The problem is crony capitalism | Arkansas Blog

Thursday, October 27, 2011

The problem is crony capitalism

Posted By on Thu, Oct 27, 2011 at 6:32 AM

The Times' Nicholas Kristof writes today that the crux of the Occupy movement's complaint isn't capitalism, its crony capitalism,

Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk.

The upshot is that financial institutions boost leverage in search of supersize profits and bonuses. Banks pretend that risk is eliminated because it’s securitized. Rating agencies accept money to issue an imprimatur that turns out to be meaningless. The system teeters, and then the taxpayer rushes in to bail bankers out. Where’s the accountability?

It’s not just rabble-rousers at Occupy Wall Street who are seeking to put America’s capitalists on a more capitalist footing.

Kristof writes, too, that some inequality is to be exepcted in a capitalist system, but too much is a bad thing. Quoting a Harvard professor:

... excessive inequality can have two perverse consequences: first, the very wealthy lobby for favors, contracts and bailouts that distort markets; and, second, growing inequality undermines the ability of the poorest to invest in their own education.

“These factors mean that high inequality can generate further high inequality and eventually poor economic growth,” Professor Katz said.

What's smelly in all this isn't the Occupy protestors.

BTW: Another word of praise for the calm and, yes, dignified handling of the Occupy Little Rock protest by city officials. Elsewhere, patience and tempers have grown short about the 1st Amendment.

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