The best Occupy Wall Street analogy I’ve seen comes via this piece by George Mason University economist Russ Roberts. He writes:

Occupy Wall Street reminds me of a doctor who sees a patient with a broken arm, decides that both arms are broken, and proceeds to amputate them: The diagnosis is half right, and the cure may be worse than the disease.

It is a very good way to put it. OWS protesters have it right that Wall Street has gotten off easy, often. However, they are wrong that this is the product of capitalism. Their attention should be focused on crony capitalism and the unhealthy marriage of the private sector with government. It is crony capitalism that explains why for years Washington has been coddling Wall Street firms with taxpayer-funded financial bailouts instead of letting these troubled institutions pay for their mistakes.

If the protesters want to fix the symbiosis between Wall Street and Washington, the first thing they need to do is recognize the disease. The disease is not too much capitalism but too little. If firms that fund bad investments by other firms lost all their money, they would either disappear or learn to be more prudent. Washington needs to be less involved with Wall Street, not more. We need less crony capitalism and more of the real thing. We need to demand of our politicians that they stop bailing out losers 100 cents on the dollar. If we keep subsidizing recklessness, we will keep getting more of it, and the rest of us will pay the price.

This isn’t new, of course, and it isn’t contained to financial institutions. A few months ago, I wrote a piece for Bloomberg about the long tradition of crony capitalism:

In the late 1800s farming interests demanded that government rein in the railroads amid the perception that they misused their power to influence local politics and set freight rates too high. The railroads responded by working with Congress to form the ICC, a regulatory agency populated with industry insiders. It fixed prices and limited new railroads from entering the business.
At the urgings of the railroads, the ICC brought the trucking industry — a source of competition — under its jurisdiction in the 20th century. It limited the number of trucking licenses, thereby constraining entry into the industry as shipping volumes ballooned and helping to prop up prices that would have fallen in a free market.
These and similar practices are rampant today, and not just among railroads or funeral directors. Each year, private corporations in America receive about $100 billion in subsidies from the federal government, gaining an advantage over those that don’t receive such handouts.

For more examples of crony capitalism or capture of the government by private firms, go here.