Politics & Policy

The Ancient March from Crony Capitalism to Statism

(Photo: Sergey Kichigin/Dreamstime)
What is at stake is our society, not just the electoral success of the Right.

I have always considered 1 Samuel 8 the birthplace of statism. We read in this chilling passage of the Israelites being warned that a king will enslave them (v. 11), trample on their liberties (12), practice egregious versions of eminent domain (14), and implement a highly confiscatory tax system (15–17). In verse 19, we read the reply to this warning the statement that I believe became the civilizational foundation for statism: “But the people refused to listen to Samuel. They said, ‘No, we want a king over us.’”

And so it was. The people wanted a king.

The message here has always been profound. Those who are theologically inclined can see that the genesis of statism was, first and foremost, idolatry: “And the Lord said, ‘It is not you they have rejected, but they have rejected me as their king. As they have done so from the day I brought them out of Egypt until this day, forsaking me and serving other gods” (7–8). Throughout history the growth of government has been a story of the decline of faithful obedience. Government’s ascent was directly correlated to the people’s surrender of moral responsibility. Abusive, oppressive, redistributionist, tyrannical, arbitrary, self-serving, and corrupt? Sure, civil magistrates have been all of those things and more for different peoples at different times since the beginning of civilization; but the people wanted a king.

The prospect of being taken care of, of being led rather than leading, of having a “savior” — this allure has too often trumped all else, even the human order created for liberty and flourishing. Time and time again history has been clear, and we see this as early as the days of 1 Samuel 8. Faced with a choice between greater freedom (which entails responsibility) and a deep state, idolatrous civilizations have chosen the latter.

It says more about the people than about the state. And in this complex reality we find one of the key issues that split conservatives to this day: Some believe that excessive government comes from a greedy state’s usurping more and more control of our lives, whereas others believe that it comes from a people’s ineptness and surrender to the state’s overreach. The unfortunate reality is that both sides are correct, as inadequate self-government begins the vicious cycle of an intrusive magistrate, leading to a more dependent people, leading to still greater government, leading to even less self-government, resulting in more state expansion. Rinse and repeat. The consequences include a government payroll of 22 million employees and $20 trillion in national debt. The importance of getting this cause and effect right is immense — but not the subject of this article.

In the verses leading to the famous passage I quote above, we can find a disturbing ancient foreshadowing of what plagues us very much to this day: Cronyism and corruption are so often what cause the people to lose faith and opt for statism. Let’s briefly look at the first few verses of 1 Samuel 8:

When Samuel became old, he made his sons judges over Israel. The name of his firstborn son was Joel, and the name of his second, Abijah; they were judges in Beersheba. Yet his sons did not walk in his ways but turned aside after gain. They took bribes and perverted justice.

Then all the elders of Israel gathered together and came to Samuel at Ramah and said to him, “Behold, you are old and your sons do not walk in your ways. Now appoint for us a king to judge us like all the nations.”

1 Sam. 8:1–5

Yes, the people rejected self-government and even theocracy. They were warned of all the consequences of having a king but didn’t care. They traded the promise of greater freedom and prosperity for leviathan. And they did so reasonably aware of the implications. But underlying it all, indeed, serving as the impetus to the impulse for big government, was corruption. Crony capitalism, to use a modern phrase, gave birth to statism. And to be sure, history has done nothing but reinforce this basic reality. Thoughtful people may think it a non sequitur, but it is raw human nature. What we risk in not repudiating rent-seeking, handouts, sweetheart deals, and governmental selection of winners (and losers) in the marketplace goes far beyond election results.

Those who are theologically inclined can see that the genesis of statism was, first and foremost, idolatry.

Not only will Republicans lose elections if they are perceived as the party of cronyism (and this applies at local, state, and federal levels), but worse, Republican ideas — or at least truly conservative ones — will fail as well. Forced to choose between what they believe is a devil they don’t trust (corporate interests, Wall Street, big business, greedy developers, etc.) and a devil that at least offers them candy, the blue-state model of big spending, vast government services, and deep-government programs simply becomes the lesser of two evils. At this point, it does us no good to argue (correctly, of course) that behind the second door, too, is vast corruption and cronyism. The embedded cronyism and corruption of public-employee unions and politicians is not a desirable replacement for crony capitalism, and we can be right about that until kingdom come, but it is a losing argument. The people wanted a king.

The time for the Right to grab ahold of this message is now. To anyone who doesn’t think that the stigma of crony capitalism is election-crushing: Please ask Hillary Clinton. In an election match-up that she and the Democratic party would have moved heaven and earth to create, she was also funded with 1.2 billion donor dollars, an unprecedented amount, but simply could not shake the (accurate) assessment that her Clinton Foundation, corporate speeches, and entire post–White House ecosystem was all one big crony charade.

Given Donald Trump’s populist appeal and the electoral success of his promise to “drain the swamp,” you could argue that Republicans have been shown to be in greater need of this message. After the Troubled Asset Relief Program, Americans felt that Wall Street was receiving a crony handout from the Republican party — an unavoidable outcome when the TARP legislation was so poorly constructed, executed, administered, and defended in the court of public opinion. All of those failures led the American people to hate the “financial bailouts” (a subject for another time). Democrats supported the bill, but it came from a Republican president and a Republican treasury secretary. The association between TARP and the GOP was set.

Today, however, at the federal level, the most egregious forms of federal crony capitalism, whether it be the known failure of Solyndra or the perceived success of Tesla, are not associated with the GOP. Republicans must drive this fact home: that it is the Left that is making people billionaires with taxpayer dollars. Republicans must advance thoughtful legislation that strips from the federal landscape, as much as possible, the opportunity for rent-seeking. Needless to say, corporate tax reform is a great place to start. (I will save for another time, however, the plethora of ways that favoritism and governmental selectivity can be struck from the tax code.)

But we should not naïvely assume that there will be no pig slough of opportunity for crony capitalism if a massive Trumpian infrastructure program materializes. “Public-private partnership” is an invitation to the worst form of cronyism, and it is not hard to see a lot of this coming down the pike in the next year or so.

Alas, it is not at the federal level where Republicans have the most to lose in being on the wrong side of crony capitalism. If the GOP fails to get this message (and policy) right at the local and state levels, the results will be catastrophic. Indeed, in city and county politics, it is the predominant issue and will dictate the direction of localities for the next generation. Special and targeted incentives are the ultimate slippery slope. The silly defense I most often hear for governmental sweetheart deals with business is that Republicans are supposed to be defenders of business and promoters of growth. Of course, that is correct.

‘Public-private partnership’ is an invitation to the worst form of cronyism, and it is not hard to see a lot of this coming down the pike in the next year or so.

Targeted incentives, though, that favor a particular company or sector fool nobody. They do not promote growth; they reward the already big and powerful who have the lobbyists, lawyers, and influence to reap the benefits of a gravy train. Local and state politicians should be fostering a pro-business culture, and they should be doing that with universally low tax rates, not special low tax rates for a particular company; they should be doing that with a culture of low regulation, not special, one-off waivers for this or that business.

The Right must be committed to stopping this, from deplorable stadium deals for billionaire sports-team owners to appalling tax favors for connected real-estate developers. Equal opportunity for all means one set of rules for the entire population. When a city council or a county board decides that it, holding the public purse strings, will decide whom to credit back tax dollars and for what, it has defied any reasonable definition of equal under the law. There is a concerted effort to manufacture ambiguity around the difference between crony capitalism and legitimate governmental support for business and growth. Not surprisingly, that effort comes from crony capitalists.

Too many Republicans who indict Fannie Mae and Freddie Mac as a perilous example of business and government in bed together become suddenly paralyzed with confusion and nuance when a big company wants a special tax break for a new factory or hotel it wants to build. We cannot afford to impose a double standard: to oppose subsidies when we do not like the company, product, or sector in question but then to change our mind when we favor them. Likewise, the decision for an employer or a developer to build a project or invest in a community only if it receives a special treatment not afforded to others is corrupt at its core. Local government can support the free market by not distorting it. City councils should find ways to remove from their regulatory framework impediments to growth and business. If they do, they will create 50 times more benefit than they would with all the special tax breaks they could dream up.

Those who believe that defeating liberals at the ballot box is the highest ethic we are held to (it isn’t) ought to seize this message. For 40 years, crony capitalism has been the basis for more Republican election losses than every social issue combined. There is a non-crony way to be highly supportive of business and growth: Ensure a very low tax base because of a very non-intrusive government (non-intrusive governments cost less) and combine that with very light regulation. Low tax, low regulation — for everyone.

These are basic right-wing orthodoxies that, fairly and consistently upheld, create even playing fields and promote the dignity of the open marketplace. Whether they are called subsidies, mandates, incentives, loan guarantees, or anything else, crony privileges have no place in local, state, or federal politics — not just because it is bad government, but because it makes for a bad society.

“This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundation of our culture,” Charles Koch wrote in 2012 in the Wall Street Journal. It would be a shame for the Republican Right to contribute to such a demise, when it has such a golden opportunity right now to be part of the solution. Are the people likely to continue to want a king? Sure. But the less corrupt cronyism they see, maybe, just maybe, the less leviathan we’ll all see.

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