The Business of Politics
“The mere proposal to set the politician to watch the capitalist has been disturbed by the rather disconcerting discovery that they are both the same man. We are past the point where being a capitalist is the only way of becoming a politician, and we are dangerously near the point where being a politician is much the quickest way of becoming a capitalist.” ~ G.K. Chesterton
The Wall Street Journal ran a story yesterday about how the House Energy panel chairman Joe Barton used his influence to make sure that the new energy bill will include plenty of personal benefit for himself and his aides. The bill was structured in such a way that Reliant Energy Inc., a company closely connected to the panel chairman, will benefit at the expense of some of its southern competitors. This is mainly because the bill gives federal regulators authority to allow Reliant to use the delivery lines of other companies.
Two members of Barton’s staff are former Reliant executives and Reliant’s lobbying team once employed two of Barton’s former aides. Reliant has been and of course will continue to be a source of political support for their man Joe. Mr. Barton owns stock in the company as well from which he is sure to profit as the company benefits from the new bill. The journal also quoted Frank O'Donnell, the president of Clean Air Watch as saying, "It really does look like Reliant has set up a branch office in Barton's office." Mr. Barton of course claims that the bill and his decisions pertaining to it were made in the interest of "sound policy" and not personal benefit. But one cannot help but notice an extreme conflict of interest here.
This is just another example of how politicians use their power and position to benefit themselves. This is an extremely mild example but it serves to illustrate how easy it is for this to occur. These rackets have been going on in America since the very beginning. Businessmen have been ever eager to use government power to gain special privileges and protection from competition, and in return the politicians who aid them receive both political and financial benefits.
This was the case with the disastrous federal program of subsidizing railroads during the 1800’s. Businessmen and politicians hiding behind the cloak of “internal improvement,” “the common good,” and “national interest,” plundered taxpayers to pay for their desired boondoggles which were notoriously inefficient, but from which they all profited handsomely. Not only did the railroad owners gain greatly at the expense of their non-subsidized competition, but politicians spent their energies squabbling over who would gain the most from the arrangement. In his book The Real Lincoln, Thomas Dilorenzo quotes a delegate to congress from New Mexico in 1862 as saying, "The wrangle of local interests” was such that many members of congress refused to support the subsidy bill unless the railroad "starts in the corner of every man's farm and runs through all his neighbors plantations" in every congressional district.
This is the mercantilist system that the founding fathers fought a revolution to overthrow, but which many early American politicians such as Alexander Hamilton, Henry Clay, and later Abraham Lincoln sought to reinstate. It is corrupt, unjust and inefficient. On the market, firms survive and prosper by providing better products and services than the competition at a better price. Consumers reward those businesses that best serve their needs with the most profits. In the mercantilist framework, competition to please the consumer is replaced by competition to influence and please politicians. Why compete when you can simply lobby the government to eliminate your competition? In fact, under mercantilism, most businesses are forced to enter the realm of politics in order to prosper because real competition becomes ineffective.
A highly sophisticated and intelligent analysis of how politicians use their power for personal benefit is Fred S. McChesney's book Money for Nothing : Politicians, Rent Extraction, and Political Extortion. He uses detailed economic and historical analysis to show that this type of behavior is not only possible and probable, but that it happens all the time. I would highly recommend it.
This type of behavior is the inevitable outcome of a system that allows politicians arbitrary power to control and regulate the market. It was one reason why the constitution and the rule of law were so important to America’s founders. You cannot give a man the power to do something by which he can clearly benefit himself at the expense of others, and not expect that he will do exactly that. This is one of the main problems inherent in a democratic system. The majority is given the ability to benefit itself at the expense of the minority by way of the ballot box, and of course they have repeatedly shown their willingness to do it.
The media talking heads are often quick to point out this type of political corruption, but for all the wrong reasons. They blame the individuals involved for their personal behavior and are often effective at arousing the public’s ire against specific politicians and businesses. The system itself is rarely if ever brought into question. It is just assumed that the problem lies with the individual people. They are dishonest and corrupt and the solution is to simply elect new, “honest” politicians in their place.
This is utterly absurd. Human nature is what it is and people can generally be expected to behave in ways that will further their own best interest. To expect that moral and unselfish men can be found and entrusted with power is not only illogical, it flies in the face of centuries of historical experience. The solution is not to try and change human nature, it is to change the incentives. The system is the problem and not the people who live under it. What is required is a system that is firmly rooted in law and property rights; a system that does not allow government interference in the marketplace and therefore does not allow for this type of corruption. If politicians don’t have the power to inhibit competition or hand out favors and privileges, then businesses would be forced to engage in genuine, productive competition that serves the consumer rather than wrestling for position at the public trough.
The Wall Street Journal ran a story yesterday about how the House Energy panel chairman Joe Barton used his influence to make sure that the new energy bill will include plenty of personal benefit for himself and his aides. The bill was structured in such a way that Reliant Energy Inc., a company closely connected to the panel chairman, will benefit at the expense of some of its southern competitors. This is mainly because the bill gives federal regulators authority to allow Reliant to use the delivery lines of other companies.
Two members of Barton’s staff are former Reliant executives and Reliant’s lobbying team once employed two of Barton’s former aides. Reliant has been and of course will continue to be a source of political support for their man Joe. Mr. Barton owns stock in the company as well from which he is sure to profit as the company benefits from the new bill. The journal also quoted Frank O'Donnell, the president of Clean Air Watch as saying, "It really does look like Reliant has set up a branch office in Barton's office." Mr. Barton of course claims that the bill and his decisions pertaining to it were made in the interest of "sound policy" and not personal benefit. But one cannot help but notice an extreme conflict of interest here.
This is just another example of how politicians use their power and position to benefit themselves. This is an extremely mild example but it serves to illustrate how easy it is for this to occur. These rackets have been going on in America since the very beginning. Businessmen have been ever eager to use government power to gain special privileges and protection from competition, and in return the politicians who aid them receive both political and financial benefits.
This was the case with the disastrous federal program of subsidizing railroads during the 1800’s. Businessmen and politicians hiding behind the cloak of “internal improvement,” “the common good,” and “national interest,” plundered taxpayers to pay for their desired boondoggles which were notoriously inefficient, but from which they all profited handsomely. Not only did the railroad owners gain greatly at the expense of their non-subsidized competition, but politicians spent their energies squabbling over who would gain the most from the arrangement. In his book The Real Lincoln, Thomas Dilorenzo quotes a delegate to congress from New Mexico in 1862 as saying, "The wrangle of local interests” was such that many members of congress refused to support the subsidy bill unless the railroad "starts in the corner of every man's farm and runs through all his neighbors plantations" in every congressional district.
This is the mercantilist system that the founding fathers fought a revolution to overthrow, but which many early American politicians such as Alexander Hamilton, Henry Clay, and later Abraham Lincoln sought to reinstate. It is corrupt, unjust and inefficient. On the market, firms survive and prosper by providing better products and services than the competition at a better price. Consumers reward those businesses that best serve their needs with the most profits. In the mercantilist framework, competition to please the consumer is replaced by competition to influence and please politicians. Why compete when you can simply lobby the government to eliminate your competition? In fact, under mercantilism, most businesses are forced to enter the realm of politics in order to prosper because real competition becomes ineffective.
A highly sophisticated and intelligent analysis of how politicians use their power for personal benefit is Fred S. McChesney's book Money for Nothing : Politicians, Rent Extraction, and Political Extortion. He uses detailed economic and historical analysis to show that this type of behavior is not only possible and probable, but that it happens all the time. I would highly recommend it.
This type of behavior is the inevitable outcome of a system that allows politicians arbitrary power to control and regulate the market. It was one reason why the constitution and the rule of law were so important to America’s founders. You cannot give a man the power to do something by which he can clearly benefit himself at the expense of others, and not expect that he will do exactly that. This is one of the main problems inherent in a democratic system. The majority is given the ability to benefit itself at the expense of the minority by way of the ballot box, and of course they have repeatedly shown their willingness to do it.
The media talking heads are often quick to point out this type of political corruption, but for all the wrong reasons. They blame the individuals involved for their personal behavior and are often effective at arousing the public’s ire against specific politicians and businesses. The system itself is rarely if ever brought into question. It is just assumed that the problem lies with the individual people. They are dishonest and corrupt and the solution is to simply elect new, “honest” politicians in their place.
This is utterly absurd. Human nature is what it is and people can generally be expected to behave in ways that will further their own best interest. To expect that moral and unselfish men can be found and entrusted with power is not only illogical, it flies in the face of centuries of historical experience. The solution is not to try and change human nature, it is to change the incentives. The system is the problem and not the people who live under it. What is required is a system that is firmly rooted in law and property rights; a system that does not allow government interference in the marketplace and therefore does not allow for this type of corruption. If politicians don’t have the power to inhibit competition or hand out favors and privileges, then businesses would be forced to engage in genuine, productive competition that serves the consumer rather than wrestling for position at the public trough.
posted by Aaron Singleton at 5:12 PM
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