May 2012 — Laissez FaireLaissez Faire

It’s become fashionable in the last few years to denounce “crony capitalism”—the sort of mutual backscratching that often takes place between government and business. “You give me political support, I’ll give you a bailout.”

It’s wrong to call that “crony capitalism.” There’s nothing capitalist about it. Capitalism means the separation of state and economics. Under capitalism, the government has no special favors or protections to hand out, and so business has no reason to grovel.

But setting that aside, it’s true that cronyism is rampant today, as it is in any mixed economy. The blame, however, rests not with business but with government. Because the fact of the matter is, if you want to survive in business today, you had better have friends in Washington.

Just look at what’s happening to Apple. According to David Boaz:

Yes, Apple—praised to the skies for being an innovator and job creator by Washington politicians when that narrative serves their interests—has become the latest target of the political class.

According to Politico, the daily newspaper of lobbyists and political consultants, industry giant Apple spent a mere $500,000 in Washington in the first quarter of 2012, compared to more than $7 million Google and Microsoft spent on lobbying and related activities from January through March of this year.

Then Politico lowers the boom: “The company’s attitude toward D.C.—described by critics as ‘don’t bother us’—has left it without many inside-the-Beltway friends.”

“Don’t bother us”? I say, amen. But Washington says, no way. The attitude on the Potomac is: “Nice little company ya got there, shame if anything happened to it.”

Now, do you think Apple is going to spend more money on lobbying in the future or less?

We’ve seen this play out before. In a fascinating account, former Microsoft employee Michael Kinsley describes how Microsoft wanted nothing to do with Washington—until Washington decided it wanted something to do with Microsoft (the infamous antitrust suit against the software company).

For many years before the lawsuit, Microsoft had virtually no Washington “presence.” It had a large office in the suburbs, mainly concerned with selling software to the government. Bill Gates resisted the notion that a software company needed to hire a lot of lobbyists and lawyers. He didn’t want anything special from the government, except the freedom to build and sell software. If the government would leave him alone, he would leave the government alone.

At first this was regarded (at least in Washington) as naive. Grown-up companies hire lobbyists. What’s this guy’s problem? Then it was regarded as foolish. This was not a game. There were big issues at stake. Next it came to be seen as arrogant: Who the hell does Microsoft think it is? Does it think it’s too good to do what every other company of its size in the world is doing?

Ultimately, there even was a feeling that, in refusing to play the Washington game, Microsoft was being downright unpatriotic. Look, buddy, there is an American way of doing things, and that American way includes hiring lobbyists, paying lawyers vast sums by the hour, throwing lavish parties for politicians, aides, journalists, and so on. So get with the program.

So that’s what Microsoft did. It moved its government affairs office out of distant Chevy Chase, Md., and into the downtown K Street corridor. It bulked up on lawyers and hired the best-connected lobbyists. Soon Microsoft was coming under criticism for being heavy-handed in its attempts to buy influence. But the sad thing is that it seems to have worked. Microsoft is no longer Public Enemy No. 1.

Not every company is so reluctantly pulled into the pull peddling game—and even companies such as Microsoft, which come kicking and screaming, all too often start using their influence to hobble competitors rather than simply to defend themselves from politicians. (In what has to be one of the most disheartening ironies in business history, Microsoft called for antitrust actions against Google.)

The mixed economy makes cronyism both possible and necessary. Don’t like special favors for businessmen? Then you have two choices: abolish government intervention in the economy—or abolish business.

If you’ve ever gone to hear Yaron or me speak at a college campus, you’ve probably noticed that you were not our target audience—that we were addressing ourselves primarily to people who knew little if nothing about Ayn Rand. I hope you still had fun and learned something, but if you’ve ever wanted to go beyond the basics and really deepen your understanding of Rand’s philosophy, that opportunity is coming up.

Each year the Ayn Rand Institute hosts a conference open to anyone interested in Ayn Rand and her ideas. Yaron and I will both be there, along with a long list of other great speakers. You can see the full roster here, but I want to draw your attention to three events.

On July 1, Yaron will be speaking on the state of the Ayn Rand Institute. You’ll learn about our strategy for spreading Ayn Rand’s ideas and achieving a freer, more rational America. I’ve heard variations of the presentation at least fifteen times, and it still stirs me up.

On July 2, I will be giving a talk titled “Changing the Debate: How to Move from an Entitlement State to a Free Market.” I don’t want to give too much away, but I’ll just say that you really do not want to miss this presentation.

Finally, on July 4, Yaron and I will be hosting a lunch in which we’ll talk about our forthcoming book, Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government. We’ll share some behind the scenes information you won’t hear elsewhere, and take a bunch of your questions.

This year’s conference runs from June 30 to July 8 in San Diego, CA. I hope you’ll join us. If you do, be sure to come say hi.

• Is Obama the most fiscally conservative president of the last fifty years? Hey, I’m serious—some guy has a chart and everything. So what’s the catch? Dan Mitchell explains.
• Regulatory State Watch: Why it’s impossible to run a business in Chicago without breaking the law
• Regulatory State Watch Redux: The Red Tape Diaries
• Regulatory State Watch Re-Redux: Ten Thousand Commandments 2012 – An annual snapshot of the regulatory state from CEI
• Question: What costs $1 trillion a year and completely fails to accomplish its main objective? Answer: America’s welfare state.
• Yaron recently explained why the repeal of Glass-Steagall was not responsible for the financial crisis. This article, from the New York Times believe it or not, seconds Yaron’s comments. My favorite part? Senatorial candidate and former Native American Elizabeth Warren has been screaming her head off about Glass-Steagall but when confronted with the facts she admits “one of the reasons she’s been pushing reinstating Glass-Steagall—even if it wouldn’t have prevented the financial crisis—is that it is an easy issue for the public to understand and ‘you can build public attention behind.’”
• Speaking of banking, the latest issue of the Cato Journal has a bunch of interesting articles on banking and finance issues. See in particular John Allison on “The Fed’s Fatal Conceit” (PDF) and Larry White on “Making the Transition to a New Gold Standard” (PDF).
• Speaking of Larry White, Russ Roberts interviews White about his outstanding new book The Clash of Economic Ideas. White’s book explains with refreshing clarity some of the most important theoretical ideas in economics—and then shows how those ideas have actually worked out in historical practice.
• Say it with me: Sweden does not refute capitalism. Sweden does not refute capitalism.
• And now for something completely different. When I was sixteen, I entered and won a “tie-in” contest on Leonard Peikoff’s radio show (Peikoff is Ayn Rand’s heir). That show is now available.