be resolved by the UN General Assembly.

Big corporate interests want LOST signed because it makes it easier for them to access and exploit resources in other nations' waters, paying a "royalty" to the nation but keeping the bulk of the profits for themselves. They aren't concerned about the other aspects of this treaty because that doesn't really affect them.

The Import/Export Bank helps businesses by giving them loans to compete against other businesses. Started in the Roosevelt administration, the theory is to help American companies compete with those of other nations by loaning them tax dollars. In 2008, candidate Obama called it "corporate welfare" and opposed its existence, calling for it to be cut as wasteful spending. Now he praises the "Ex-Im Bank's" "extraordinary mission." What changed? Well President Obama has been annoying and hurting business so much he needs to throw them a sop for that sweet corporate campaign cash.

The reason businesses like this is that its an easy, ready source of cash for their investments and helps them compete with foreign companies.
The U.S. Chamber of Commerce, the National Association of Manufacturers and major companies like Boeing Co. and Caterpillar Inc. all wanted quick reauthorization of the Export-Import Bank
writes Ms Cassata. But what this institution really does is hand money to already wealthy companies at the federal level.

While the LOST is technically constitutional - as an international treaty - the Im-Ex Bank simply is not. In no conceivable way does the US Constitution authorize handing money out to businesses to help them compete. Its illegal, in other words. If you cannot compete without the federal government's assistance, maybe its time you stopped competing altogether.

Even if it wasn't unconstitutional Because this is a federal agency, it is used to help fund not necessarily viable or critical US interests, but political interests like "green energy" companies and political allies. This is used as a sort of slush fund to aid pals and future hires for agency heads all too often. Which is probably why the constitution doesn't allow this kind of thing.

The US federal government is already sixteen trillion dollars in debt, so it just can't afford to be handing out money to help businesses survive even if this was a good idea to begin with.

And ultimately, it isn't a good idea. Studies have shown that when companies have a turnover rate, when they are allowed to crash and burn when run poorly or cannot be sustained in the modern economy, then the overall economy thrives much better. Timothy Carney writes in the Washington Examiner:
Mitchell cites a 2008 study in the Journal of Financial Economics that found "big business turnover ... correlates with smaller government, common law, less bank-dependence, stronger shareholder rights, and greater openness [to trade]."

Further, in Mitchell's words, "those nations with more turnover among their top firms tended to experience faster per capita economic growth, greater productivity growth, and faster capital growth."

Big business wants safety, but big-business safety hurts the rest of the economy.
This seems strange, but the truth is, business is more vital and the economy as a whole more healthy if failing businesses are not propped up. That keeps businesses on edge and less likely to make stupid moves, and it punishes poor business policy as it ought to be. If you run your company like an idiot, it should do poorly. Every dollar taken to maintain a business "too big to fail" is one dollar less in a vibrant, promising business that will take the economy into tomorrow. Every dollar used to protect bad business tends to stagnate an economy.

And that's why conservatives oppose these ideas, even though businesses like them. Because a big business isn't about the big picture or even the free market as a whole, its about that business and making money. The need for ethical business goes both ways; not only do you need to prevent them from exploiting workers and damaging the environment, but you need to keep them from exploiting laws and ignoring the benefit of the nation at large for their personal enrichment.

This is something I keep emphasizing: free market capitalism despises and opposes corporate cronyism and big corporate congressional deals. The free market didn't cause this massive financial crash, it was big government working back room deals with companies. That's the opposite of capitalism, more like fascism than anything else.

The free market doesn't want bailouts of companies, it wants them to stand or fall on their own merits and abilities. That's why President Bush said he had to "violate free market principles" by passing TARP. Because it is a complete violation of the idea of capitalism for the government to hand out money to businesses and keep them running.

So its completely reasonable and consistent for conservatives to oppose these bills, Ms Cassata. What's not consistent is you writing an opinion piece disguised as news - or perhaps it is, with the Associated Press.

Tip of the hat to Ace of Spades HQ for this story.

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