OP-ED: Critics of cronyism continue to miss target |



How best to ensure substantial long-term economic growth should be a matter of concern to everyone. Its benefits cannot be overstated, and it is undeniable that lack of growth is the root of many seemingly disconnected economic and social problems. This is the central theme of a recent podcast discussion between The New York Times’ Ezra Klein and George Mason University economist Tyler Cowen.

They both expressed support for reforms aimed at making government less bureaucratic and more nimble. For example, Cowen cited the recent failure of the Food and Drug Administration to approve COVID-19 treatments fairly quickly, while also hindering the development and distribution of COVID-19 tests. In an ideal world, Cowen’s sane observation should lead to serious reform of the FDA and other alphabetical agencies that are failing the American people through slow and counterproductive processes. In ordinary times, these bureaucratic problems are quite significant; during a pandemic, they are devastating.

My problem, however, is Klein’s suggestion that changing the status quo forces conservatives and libertarians to stop denouncing Uncle Sam for big fiascos like Solyndra, the solar company that went bankrupt shortly after going bankrupt. received a $ 538 million loan guarantee from a green energy program. under the Obama administration. Exposing such waste, Klein insists, only serves to embarrass the government for its failures, thus prompting it to be more careful. As such, Klein would like to “somehow calm down those players who seek to report every failure.”

It’s wrong. Klein misunderstands why I and other free market supporters fight against private companies receiving government-granted privileges – which is called “cronyism.” These are not the unnecessary expenses that I mainly focus on; it is injustice.

Before explaining, I want to clarify that it is not the role of the government to support private companies, even green ones. Nor is the FDA getting it wrong because conservatives and libertarians don’t miss an opportunity to criticize government failures. Bad government, political incentives and repeated lack of accountability are the only ones to blame for this mess. Furthermore, if pointing out that the government is failing and wasting taxpayers’ money was such a powerful way of embarrassing the government to be overly cautious, we would not continue to see this administration doubling down on its interventions there. where others have failed before.

Now consider the Department of Energy Section 1705 Green Power Loan Program which has given us failures like Solyndra, Abound Solar and others. The program began under former President George W. Bush, but reached its peak during Obama’s presidency. It would have been designed to encourage banks to lend to riskier green businesses that would not otherwise have access to capital, thereby boosting innovation and stimulating growth.

Although he loaned to risky Solyndra, a large majority of the loans went mainly to large, well-funded and established companies that are already producing green energy. Take NRG Energy Inc., for example, one of the major beneficiaries of the program. As then CEO David W. Crane explained to The New York Times after securing $ 5.2 billion in federal loan guarantees, along with hundreds of millions of other grants for four major solar projects, “I never saw anything that I had to do over the course of my 20 years in the electrical industry which involved less risk than these projects, “and” It’s just filling the wilderness with panels. “

This story is repeated throughout the program. Contrary to the objective of the program, the 1705 loans did not encourage new entrants to the market. Instead, they subsidized large and powerful incumbents in the market. Under these conditions, it is not surprising that on paper and to the untrained eye, the overall program appears to be fairly low risk, if not successful, and has led observers like Klein to dismiss Solyndra’s failure as a cost. worth paying for an otherwise good program.

This is the wrong conclusion, of course, if one understands how incredibly unfair such handouts are. They give an artificial competitive advantage to large companies that have no problem accessing capital, and this comes at the expense of smaller and truly innovative competitors, consumers and, ultimately, the integrity of our markets. and our political system. Adding insult to injury, corporate executives are often well connected with politicians or with White House officials – just like Solyndra executives. This recipe is hardly the one that produces innovation and growth.

The incentives within government decision-making processes are such that this same pattern exists in most programs where the government grants grants to private companies, which is why I oppose all grant and loan guarantee programs. . This is an obstacle to growth that Cowen and Klein want to stimulate, and it is deeply unfair.

Véronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.



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