Monday, June 20, 2011

Economics: Crony Capitalism pt 2 - Military Industrial Complex

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"Special Interests" should likely be the title here, but I think the Military Industrial Complex sums up special interests pretty succinctly. Well, I suppose the health care industry would work as well, but let's just assume we're including the pharmaceutical industry (outlaw marijuana, but this latest batch of chemicals is government approved for public consumption), the food industry (outlaw homegrown raw milk), the education industry, the EPA, Department of Energy, and a slew of others. However, none of them come close to the size of the Military Industrial Complex, or MIC for short.

To the uninitiated, I know that phrase can come across a little conspiratorial, perhaps like an "Illuminati" reference is just around the corner. Hardly so, MIC is just referencing the large bureaucratic agencies and private companies that surround our military. Agencies include the National Security Agency (NSA), CIA, DHS, et al, and private sector companies range from Halliburton, Black Water, Lockheed, Boeing, et al. Have you ever seen so many companies and agencies whose lifeblood is war?

At the heart of a crony capitalistic system is the government providing special favors to special interests. You want to bomb Libya, well, that costs $2+ Million per day (already $200 million over the $750 Million estimate), the weapons we develop cost $3 Billion per year alone, oh, not for all of them, just on the ones we end up canceling for the Army. Our "defense" budget was set for $700 Billion this year, which likely doesn't include everything such as the CIA who does not have to disclose their budget.

Someone gets paid to make the guns, make the bombs, the jets, build the bases, supply the food, the energy, the vehicles, gather the intelligence, contractors and "armed security". A recent expose by the Washington Post estimates that there's over 1,200 government organizations plus nearly 2,000 private companies just for counterterrorism, homeland security and intelligence. I won't discuss the inherent conflict of personal liberty that this affects, but the financial costs are insane when you add in the fact it's money that's taken out of the private sector and used for non-productive ends as discussed previously.

This brings up some rhetorical questions. Can we be sure the wars and 700+ military bases abroad are in our national interest when it's such a lucrative business for people with close ties to the ones who put us in these positions? Is our money best used to build a bomb to be dropped on people who in turn get angry and threaten us which in turn leads to the commissioning of more bombs and bullets to be fired at them? Seems a little self-sustaining.

In other words, if I had a friend in the government who would pay me a billion dollars for weapons if the need arose, would I be motivated to help that need arise? See, some people think this same logic applies to a doctor wanting his patient to stay sick, but that's false. A doctor is paid by his patient, his reputation relies on his patient getting healthy. Well, in a free market that's how it works, in our current market it's in our doctor's interest to prescribe us meds that we stay on since he's actually paid by an insurance program facilitated by our government. That, is the point. This is not a free market, it's crony capitalism, where government helps those who don't need it while feigning the moral high ground by saying the things that actually help the privileged are helping the needy. Straw-man arguments.

The evil beauty of crony capitalism is that it looks a lot like a free market, because the government doesn't own the business like in socialism, so the government can manipulate the marketplace while simultaneously blaming it for any mistakes that arise. These "free market mistakes" will of course necessitate more oversight by the bureaucrats who were actually responsible in the first place. More laws are passed in the public's interest, to help stimulate the economy, to help efficiency, to protect the people who are unable to protect themselves.

Often with good intentions, these are poor conclusions and often lead to the systemic risks that are trying to be avoided. If there were no legal tender laws (laws that say you cannot buy/sell in anything other than US Dollars) then the Federal Reserve would not have the monopoly on our currency. If they didn't have the monopoly on our currency then we would not have to be victims to their inflating and devaluation of our dollar. If they couldn't inflate our dollar then they would not have been able to pump in billions into the housing sector through government agencies like Fannie & Freddie, or loan it to foreign governments, or owe trillions to China, Japan and a host of other nations, and the whole world would not be tied into the health of our dollar. That is systemic. That is crony capitalism.

Yet, when the cookie crumbles it will be the free market to take the beating, but a free market would never have allowed such a moral hazard to develop. Luckily, there will be bureaucrats to lead us to safety, and they'll be backed by a large military industrial complex to keep the peace.
Because peace is in their interest...right?

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