The world is changing fast and to keep up you need local knowledge with global context.
It’s good to be reminded that crony capitalists aren’t just a feature unique to South Africa’s political landscape – they cause ire around the world. Tim Wood, a brilliant analyst with a global perspective, shares a list of books you must read if you want to understand how politicians influence markets and enrich themselves. Best of all, Tim highlights a solution to this problem: Making politicians pay 50% of any earnings, for five years, after leaving a government post for a private sector job. – JC
By Tim Wood*
Four books are required reading to provide context and analysis of the causes and consequences of the Great Recession – the global credit crisis that ignited in the opening months of 2007, detonated in September 2008, and which continues to smoulder.
The first book is Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment. The best seller zeros in on the almost single-handed corruption of America’s home mortgage financing superstructure by Jim Johnson using the parastatal Fannie Mae for his treacheries.
Second and third on the list are two books by muckraker extraordinaire, Peter Schweizer. Throw Them All Out details how America’s politicians exempt themselves from insider trading laws, and grow fantastically rich in the process. Extortion rounds out the theme by revealing the order flow and bid-offer spread on legislation.
Those books paint the background canvas for the global credit crisis. However, to properly understand how that canvas came to be painted and by whom, it is necessary to read Mark Levin’s Ameritopia, the fourth book on our list.
It turns out that state socialists realized that they had common cause with a supposed foe. Why nationalize by force what you could achieve by collaboration with large corporations? How apropos that the world recently noted the 75th anniversary of the Molotov-Ribbentrop Pact, that genocidal alliance that was supposedly impossible.
Crony capitalism has never been stronger, and the ideology has globalized at a frantic pace. Theocrats in Tehran, autocrats in Azerbaijan, democrats in Delaware, and populists in Pretoria have embraced it eagerly.
The most universal example of this political-industrial complex is the Global Warming Climate Change crusade and the determination to commoditize carbon dioxide, a gas essential to life on Earth.
Pick the scabs of any number of South African wounds, and it is blazingly obvious that the country has long been in the grip of statist forces allied with rent seekers. Whether it was Dutch East India Company governors, British mining magnates, or ANC arms and oil dealers, they all exhibit the same symptoms – a nexus of private and government interests who leveraged the state to enrich themselves at the expense of others and the greater good.
It was as true of Apartheid South Africa (e.g. the “ten percenters” of Waterkloof Ridge) as it is Post-Apartheid South Africa (e.g. the Tenderpreneurs). It is as true of modern Washington D.C. where the Democratic and Republican Parties are contemptuously known as the “Permanent Bipartisan Fusion Party”, as it is of Parisian taxi drivers rioting over competition from Uber.
The primary concern is not the accumulation of wealth by dubious means, odious as that is. Rather, the greater problem is that crony capitalism, just like its kissing cousin, state socialism, necessarily inhibits and withers individual liberty.
When the ability to earn a fortune can be had by leveraging government-connections, it is inevitable that there will be less competition accompanied by higher prices and poorer service. Masters serving only themselves can so much more easily herd citizens with fewer choices.
All the while the incentives for corruption metastasize until the Zimbabwean or North Korean outcome is in reach – a nation enslaved to hand picked ruling elites. An alternative is Somalia or Afghanistan where the civil society is so shattered that Warlordism is the survival reflex.
The solution to crony capitalism is not more regulation and oversight. The regulators and overseers can be bought too cheaply. The better option is an idea put forward by Tennessee law professor, Glenn Reynolds. He proposes a “Revolving Door Surtax” that would take 50% of any earnings, for 5 years, for someone who leaves government for a private sector job.
The risk is that corporations would simply adjust the compensation package to make up the difference. It would be preferable to completely strangle the ability to jump from government to rent-seeking companies. No less important is the need to smash the capacity for families and friends to peddle influence using their connections.
No political or bureaucratic office should carry a market value that can be realized by an individual or a group. But which political party has the most courage to make it so, and which Chamber of Commerce will yield?
— Pepe Marais (@pepemarais) September 4, 2014
* South African-born Tim Wood is a naturalised American who was Employee Number One, Executive Director, Technical Genius and Mr “Yes, but…” during the developing years of Moneyweb, a company which owes him an everlasting debt. Wood’s talents and intellect have delivered him a glittering career in his adopted homeland. The former head boy of Treverton School wrote this piece in a personal capacity.
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