Written by Richard Butrick   

'Crony Capitalism' is too cozy a phrase. It is more like Klepto-Capitalism

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Crony Capitalism or Klepto-Capitalism?

The K Street bundlers have already dumped 1.6 million in the laps of several members of the supercommittee. Washington Sen. Patty Murray, who co-chairs the super committee, has already taken in over 200 grand from the likes of bundlers representing AT&T and Microsoft. The collusion of big business and government is not just rampant, it is par for the course. The government is running a protection racket through the power of regulation. The government sells exemptions and wavers like the Catholic Church sold indulgences during the Middle Ages. It even threatens recalcitrant corporations with hell and damnation in the form of crippling regulations. Witness the coercion of banks to make sub-par housing loans before the “banking” crisis by threatening to block mergers and acquisitions.

The cronyism is not just between government and big business it is embedded in the cabal of the corporate executive class and the board of directors class. The latest manifestation is a new twist on the golden parachute - the guilded exit. Contract clauses are set up for CEOs that sell companies to reap bigger payouts than those being pushed out the door. According to a Wall Street Journal analysis of Securities and Exchange Commission filings, at least three chief executives are in line for payouts of more than $50 million by selling out - with the usual concomitant elimination of lower level positions and even whole departments. Topping the list: Sanjay Jha, CEO of Motorola Mobility Holdings Inc., who could receive $65.7 million as part of Google Inc.'s acquisition of the cellphone maker.

The game is rigged and Americans know it. It is not that Americans resent great wealth won by hard work and innovation it is rather that they sense that there is a collusion of big business and big government tilting the playing field and a cabal of the executive class and the board of director class skimming of corporate profits at the expense of employees and stock holders. Crony capitalism is too cozy a phrase for the real harm being done to merit based capitalism. It ought to be called Klepto-Capitalism.

And the solution is?

Robert Reich proposes a New Deal type solution:

"… including a WPA and a Civilian Conservation Corps, to be financed by cutting the military budget in half and big tax hikes on the wealthiest. … The nation needs a real jobs plan, one of sufficient size and scope to do the job – including a WPA and a Civilian Conservation Corps, to put the millions of long-term unemployed and young unemployed to work rebuilding America."

There is a difference between a policy that assuages the anger and one which addresses the root cause. In effect Reich is proposing creating taxpayer funded jobs from a shrinking tax base. But for those who have been marginalized by outsourcing and other slick MBA maneuvers that fatten top executive wallets and kill their own companies in a rigged game of crony capitalism, one would expect that there are better more direct means that address the problem rather than merely redressing the consequences and weakening the self-sufficient sector of the economy.

Expect all you want. Real proposals to deal with crony capitalism are nowhere to be found. Kristoff of the NYT has an article which laments crony capitalism. But that is about it. No specific proposals nor none from any of the experts he sites.

The libertarian John Stossel has an article with a promising title:“Take the ‘Crony’ out of ‘Crony Capitalism‘”. Again, no specific proposals nor none from any of the experts he sites. The stop gap measures being proposed by Paul Ryan and other supposedly serious economic minds on the right side of the isle totally lack coherence and scope.

We are left with commissions, oversight committees, creation of new government agencies and more regulations in the vein of Volker and Dodd-Frank band aids. One has just to look at the million dollar bonuses given the executives of Fannie and Freddie to see how well government supervision works.

The right wing think tanks and pundits and economic experts are woefully remiss in coming to grips with the problem and until serious proposals and analyses are forthcoming that do not merely swell the ranks of the “government class” we are left with a New Deal type solution which does not directly address the rigged-game problem.