The explosive growth in government regulations impose huge costs on productive activities. The arbitrary way in which they are enforced causes more insidious damage. It corrodes the rule of law and creates serious distrust on the merits of winners and losers in the market place. In addition, this “arbitrary” enforcement does not take place randomly. It is not the product of chance. It is the result of political machines that have perfected the art of extortion.
Peter Schweizer describes this process in his new book, Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets. Schweizer details the structures and processes that create a state of affairs where extortion is becoming commonplace.
During the last few years we have seen a rise in the concern for cronyism. It is the sole focus of the group Against Crony Capitalism.
Cronyism can be defined as “legal” corruption. Schweizer writes that, “in Washington today corruption is driven more by extortion than by bribery.” Extortion, unless done by the government, is usually criminal. Cronyism, giving favors to friends, is not criminal. It becomes a policy, rather than a private matter, when the favors are granted by government.
In order to combat cronyism one is obliged to name the culprits and expose their actions. Even during the longest lasting governments of crony states, such as Paraguay under General Alfredo Stroessner, or the “Perfect Dictatorship” of the Institutional Revolutionary Party that ruled Mexico for 71 years, criticism, on a general scale, was usually tolerated. No one was punished by making general statements that corruption, cronyism or extortion were damaging the economy. On the other hand, if someone denounced specific actions and actors, punishment and unrelenting destruction would follow. Often with the crony media as an accomplice.
In his book, Schweizer names guilty parties and specific cases committed by politicians from both sides of the isle. He quotes a few CEOs with the courage to come forward, but most of the quotes come from former CEOs, like John Allison, who, as head of BB&T, was a witness to these processes. Current CEOs are reluctant to talk for fear of political reprisals and retribution.
The governing principle of, “To my friends everything, to my enemies, the law,” which seems so prevalent in banana republics and totalitarian regimes, describes the selective use of the Foreign Corrupt Practices Act. Complex laws, promoted by Democrats, such as the Dodd-Frank bill, and the Medicare reforms during the Bush administration, also get their fair share of criticism.
Obamacare is providing new examples of how the process works. CNN has reported how health insurance executives are being told to be quiet or else fear retribution.
Schweizer, who criticizes leaders in both political parties, Democrats (Harry Reid) and Republicans (Roy Blunt), attracted the attention of traditional media. Both “60 Minutes” and "he New York Times covered his work."
Now, where will his crusade go?
In a similar fashion to other writers, he started a think tank: the Government Accountability Institute (GAI). GAI’s mission is, “to investigate and expose crony capitalism, misuse of taxpayer monies and other governmental corruption or malfeasance.” It will work with a team of investigative researchers and journalists committed to fairness and factual reporting.
His think tank is not alone. The battle for government accountability needs to be fought from the bottom up. The Franklin Center for Government and Public Integrity, founded in 2009, is one of the most successful young policy centers. It aims to, “address falling standards in the media as well as a steep falloff in reporting on state government.” It does at the local level what GAI does at the national level. The Franklin Center promotes a nationwide network of nonprofit reporters focusing mostly on state issues.
In many countries, books such as “Extortion” would end up with the powerful destroying the career of the author. Schweizer uses the word “mafia” more than a dozen times, he exposes powerful figures in politics, law firms and corporations. Traditional and academic think tanks, such as the Hoover Institution, will likely help complement the efforts of these activist think tanks. Both are needed to win what I consider the mother of all battles of this decade, preserving America’s biggest treasure: the rule of law.
This piece was first published at Forbes.com on Oct. 30, 2013.
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