In Defense of a Crony Capitalist

Michael Schaus
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Posted: Sep 17, 2014 12:40 AM
In Defense of a Crony Capitalist

Elon Musk is a man I hate to applaud. He is a politically savvy businessman that understands how to exploit the crony-capitalist mentality of state legislators, federal regulators, and well connected corporate giants. Musk tends to exploit our American style of government-sanctioned corporatism with an uncanny (and often offensive) penchant. And yet… I (a liberty-loving advocate of small government) just can’t quite bring myself to stop writing flattering things about some of his recent endeavors.

He is representative of everything that is wrong with today’s corporate relationship with big government. Tax favors, political engineering, and even subsidies have helped him to amass a fortune… It’s not exactly the “rags to riches” story we remember hearing about when we were kids, but it’s nonetheless pretty darn effective. Of course, I’m not in awe of how he made his millions… Cozying up to politicians for special tax breaks, subsidies and legislative favors is nothing to admire.

Despite my personal qualms with the crony-capitalist methods of today’s most ingenious industrialist, I still find myself rooting for him more often than not. After all, his civilian run space program is a far more “American” alternative to sending our astronauts to space than hitching a ride with Putin’s cosmonauts. Wasn’t it big government favoritism that was monopolizing the industry of space exploration? I might have issues with Elon Musk, but I’d rather see an American company building the rockets to send satellites and astronauts to space, than send another truckload of money to Vladimir Putin.

And let’s not overlook the business model Musk adopted for selling Tesla electric vehicles: Bucking the traditional (and often government-mandated) model of setting up dealerships, Musk wanted consumers to be able to purchase Teslas directly from the manufacturer. And while many states continue to bar such benign transactions, Musk has moved forward in fighting for the empowerment of consumers. Automobile Dealership Associations across the nation are lobbying to prohibit direct sales of Tesla electric vehicles – as if it’s government’s role to mandate the existence of outdated dealership business models.

Heck, even the idea of Musk’s electric vehicle isn’t necessarily antithetical to my general disposition on “green energy”. After all, this isn’t some subsidized Chevy Volt that pretends to be the affordable answer to conventional locomotion… It’s a luxury conversation piece for rich environmentalists in Washington and Hollywood. In short: It’s exactly what it claims to be. (An overpriced, limited application, feel-good toy for people who can drop a hundred grand on making a social statement.) I don’t begrudge rich liberals for having money; and I certainly don’t begrudge them for spending it on an American product.

But… Musk is not exactly helping the government see the errors of their favoritism, big-government, crony-capitalist tendencies. Actually, he’s probably exacerbating the problem. The Pay-Pal founder has, apparently, come to the conclusion that rubbing shoulders with politicos is the way to make millions in today’s America.

He’s building a new battery factory in Nevada. Why Nevada? Well, because he received roughly $1.3 billion in tax incentives. He received similar deals from authorities in Texas for his space center; and he’s still lobbying California for the rights to a public transit project. Even his attempt to bring an end to the monopoly of automobile dealerships has been executed with the tactic of getting legislators to extend him special (limited) exemptions to state laws. Apparently Musk has discovered the unfortunate truth in today’s America: Crony Capitalism is best usurped with a little more cronyism.

And really, he might be right. It’s pretty well illustrated throughout history that big government leads to big corruption. Unfortunately, it might be a better bet in today’s political environment to make a few high-ranking friends, than degrade the influence of local, state, and federal regulators.

Don’t get me wrong… I’m not throwing in the towel on small government. In fact, Musk’s full embrace of political favoritism disgusts me. Common sense would indicate that limited government tends to neuter any corporation’s ability to curry favor with legislators, bureaucrats, and governors. A government restricted in power would (generally) be impotent in the crusade to stifle competition or grant favors. The bigger the government, the more complex the tax code, the more extensive the regulations, the greater leniency we tend to give our “leaders” to pick the winners and losers in the economy.

In a way, Elon Musk epitomizes everything that is wrong with how corporate America and big government have developed an unholy alliance… And yet, he is not – despite the tendency to say otherwise – the problem with today’s corporate culture. Instead, he is a symptom of today’s government-centric Americanism. When making millions depends on knowing the right folks in marble buildings, control of the system has probably started to slip from “we the people”.

I don’t hate Elon Musk. (Heck, I almost applaud the ambitious cronyist on occasion.) No… I hate that his style of favoritism actually yields results in today’s America. Musk is not a hero. But he’s probably not the villain either.

Musk is merely a successful businessman. And, unfortunately, that seems to require special permission from the government nowadays.