Say what you want about the Obama economy,
but one aspect of it must be stated up front: It was the “Happy
Time” of crony capitalism. I know this statement departs from the
glowing narrative being promoted by mainstream sources, but facts are facts.
Maybe Obama’s was left-cronyism, whereas Bush pushed a right one, but no
matter. Crony capitalism has done well since 2009.
It’s not hard to understand why. When an
era’s political milieu is defined by Dodd-Frank, the Affordable Care Act,
feeding the national security monster, climate-change-inspired central
planning, Elizabeth Warren, and Bernie Sanders, then you are going to increase
costs of doing business. Large, well-connected firms will benefit, as a result,
if only because large, well-connected firms can afford to comply. Everyone else
will go out of business, become an entrepreneur, do consulting, join the gig
economy, or whatever else is necessary to just get by.
Such is the conclusion of regulatory capture, and it’s no surprise. The
sainted Franklin Roosevelt embarked on a similar round of unprecedented regulation
during the so-called First New Deal. The large corporations of his day did very
well — from 1933 to 1937 — and worked hard for his reelection. If you worked
for one of these lucky organizations, you wouldn’t even know there was a
Depression going on. FDR’S economy was one in which real incomes rose — a
glorious thing to anyone earning an income in those days.
So the early framing of Obama as a new FDR
should have provided a clue of what was to come. Remember Cash for Clunkers?
That and the bailouts of GM and Chrysler stopped the flow of capital and labor
from Detroit to more capable hands. Remember passing Obamacare following Nancy
Pelosi’s reassurances that skeptical lawmakers could read the legislation after
it passed? One assumes they had the opportunity after being voted out of office
in the next election and Obama’s party lost majority status. Remember how the
Washington-Arlington-Alexandria Metropolitan Statistical Area led the country
with 3.3 percent economic growth in 2010, thanks to the influx of lobbyists to
the region? These really were happy times, at least for the cronies.
But this is not an article about the Obama
economy. It is one about my concerns regarding the upcoming Trump one. As I
write this, I have nearby Time magazine’s Person of the Year issue,
filled with dark pictures of Trump and encomia for Clinton and other
establishmentarian. It’s as if Time took its 1979 Man of the Year issue
and autocorrected Ayatollah Khomeini with Donald Trump and earnest references
to Jimmy Carter with Barack Obama.
Time blames Trump for the deep-seated divisions that surfaced and was stoked
over the last year, but Trump didn’t create the divisions. If George W. Bush
was an extremely divisive figure by 2008, then so became Barack H. Obama by
2016 since, after all, he simply rebranded, and then expanded, the very growth
of government that causes division. In this sense, Obama simply served Bush’s
third and fourth terms. He was all hope, but no change.
This became more obvious to me this past
June when I was presenting to a group of small business people in Bonita
Springs, Florida, and there was desperation in the air. Their businesses were
not going to survive another four years. Trump had to win. Obama had to go. One
of Fidel Castro’s mottos, “Socialism or Death!,” came to mind here. Only now,
we have an American version in which the death would have been the family
business that was being regulated into the grave.
So the division is real and deep. Trump
himself tried to communicate as much when he said (just prior to last year’s
New York primary) that he “could stand in the middle of 5th Avenue and shoot
somebody and I wouldn’t lose voters.” Far from a sick boast, it was a reference
to the division our political classes had created and made them hated, proclaiming
to anyone with ears that his side of the division was bigger, more motivated to
vote, angry, and was going to win.
It’s a division Rothbard wrote about in his
important, Bastiat-like essay, “Anatomy of the State,” where he discussed John
C. Calhoun’s analysis of net taxpayers and net tax consumers resulting from any
system of coercive redistribution. This is nothing new. US economic history
records crony influences from the beginning, but some years have served as
inflection points for their ratcheting up. These include 1791 (when the first
bank of the US was chartered), 1861, 1913, 1933, 1971, and now 2008.
But there has also been years when crony
influence has been resisted, be they the Jacksonian Era of the 1830s, the
Return to Normalcy in the 1920s, and the late 20th century when a population
weary of the Cold War and Great Society forced a sitting president to say that
the era of big government was over. They always come about when the net
taxpayers reassert themselves. Main Street’s needs are considered as seriously
as Wall Street’s, and the power elite is shamed.
It is happening again. What makes our
period different is that during previous eras of normalcy reasserted, the
political class usually serves up a president to pacify and unify an angry
nation. This is Reagan’s real legacy in leading a country fed up with wars,
wealth redistributions, and stagflation of the 1960s and 1970s. In this
respect, Trump, who ran against a bankrupt political class and often mocked it,
is no Reagan.
What also makes our era different is that
Trump will be a wealthy man entering the presidency, making him the first
president since JFK to have little incentive to use the presidency to
contribute to his personal wealth after leaving it. Like JFK, he will be harder
to buy and therefore harder to control. Thus you can sense the shock and angst
being expressed about how he might approach the empire. Why what will become of
Obama’s secret “kill list”? Will he make friends with Russia, de-escalate the
Middle East, and let trade — and the peace it foments — take root?
If you are a crony, fear not. Trump’s
ridiculous intentions to increase infrastructure spending (when public spending
on infrastructure in 2015 equaled $32 billion a month) and to rebuild
the military have crony capitalism written all over them. Such plans garner
support from representatives whose re-election depends on maintaining existing
public spending levels in their districts, but they don’t exactly drain the
swamp.
My concern is that the Fed might decide to
shut Trump down by raising rates drastically, bringing in a much-needed
correction, and normalizing monetary policy — a trifecta that could make any
president a one-termer. Don’t think this hasn’t been discussed at length
by the monetary Keynesians at the Fed who would like nothing more than to bring
that about.
Still, if the powers-that-be who have been
running the country are panicking about Trump, then this must be a good thing.
It’s even, I’d say, a Happy Time, only now for the productive and wannabe
productive who suffered the most from the cartelizing economy foisted on the
country following 9/11.
Their peace dividend was stolen from them
on that day, and they want it back, as do many millions of people around the
globe. Because one important lesson of economics is that there are better
outcomes than socialism or death.
Christopher Westley teaches economics at Jacksonville
State University. His son, Justin, begins his freshman year at Vanderbilt
University this fall. Send him mail.
Follow him on Twitter.
