Blame Cronyism for Our Economic Woes, Not Free Markets

What is so startling about the rise of Democratic Socialism is not that young people are realizing that the economy is rigged against them. It absolutely is. What is concerning is the lack of an accurate assessment of how it is rigged. Young people who believe in the vision of Democratic Socialism will often say that the fault of their economic struggles is the “billionaire class,” and their ownership over such vast amounts of wealth relative to the rest of us. So, in order to repair this injustice, the government must insert itself into the economy and engage in redistributive measures to take from some (“the rich”) and give to others (“the workers”).

On a base level, what the Democratic Socialist is outlining here is a class analysis. In their narrative, there are the rich, who exploit their labor and garner large (and, in their view, undeserved) profits. Then, there are the workers, who can’t seem to get ahead due to their inherent struggle against their corporate overlords.

The Democratic Socialist has also decided on a cure for this situation: government intervention into the economy. They believe that in order to break up large corporations and strip wealth from the billionaire class, the government should step in and enact their version of justice. Concisely, they are advocating for the growth of government as a means to redistribute wealth. This gets at the core of their misunderstanding of our current economic system.

There is a misconception that the power wielded under our current system by billionaires such as Elon Musk or Peter Thiel was handed to them by the free market, and that the government can be used as a tool to rid our society of their outsized influence. This is actually the opposite of reality.

The real reason that Elon Musk and Peter Thiel are able to have as much of an impact on our lives as they do is because of their cozy relationship with the government.

It is government favoritism which has allowed Thiel’s company Palantir to gain access to vast sums of money through contracts and subsidies, for example. It is a phenomenon known as corporate welfare which has resulted in all of us being forced to fund militarism and murder overseas, regardless of how much we on both the right and the left may oppose it. It is not free markets which lead to this arrangement. It is the relationship between big government and big business.

Companies like Peter Thiel’s Palantir haven’t become as powerful as they have due to all of us voluntarily exchanging our money for their services. Their influence is the result of an unholy alliance between business interests and government power.

In a narrow sense, the Democratic Socialists have it right when they say there is a class conflict in our society. However, they are false in their labels. Unlike the voluntary associations we engage in daily in the private sector, we are forced to interact with one entity, the government, every single day regardless of our dissatisfaction with them. The real class conflict (or caste conflict) in our society is between those of us with the legal right to steal (the government), and those of us who must provide value through voluntary exchange in order to accumulate wealth.

It goes something like this: the government uses their monopoly on force to steal money from the American people without any real pushback. This is done through a process called taxation. We are forced to fund this entity regardless of whether or not we approve of its conduct. Once they have taken our money, they then decide what to spend it on. Some of it is used to fund our seemingly endless foreign wars, so money is funneled to corporations within what has been dubbed the “military-industrial complex.” This includes companies such as Boeing, Lockheed Martin, Raytheon, and many more. Some of the funds will also go towards government surveillance programs, and companies like Palantir will be standing by, waiting to exchange their surveillance expertise for government funds.

We can clearly observe that redistribution is already happening. However, instead of the socialist scenario, where “the rich” are robbed and their wealth is given to “the workers,” this entity called the government actually steals what little money the poor or working-class people have and gives it to their corrupt (and very wealthy) friends. This is not free market capitalism; it is cronyism.

The reason capitalism (private ownership of capital) is conflated with cronyism (when political connection is favored over market competition) is because Republican politicians have done a very good job of practicing crony behavior while preaching the virtues of capitalism. They will, on the one hand, give hundreds of billions in taxpayer dollars to a weapons manufacturer, and, on the other hand, make campaign ads about their belief in free market capitalism. They falsely label their corporate handouts as a practice in “capitalism,” when they are actually engaged in a form of socialism.

The dirty secret is that they don’t actually believe in free markets. Many of them likely don’t believe anything at all, and were just told by their advisors that “capitalism” sells to the Republican base. They engage in cronyism by propping up specific government-friendly companies, not based on their ability to compete within a fierce market, but instead based on their willingness to help the government spy on the citizens, or more efficiently blow-up buildings in third-world countries. They engage in their own socialist redistribution of wealth, only this time it is taking money from the poor taxpayer and giving it to the rich government-aligned corporation.

This, again, is not free market capitalism. It is quite the opposite. Unfortunately, thanks to the unhelpful behavior of Republicans in Washington, this corruption has been branded as capitalism, and thus the good name of free enterprise has been slandered.

I actually share the skepticism that many Democratic Socialists have in companies like Palantir because of their ties to the government. The meshing of big government and big business is one of the biggest threats to liberty we face. If we seek to limit the risk of future dystopia, we should actually embrace free markets.

End government favoritism, end corporate welfare, and end the cronyism which has poisoned the name of laissez-faire capitalism.