Friday, December 26, 2014

Welcome to Cronyland: Mid and Long-Run Cronyism at Work

“So it’s no surprise that governments with vast powers routinely behave stupidly: they are attempting to do the impossible while being overseen by the ill-informed.” - Don Boudreaux


Apparently Greensboro, NC does not rank highly as a place individuals or individual firms would desire as a relocation destination. Could it be that Greensboro is viewed as an economy that is not chronically and indigenously innovative? With an economy lacking in chronic and indigenous innovation the economy at large will lack dynamism and hence lack in jobs in which people feel vital. Would one want to relocate to such a non-innovative and non-vital environment? (1)

If an economy is not innovative and hence not a dynamic economy in which people feel vital, then what sort of economy is one viewing? Likely one is viewing an economy of the few and not an economy of the many. An economy based on the plans of the few and not the plans of the many. A politically directed economy where what little growth that does occur flows to the few and not the many. One might say an economy with a focus on the few at the expense of the many. (2)

An economy that is chronically and indigenously innovative that produces vitality, such economies are in the main, products of spontaneous/emergent order or what some people refer to as “bottom-up”. The economy is a product of the many. (3)

-Back to the Future-

Most economies that existed prior to the year seventeen hundred were economies of the few. Kings, queens, despots and the like were common. However, after the year seventeen hundred spontaneous/emergent order had produced an overwhelming and unstoppable force of the many. The many wanted to act as free individuals and freely pursue their individualistic needs, wants, talents and desires. The result, the ensuing growth, on a global scale was and still is astounding. (4)

Some two hundred and thirty years into the “bottom-up” revolution a small secondary group emerged known as the predator class which some refer to as the political class. A predator class in that their existence depends to one degree or another, consequent to, preying upon other people’s money:

The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves" - Milton Friedman (5)

-Political Slight of Hand-

The predator class depends greatly on political slight of hand as they cloak their activities as being directed toward the many. But in essence their activities, in the main, boil down to the plans of the few superseding the plans of the many. James and Jane Goodfellow have been superseded. One ends this exercise with an economy that moves back toward the direction of kings, queens and despots, with political solutions as the only solutions, as political solutions are the predator class bread and butter:


Perhaps the greatest achievement of market economies is in economizing on the amount of knowledge needed to produce a given economic result. That is also their greatest political vulnerability. The public can get the economic benefits of such systems by judging results without understanding processes. But in their political behavior, the public must judge processes - including economic processes of which they may be ignorant or misinformed. Public misunderstandings can lead not only to misinterpretations of economic benefit as harm, but to actual harm resulting from policies designed to “correct” perceived problems. Once the process is underway, every perceived problem - whatever its reality or origin - calls for political solution, and these “solutions” tend to create a never-ending supply of new problems to be “solved”. - Thomas Sowell (6)

-Welcome to Cronyland-

Returning to Greensboro: Welcome to Cronyland where the only room available is for the plans of the few, and not so incidentally, plans that benefit the few. In Greensboro’s particular case, from coliseum to music hall and all the empty industrial parks in-between, to the use of taxpayer dollars to attempt to attract or retain firms that have grown to depend on crony handouts, the many pay and the few receive. 

Cronyland is a bust for the many and a boom for the few.

Politicos and their ilk come up with master plans (more succinctly notional propositions), financed by the many and their associated tax dollars. The supposed master plan, which generally are far outside their field of expertise of the sponsoring politicos, are then advertised as a panacea. When that plan fails, and the known-known cascading unintended consequence mount related to the notional proposition playing out, a new master plan appears. Yes, the new plan will cause things to be different this time. Alas, same result. Then yet another master plan appears and so on it goes with an unending chain of master plan failure. And when the failure occurs, yet again, the excuse is: You can't make mistakes if
it's everybody else's fault. (7) (8) (9)

“The plans differ; the planners are all alike…” - Frédéric Bastiat

"That illustrates a general rule: If a private enterprise is a failure, it closes down - unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find an exception." - Milton Friedman, from the essay Why Government is the Problem

“Government is the only enterprise on earth, that when it fails, it merely does the same thing over again, just bigger” - Don Luskin


(1) Mass Flourishing, Edmond Phelps


(2) F.A. Hayek, The Constitution of Liberty. Chicago: University of Chicago Press


(3) Mass Flourishing, Edmond Phelps


(4) Why Does 1% of History Have 99% of the Wealth? McCloskey

(5) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11

(6) Knowledge and Decisions, Thomas Sowell, p. 69


(7) This Time is Different, Eight Centuries of Financial Folly, Reinhart and Rogoff

(8) The Vision of the Anointed, Self-Congratulation as a Basis for Social Policy, Thomas Sowell


(9) No, They Can’t, Why Government Fails but Individuals Succeed, John Stossel