Though the 2016 race for president has just begun, the two Republican candidates, Rand Paul and Ted Cruz, may very well be setting the tone for the Republican primaries with an anti-establishment, populist bent. Though Paul and Cruz differ in certain areas, most notably in foreign policy, they both have libertarian-tinged views of capitalism, and are quite vocal about what they call “crony-capitalism,” what they see as a sort of perversion of the free market by big government.
This idea that pure capitalism has been corrupted by the shady partnership between business and government is quite popular in the right-wing libertarian community. And of course, it is true, in a sense. Modern capitalism is corrupt, and since the Citizens United ruling, big corporations and the ultra-rich have been able to further corrupt the government. In the liberal community, many prefer to use the term “corporate welfare,” or “corporatism” to describe our current economic system, but regardless of what we call it, there can be no doubt that it exists, and has worsened over the years.
So Paul and Cruz are right about what they call crony capitalism -- it exists. But when it comes to asking why it exists and how to combat it, the right could not be further from the truth.
First off, lets look at how conservatives believes capitalism should work in theory. People of the libertarian persuasion have a certain notion of how the unfettered free market operates, traced back to Adam Smith’s invisible hand, which posits that when every person in a economy works to satisfy their own interests, the interests of society as a whole are satisfied. This theory first appeared in "The Wealth of Nations," which was published in 1776. And if one looks back to this pre-industrialized time, it does make a lot of sense. Think about a town with a variety of different artisans, all producing their various goods and then purchasing goods from other producers. Though all of the artisans are operating in their own self-interest, they end up contributing to the material good of the whole town.
Now, the invisible hand still has some truth to it, even in the very different world we live in today -- but at the same time, many on the right have not given up the romantic idea of millions of producers (now "small business owners" rather than artisans) working to satisfy their own self-interest in a landscape of countless other such producers -- as if we were living in an global village of artisans.
We can call this "lemonade-stand capitalism." It is the idea that in a completely free market society, the economy would operate as millions of small producers in perfect competition, as children operate lemonade stands. As long as a person works hard and competes fairly, they will succeed; if they are lazy, they will fail.
So how has our economy become this monstrous fusion of government and business? Paul and Cruz go after the usual enemy -- the state. Libertarians believe that it is the government -- which just can’t mind its own business -- that caused crony-capitalism. If only the government got its hands out of the private industries, then a purer form of capitalist harmony would emerge.
The idea of lemonade-stand capitalism suits their ideology perfectly -- but it is a myth. In reality, the more "free" a market becomes, the more the competition gets rigged. In a capitalist system, the main goal is to grow and accumulate indefinitely. Competition is an effective way to drive innovation and efficiency in theory. But as businesses grow into large corporations and gain larger shares of the market, smaller producers can no longer compete, and must either work for the competition or exit the industry. We see this dynamic at work in the dominance of companies like Walmart and Amazon, who have managed to stack the deck overwhelmingly in their own favor and drive innumerable smaller competitors out of business.
One thing about capitalism that free-market libertarians do not seem to understand is that it represents a constantly evolving social system. This also means that theories must also keep up with reality, and not reside in past centuries. In today's world, corporations rule, and in America, as regulations have become laxer over the past few decades, they have grown even larger, especially in the finance industry, where the biggest corporations began merging after the repeal of the Glass-Steagall Act into the too-big-to-fail behemoth's that persist even today.
The problems become even more pronounced when you consider the power available to the world's largest companies. After the Citizens United ruling, which both Ted Cruz and Rand Paul have defended, corporations can contribute unlimited funds to political action committees. Enter the Koch brothers, who are planning to spend about $900 million on the 2016 election.
The game is rigged, there is no doubt about it, and crony-capitalism exists -- but it is not a perversion of “pure capitalism,” it is simply a natural evolution of it. Capitalists do not care about theory, as libertarians do; they care about getting ahead and increasing profit. Tilting the scales in one's favor is simply an expedient way to achieve said profits. Competition on a level playing field isn't a feature in such a system, but a bug, and one that's increasingly been pushed to the margins.
So the solution provided by libertarian leaning individuals like Paul and Cruz is based on this false notion of what capitalism actually is. They say that government is always the problem, and that it is the states fault for the crony-capitalism of today. But it is not the state who has corrupted the corporations, but the corporations who have corrupted the state.
Getting rid of regulations and privatizing everything, as libertarians propose, would not create a pure form of capitalism where everyone has a fair shot -- it would create a dystopia of abusive and uncaring corporations without any accountability to the public. The true answer to fighting the crony capitalism of today is to attack the nexus of corporations and their government sponsors. And Citizens United, contrary to what Cruz and Paul seem to believe, is one of the clearest examples. When politicians depend on millions upon millions of corporate campaign dollars, one cannot honestly expect them to be on the side of the common people.
The game is rigged. If a politician attempts to do their job and refuses to court the wealthy and corporations, they will most likely cease to be a politician in the next election. This is especially true for presidential politics, where campaign spending has skyrocketed. During the 2008 election, eight donors gave more than $1 million to outside groups, like Super PACs. Fours short years later, and two years after the court decision, this number shot up to 126 for the 2012 election.
The only way to truly fight crony capitalism is to stop the madness, and limit campaign spending, or more preferably make campaigns publicly financed. Get private money out of politics, and create a level playing field, where politicians can honestly say what they believe without having to worry about campaign donations.
Once this happens, the state can properly regulate private industry without worrying about elections. The governments job should be to limit the size and strength of corporations, and keep competition strong; not to let these corporations do whatever they please.
Since the rise of neoliberalism in the eighties, corporations have grown, and their influence has infected the government throughout all of its branches. The government went on a financial deregulation spree in the '80s and '90s, and the results are quite clear. Further deregulation of private industry, as Republicans like Ted Cruz and Rand Paul suggest, is not the answer, but the problem. A democratic government is supposed to represent its people, not a few with enough to pay. There is no pure capitalism; and in order to tame crony-capitalism, capitalism itself must be tamed, not set free.