The Magazine

The Crony Capital

Capitalism, Washington, D.C., style.

Jun 23, 2014, Vol. 19, No. 39 • By JIM DEMINT and MIKE NEEDHAM
Widget tooltip
Audio version Single Page Print Larger Text Smaller Text Alerts

This year’s turbulent primary season, which hit a crescendo this month with David Brat’s upset victory over House majority leader Eric Cantor in the Republican primary for Virginia’s 7th Congressional District, is an opportunity for conservatives to reflect. Why have our political leaders struggled so much to capture the enthusiasm of the conservative grassroots? Why did Republicans fail to win power in the last national election, despite wide distaste for the president’s signature legislation? Is the Tea Party’s agenda the solution to that failure or the problem? To many observers, the answers are both obvious and discouraging: The messages most appealing to the conservative base do not resonate with the general public, and the messages most likely to sway swing voters do little to energize conservatives. The movement is trapped in a double-bind.

Oink!

This view is wrong. Not all of the concerns of today’s grassroots are fundamentally about left versus right, and not all political appeals to the center are bound to alienate conservatives.

For too long, conservatives have lazily substituted rhetoric about free markets and lower taxes for the hard work of identifying and eliminating structural obstacles to economic dynamism. That work is uncomfortable, as it forces conservatives to come to terms with claims made more often by the left than the right about our political and economic systems. But it is necessary, and not just as a corrective to the left’s misguided arguments; it will also lead to sounder public policy.

Left-wing populists like Elizabeth Warren argue that the American vision of democratic capitalism is incapable of living up to its ideal, a society of upward mobility, widespread prosperity, and opportunity for all. “The game right now in America is rigged,” Warren says. “It is rigged so that those at the top keep doing better and better, and everyone else is under increasing pressure, is under increasing economic strain. The rules don’t get better for America’s middle class. The rules are getting better for those who are a thin slice at the top.”

Republican political professionals might prefer to dismiss such assertions, but most Americans—conservatives included—are indeed frustrated with a political economy that increasingly seems to benefit the well-connected. Tea Partiers have as much trouble as Occupy protesters identifying with bailed-out mortgage lenders and Washington lobbyists. Elizabeth Warren’s policy prescriptions may be unwise, but the critique of American capitalism underlying them has more resonance than we conservatives like to admit. Until we begin to address the tension between the interests
of K Street’s clients and the interests of most Americans, many voters who might be inclined to agree with us will stay home.

Conservatives should recognize, moreover, that there is nothing conservative about the status quo that has engendered such cynicism in so many Americans. Where the left errs is not in its frustration with our current system but in its diagnosis that the problem is the free market itself. The truth of the matter is perfectly compatible with conservatism: Many of big business’s greatest advantages over small competitors stem not from scale achieved through success in the free market but from success in capturing the levers of political power.

Sometimes, the means employed by politicians to protect big business are clear: subsidies and bailouts delivered to political allies, for example. Others are less obvious: licensing requirements easily overcome by large-scale enterprises but especially onerous for small-staff operations; tax loopholes available only to those who can afford savvy tax lawyers; complex regulations comprehensible only to experts in administrative procedure.

These decrees kill competition, and in so doing, they don’t merely hurt small business; everyone in the market suffers. There’s a reason most Americans are struggling to keep up with essential expenses such as housing and health care. Government policy directly insulates entrenched players in these industries from competition while providing them taxpayer-funded financial support. This nexus of big business and big government is a recipe for greater costs for most Americans, through higher prices and higher taxes.

Recent Blog Posts