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Crony Capitalism 101

Here’s a letter to the Washington Post:

Michael Gerson misses the most germane problem with Pres. Obama’s praise of the transcontinental railroad as a shining example of the wonders of “mobilized government” (“Obama fails the Lincoln test,” Sept. 13).

Save for the one transcontinental line that received virtually no subsidies (J.J. Hill’s Great Northern), the building and operation of the other three lines were contaminated with graft, fraud, and corruption – of which the Credit Mobilier scandal is only the most famous instance.  And on top of these shenanigans that predictably happen when government doles out subsidies were other, equally predictable results: shoddy construction, bloated costs, and inefficient and unsafe operation of the lines.*

On further reflection, Mr. Obama is spot-on to cite the transcontinental railroad as an example of his hope for America: it is a great monument to crony capitalism, under which government officials – constantly cackling about their ‘grand visions’ and ‘commitment’ to America’s future – launch boondoggles that succeed only in transferring massive amounts of wealth from the general population to the politically connected.

Donald J. Boudreaux

* The literature on this subject is vast.  This good, brief summary is written by my former Clemson University student Timothy Terrell (now on the econ faculty at Wofford College).


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