Véronique de Rugy: critics of cronyism continue to miss | Opinions

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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 Ezra Klein of the New York Times and University economist George Mason 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 preventing 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 important; during a pandemic, they are devastating.

My problem, however, is with 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 myself 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 taxpayer dollars was such a powerful way of embarrassing the government to be overly cautious, we would not continue to see this administration doubling down on 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 lent Solyndra at risk, 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 its then managing director, 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 Big Four. solar projects, “I have never seen anything that I have had. do in my 20 years in the electrical industry that involved less risk than these projects “and” It’s just filling the desert 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 the big and powerful incumbents in the market.

Under these conditions, it is not surprising that on paper and to the untrained eyes, the overall program appeared to be fairly low risk, if not successful, and 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, as are 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 principal investigator at the Mercatus Center To George Mason University, columnist for Raison review and Washington Examiner, and blogs on the economy for National exam. Click here to contact her and follow her on Twitter: @veroderugy. Click here to read the previous columns. The opinions expressed are his own.



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