Skyscraper Capitalism has Killed the Free Market

Skyscraper Capitalism (which is hardly capitalism at all) is the real culprit in the waning affection for free markets in North America. The big banking interests, who utilized their political clout during both boom and bust, who abuse the average person through the manipulation of the credit systems and take advantage of their plutocratic connection to the Federal Reserve System--the big automotive industry that the government has been propping up for nearly 30 years now that had also been the beneficiary of three decades of loose credit and easy money (who buys a car with cash anymore? and that's precisely the reason car prices have so radically inflated compared to other consumer goods)--all of these and more have created a murky debate around "free markets" versus "state intervention." The reality is that for the entirety of American history since the New Deal, we have had far more of the latter than the former.

Much of the state intervention in the last 30 years has been to aid private sector interests, especially the interests of the major players (and therefore major campaign contributors). The development of bloated securities regulations has been a boon not just to law firms, but to investment banking, and created an entire industry around broker-dealerships with significant barriers to entry, not just for people wanting to get into that business, but for people who have to pass through those businesses in order to finance any nascent enterprise. Indeed, the state-interventionists have created the very financial services monster they now decry. The average guy wanting to start a business either has to get a bank loan (and pay interest to the banking plutocracy) or else go through the nearly insurmountable trouble of raising equity capital for his business, involving at least two attorneys and likely a couple of financial services providers. Now the state-interventionists want to implement price controls on the industry they created, meaning there will be a bigger black market in financial services, more of the business will move overseas, and there will be all kinds of other externalities to the proposed new policies that the policy-makers and politicians haven't even bothered to consider.
 
Far from being a defender of the Skyscraper Capitalists, I view them as the root cause not only of many of our political problems, but our business problems as well. These are the corporations that want to keep their shareholders at arms-length, who view the Board Room as their provincial palace where only their chosen insiders who have "played the game" are permitted to enter. It is the Skyscraper Capitalists whose abuses have turned people from free markets, and have instigated a massive rise in support for not merely a bit more state intervention, but the radical takeover of entire private sector industries by governments in the United States and abroad.
 
Ian Brown, writing in The Globe and Mail, discusses the new interest in Marxism that has been precipitated by the financial crisis. Those who care about the future not only of capitalism but liberty itself will be wise to read this article and consider its implications. http://bit.ly/bFYNq
 
What we need is a new generation of capitalists: Hard Hat Capitalists who are willing to get their hands dirty, who are willing to create long-standing partnerships and relationships with their shareholders, whose communication with their investors is more personal than an annual report. We need people who are willing to leave their ivory towers and go to where everyday commerce happens. Sam Walton and Warren Buffett are shining examples of Hard Hat Capitalists--men who did not allow their wealth or position to lead them to obsession about tall shiny buildings and New York cocktail dinners.
 
This week, I read that more college graduates are looking for work as government bureaucrats (the article termed it "public service," but we all know what that is a euphemism for) than ever before, and that there has been a substantial drop in college grads seeking jobs in business--even Business school graduates. We should not underestimate the long-term impact this will have on the efficiency of our economy. Our best and brightest should be engaged not in economic policy-making but in actual economic decision-making--ensuring capital is allocated most effectively with a profit motive, and their shareholders in mind. If not, we face a steady decline of our economic output, consumer demand being met less and less efficiently over time, and with all of our smart people in government, they will surely not be content to sit by and do nothing. They will use the force of law to try to "fix" things. America's status as the world's economic engine will go out (to borrow T.S. Eliot's words), "not with a bang, but a whimper."
 
A new generation of capitalists could not come along too soon, not simply to restore faith in free markets, but to be genuinely good stewards of our society's resources, invested with self-interest, but not greed, seeking returns for shareholders year after year, not a big bonus at the end of this one. There is no autopilot in the history of progress. We must all work hard to keep the faith in our values of liberty strong. The alternative is not so pretty.

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