July 6 2012
Crony Capitalism, Occupy Wall Street, and the Tea Party
When the Occupy Wall Street movement emerged (remember them?), many commentators made an effort to say that Occupy and the tea party, now also far less visible than one might have expected, were two sides of the same coin.
Luigi Zingales, a professor at the University of Chicago’s Booth School of Business and a contributing editor at City Journal, makes this argument in a fascinating piece in the Los Angeles Times—and he also has some ideas on how the legacies of these two groups are playing out in the current presidential campaigns:
In an attempt to tap some of the political momentum behind these movements, each party has pushed the idea most amenable to its base: the tea party's anti-tax stand for Republicans; Occupy's soak-the-rich attitude for Democrats. Yet both parties ignore what unites the two movements: their fundamentally anti-elite, anti-establishment attitude.
Since I was one of those who rejected the Occupy = Tea Party of the left argument, I was interested in the way in which Zingales connected the two movements:
The tea party and the Occupy movement both arose in response to pervasive frustration. As we've grown accustomed to hearing in recent years, Americans are angry. They're angry at bankers, who helped cause the financial crisis but paid no price for it. They're angry at Washington, which blamed the bankers but deserved as much blame, if not more, for failing to rein them in. And they're angry at an economy that seems to enrich the wealthy while leaving most everyone else standing still or falling behind.
This anger manifests itself in a strong anti-elite bias and a determination to resist an oppressive leviathan — though the monster takes different forms in the two movements. For the tea party, it's the federal government in Washington; for Occupy, it's bailout-addicted big business.
Zingales argues that the differences between the two movements are more apparent than real: the problem for both, he writes is, “not big business per se but monopolistic and politically powerful business.” In this view, both movements want reform:
What would meaningful reform entail? The first step would be an elimination of all tax deductions and loopholes. Many of them have some justification, but their existence creates the incentive to lobby for more.
Because cronyism thrives in opacity and complexity, the second step would be to require that new regulations be so simple that even members of Congress could understand them. In a perfect world, legislators should be required to take a test on the content of a law before they can vote for it. This requirement would promote more competent representatives, and it would also produce simpler legislation more sensitive to people's needs and not to the wishes of politically powerful corporations, which hire armies of lobbyists to distort laws in their favor
This is a provocative piece, but I must admit that I think Zingales' glosses over the true nature of Occupy Wall Street, an anarchistic movement that, to the extent its foot soldiers had ideas at all, hated not just crony capitalism but capitalism itself. Moreover, Occupy anger was diffuse and often vented in anti-social ways (defecating on police cars, playing drums late into the night in urban neighborhoods, and shoving old ladies to the ground, to name a few). The tea party was composed of mostly middle class people who picked up their own trash and, despite being concerned about the direction of the country, weren’t personally angry.
While both the tea party and Occupy might rue the power of certain lobbies, I am not at all sure that tea party members would accept Zingales’s solution to the problem: taxation. He writes:
To prevent undue influence on the political process, lobbying and campaign contributions should be taxed progressively. I'm not a legal scholar, but as freedom of enterprise doesn't prevent taxes on business, why should the 1st Amendment prevent taxes on lobbying?
The battle against crony capitalism is foremost a battle against anti-competitive, monopolistic corporations. Antitrust regulation should thus be extended to the political consequences of mergers. When companies become disproportionately big, they become disproportionately powerful, and as we have seen, their influence distorts the political system.
Who gets to decide what is “undue influence on the political system” or when a company is “disproportionately big” and “disproportionately powerful?” Occupy would be delighted to have somebody, presumably bureaucrats, make these judgments. The tea party, on the other hand, probably would not. Another way to fight crony capitalism is to prevent the government from meddling in the economy—a tea party prescription—and not to allow the government to have so much money to spend. If you don't have money to throw around, you can't throw half billion dollars at Solyndra, no?