What is the libertarian solution to crony capitalism?

Welcome to Ask a Libertarian 2012 with Reason's Nick Gillespie and Matt
Welch. They are the authors of the book The Declaration of Independents:
How Libertarian Politics Can Fix What's Wrong With America, coming out in
paperback later this month. Pre-order:
www.amazon.com/The-Declaration...
On June 12, 2012 Gillespie and Welch used short, rapid-fire videos to
answer dozens of reader questions submitted via email, Twitter, Facebook,
and Reason.com.
In this episode, they answer the question:
"What is the libertarian solution to crony capitalism? And, if it is possible to abolish crony capitalism, how do people prevent it from coming back?"
Produced by Meredith Bragg, Jim Epstein, Josh Swain, and Tracy Oppenheimer
with help from Katie Hooks.
To watch answers from 2011's Ask a Libertarian series, go here: • Playlist

[@joepeeler34]

Another thing that takes away some fear of loss is the separation of business and personal finance. The legal creation "corporation" does that. The owners of capital can extract wealth from the corporation in good times and transfer it to their "personal" account. In the bad times the losses fall on the corporation, or, worse, are socialized (see bailouts). A market can only regulate if there is full-liability.

[@iAmTheSquidThing]

I would say radical government transparency would help greatly in limiting crony capitalism.

[@Henry-fv3bc]

+Andy Brice Of the bureaucracies? The thing is that the media is controlled by the same interests, so its always difficult.

[@theatheistpaladin]

What? Nothing about campaign finance reform? Nothing about changing how Corporations =/= people with legal rights? Those two will drastically change the influence of crony capitalism.

[@joepeeler34]

Analogy might help. Gambling is regulated by fear of loss. It works great, otherwise we'd all be in gambling dens 24/7. But imagine a system where the govt. socialized everyone's gambling losses with winnings kept. There is no fear of loss anymore. The politicians promise to make that system sound with "smart" regulations and "safeguards." The bureaucratic regulations won't stop the excessive risk taking and crisis to come. Above is what govt. has done for large players on Wall Street.

[@goranmilic442]

In gambling totality of players are always in loss to the house. Socialized losses with winnings kept would never cover amount of loss and fear from losing would still be there.

[@starsassy]

Matt Welch said "you're never going to abolish crony capitalism, BUT THE BEST METHOD TO LIMIT IT, IS BY LIMITING GOVERNMENT". Hello? Is anyone home? The best method to ABOLISH crony capitalism is to ABOLISH government. REASON is statist. Got anarcho-capitalism?

[@magnusanderson6681]

Libertarians agree on 99% of things. How about we limit the state to literally anything other than the growing cancer it is right now, and then we quibble about whether we can also privatize law enforcement, criminal enforcement, and national defense without allowing greater abuses of power than the government already creates.

[@pahana]

As long as people think government should be in business, business will be in government.

[@THESocialJusticeWarrior]

Banks will always take wild risks with other people's money without regulation. Bubbles will always happen with or without regulation.

[@THESocialJusticeWarrior]

Deregulation is its own crony capitalism system. You are just moving the cronies around. Although deregulation is MUCH less transparent and thus MUCH worse.

[@THESocialJusticeWarrior]

Regulation is a necessary evil. It is hard to do but must be done right. Just like you can't have a game without rules. Just because you find a bad rule doesn't make all rules bad.

[@joepeeler34]

Your right, banks will always take wild risks with other people's money without regulation. I favor the strongest regulation of all: Market's fear of loss. That can only happen if govt. brings back full liability. Bureaucratic regulation will not work once much of the fear of loss for some people is gone. And it isn't just banks. It's corporate officers who are allowed to separate business from personal finance. The legal protections that come with incorporation must go.

[@lizardgizard2002]

I think a better question to ask is: How do we eliminate the influence of conspiracy theorists in the movement (eg birthers, truthers, etc)? These people tend to make true Libertarians look ridiculous and make us a laughing stock in many circles.

[@TeacherDoug7]

Anyone who can watch tower 7 collapsing from some tiny office fires, while other buildings have been completely enveloped in flame for over 24 hours and not collapsed, and not come to the conclusion that it was a controlled demolition, looks ridiculous in my view. It's amazing how few people are capable of thinking their own thoughts. Humans really are like bees.

[@joepeeler34]

You may be right. I have made the exact point about limited liability and separation of business and personal finances to people who are otherwise pro-free market and most of them respond with repulsion at the idea of getting rid of the legal protection corporation. These same people claim that a market will regulate, but then I ask them how a market can regulate by fear of loss when a govt. takes it away in innumerable ways. They have no answer. I have no faith in bureaucratic regulation

[@styzoom]

Great guys, always informative.

[@joepeeler34]

continued... Back to the concept of full liability. If a corporate officer at a bank couldn't separate his business from his personal finance, do you think he would take wild risks? As it stands now, the corporate officer can extract from the corporation during the good times by transferring his profits to his "personal account." When things go badly, the losses fall solely on the corporation, not on his personal finances. See the problem with taking away fear of loss?

[@xcvsdxvsx]

"limit government because competition is good for everyone" i dont think any libertarian would claim this. its usually good for at least 99% of people but its definitely bad for the special interest that lobbied for the barriers to begin with

[@joepeeler34]

That isn't a refutation. If you think the ideas put forward are in error, offer a systematic refutation. Attacking personalities is an avoidance of ideas.

[@joepeeler34]

It was an analogy, not a strawman. A strawman is when a person tears down a manufactured argument of his own creation in order to make another person/group look foolish/irrational while attributing the manufactured opinion to them. I did no such thing with my casino analogy. I compared the lack of full-liability on Wall Street to a lack of fear of loss regulation if the govt. collectivized all the losses at the casino. Look up definition of strawman, then read my previous post again.

[@joepeeler34]

FDIC takes away fear of loss for bank depositors. So: banks don't have to compete on the quality of their loans or the soundness of their balance sheets. In the absense of collectivized risk (FDIC) people would shop around. They would be very concerned. They would seek out reliable sources that were experts in banking to grade the banks. Just what Consumer Reports does for other products/services.

[@affectionimpression1826]

We do direct democracy. Then we have tyranny of the majority. We see like on prop 8 that sometimes a direct democracy isn't always fair to minority groups. So yes It would be better because voters can vote down obvious special interest bills. At the same time a groups bigotry might get in the way.

[@joepeeler34]

As far as financial regulations, bureaucratic regulation has proven to be a disaster. It's true that if you remove market's regulation by fear of loss to a large degree you'll at least have to try to regulate by bureaucrat, but I don't think it will be very effective. It's not a given "rule" that I am opposed to, but the philosophy and structures in place that I oppose.

[@Longeno55]

Very well said. I'll be buying and sharing your book!

[@goranmilic442]

Crony capitalism is natural state of humankind. It's worst than pure socialism or pure capitalism, but it's realistic, it's there. Pure socialism can never be because you would need a government that is honest and knows what's best for you better than you do. Pure capitalism means small government, which means big political parties would have to give up their power and stop manipulating people. It's democracy that's enemy of libertarianism, because libertarians are always losing on elections. And they don't want to gain power in different way, like socialist do with revolution.

[@joepeeler34]

I don't think campaign finance reform will solve anything. Money will always find a way to sluice through the political pipes once govt. gets heavily involved in an area. If the govt. creates a come-by-me system, don't be surprised when interests respond to those incentives. I favor depolitization as much as possible. If the govt. hands out subsidies, mandates, public-private partnerships, etc., it creates a market in political favors. Instead of market capitalism, we get political capitalism

[@joepeeler34]

Once govt. gets involved with mandates, public-private partnerships, inequitable tax breags that some firms get and others don't, subsidies, govt. guarantees, etc. then it is inevitable that a market in political favors manifests itself. Large firms like the progressive corporatist state that was erected during New Deal/Progressive eras. There was a bias toward bigness by the progressives. Large firms were thought to be more efficient. They sought a partnership between business and state.

[@joepeeler34]

Why is full liability impossible? Of course it's possible. What we will have is an unsound economy prone to excessive speculation and wild risks so long as limited liability is in place. Bureaucratic regulation won't do the trick once the fear of loss is partially taken away. Whenever the next crisis comes (it IS coming once interest rates spike) some will claim that we need even more bureaucratic regulation. That will only create jobs for lawyers and bureaucrats.

[@elharbingero]

Man, the trolls sure found this video in a hurry.

[@THESocialJusticeWarrior]

And you will never have full-liability.

[@THESocialJusticeWarrior]

How are bankers going to fear losing your money? They couldn't care less. They will just get some other sucker to give them their money if they lose yours.

[@Mmmald397]

Maggie los andes

[@THESocialJusticeWarrior]

Some people would shop but enough people wouldn't to keep the shysters in business.

[@THESocialJusticeWarrior]

"misrepresentation of an opponent's position" Which is exactly what you did.

[@jessechavez7448]

Please explain

[@xcvsdxvsx]

Regulations create barriers to entry which reduce or eliminate competition. Eliminating regulation exposes these entrenched corporate interests to competition and forces them to self regulate in the ways which are important to consumers. You see with out barriers to entry any corporation that alienates its consumer base creates the opportunity for regular people like you and i to steal their market share.

[@joepeeler34]

And how exactly did I do that? Misrepresent. My post didn't site any specific thing you said. You gave your opinion on bureaucratic regulation, I have mine. The point of the collectivized risk in gambling wasn't to refute anything you said. It was to demonstrate the moral hazard present when collectivized risk is present. It was to demonstrate that full-liability is the best regulator of human behaviour. I didn't claim you want collectivized risk at the casino.

[@joepeeler34]

All of the endless bureaucratic regulation entices interest factions to come to D.C. to get favors, exemptions, etc. I think the only regulation that is effective is fear of loss regulation. Govt. has taken much of that away, esp. in finance, with lender of last resort (the FED), govt. guarantees, regulations intended to create barriers to entry, public-private partnerships, etc.

[@joepeeler34]

Another analogy might help. Ever stored anything in a warehouse that another owned? The owner of the warehouse is careful with your property. They are no govt. guarantees, lender of last resort, bailouts, collectivized risk, etc. He's liable. Think of a bank as a money warehouse. Is the owner of a money warehouse going to take many more risks if limited liability is in place? Of course. The govt. has taken away much fear of loss in banking with Federal Reserve, FDIC, and govt. guarantees.

[@joepeeler34]

Well, I agree with you to a point about the internet. That's because I don't think the solution lies with govt. force or politics. I would like the govt. out of the business of trying to centrally plan the economy and society. Once one resorts to government, everything becomes politicized. Govt. is monopoly and force. There are alternatives in most instances. The internet is a great way to educate and present new ideas to people. My worldview is night and day compared to 5-years ago.

[@iamoverrated]

....or you could do your research and find its a factual statement.

[@joepeeler34]

You seem to have a low opinion of your fellows. Tell me, if you think people are to be ruled by bureaucrats and central planners in govt., why are the central planners and bureaucrats imbued with so much intelligence, wisdom, and virtue? Afterall, they are drawn from the very same body of people that you call suckers. If man can't largely rule his own personal affairs, why would you think other men, with the same human weaknesses, are fit to rule over the rest of us? It's a contradiction.

[@joepeeler34]

Look at how many people go onto consumer information sites to glean information for as mundane a product as a microwave. Almost everyone looks up info about a model of car before they buy it. I know I personally look up information on consumer sites before I purchase any kind of electronics. BUT I don't shop around for where I put my money!!! I just pick the one with most branches closest to my house/work. Why? Because of FDIC. Banks don't have to compete because of it. Banks win!!

[@user-dr5me1xt4y]

Put your money in a credit union

[@wiskasIO]

Of course he only mentions Obama...

[@THESocialJusticeWarrior]

I think gov needs to change big time, we need to use the power of the internet to create democracy 2.0 Then we can get regulation right.

[@THESocialJusticeWarrior]

We can never have full-liability. So, your point is moot.

[@captainandthelady]

...started with Obama? I take it you have been politically aware for about three years, right? This has been going on for alot longer than that. Like all the way back to the begining in 1776. When George Carllin said that "This country was baught and paid for along time ago" , Obama wasn't even around. Both parties get the blame on this one.

[@THESocialJusticeWarrior]

Nice straw-man you built there.

[@Imjustaguy123]

Lol, I was actually interested in the topic but the guy just starts with the usual meaningless shit throwing you always hear in amercan politics "hurr durr my political opponent did this dumb thing" "limit government because competition is good for everyone". This clearly isn't serious enough and it only caters to people who already agree and wants to hear their own opinion. Unsubscribed.