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Sunday, January 13, 2008

Nepotism Capitalism

According to Google Analytics, a bunch of people have found my blog by searching for "nepotism capitalism". I feel morally obligated to write a full post on the subject.

There are two ways to build a successful business. The first way is the honest way, by providing something productive and useful. The second way is to use government force to support your business. This dishonest method of forming a business can be called fasco-capitalism or nepotism capitalism. In the present, most businesses that are successful succeed the second way.

The primary distinguishing feature of nepotism capitalism is that a person's political contacts are more valuable than their skills and abilities.

Let's consider some examples.

The most famous example is Enron. They practically wrote the energy industry deregulation laws, and then proceeded to exploit those laws to the maximum extent possible. Of course, they're a failed business now, but the Enron insiders made a ton of money.

Consider all the private military contractors like Blackwater. They have used their political connections to make a very profitable business.

Consider pharmaceutical companies. They lobby the FDA for extensive regulation of the drug industry. This squeezes out smaller competitors. They even managed to arrange for certain herbal treatments and vitamin treatments to be declared illegal, or regulated so much to make them unprofitable.

Consider Microsoft. They were basically handed their monopoly by IBM. Bill Gates' connections at IBM enabled him to create a very profitable business. Intellectual property laws, restrictions on reverse-engineering, and DRM laws all work to support Microsoft's monopoly.

Most media companies have "preferred voting shares", which means that insiders control the company even though they only own a small percentage of it. A handful of people control all the media companies.

Doctors have a very strong union, the AMA. By artificially restricting the supply of doctors, doctors are guaranteed a high salary. The idea that government licensing requirements improve the quality of doctors is a complete lie. With a restricted supply, there's no mechanism for incompetent doctors to be removed from the market. Doctors use government force to improve their salaries. Most individual doctors are not aware of this massive government subsidy they receive.

Similarly, lawyers have a very strong union. The demand for lawyers is literally backed up with government force.

There are so many examples of nepotism capitalism that I could write many pages listing all of them.

There are so many groups of people using government force to profit. Most of those people would be better off if they all simultaneously agreed to stop exploiting government for their own interests.

Many large corporations have "interlocking directorships", meaning that the same person serves on the board of several companies. This helps the large corporations act as a cartel. This guarantees that only people with the right connections or right attitude will be chosen as CEOs. The idea that CEOs are chosen based on merit is a media lie. CEOs are chosen based on their political connections.

Most large corporations receive massive government subsidies. They receive subsidies in the form of artificially low interest rates. Government regulations squeeze out smaller competitors. Government subsidized transportation also benefits large corporations. They can distribute from a centralized factory without paying their true distribution costs.

The USA does not have a free market. The USA is a communist dictatorship. The Federal Reserve, income taxes, and government regulations completely destroy a free market. The economic system in the USA can be more accurately described as fasco-capitalism or nepotism capitalism.

1 comment:

lordjek said...

May it be the problem in nepotism is in the goverment part? If I make buisness with friends, it is not nepotism. But if I hold some power over some people, and then I use it to promote my friends buisness, it is corruption?

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