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Reason On How and Why 38 Studios Went Bust
cathyreisenwitz writes "The 2012 bankruptcy of Rhode Island-based video-game developer 38 Studios isn't just a sad tale of a start-up tech company falling victim to the vagaries of a rough economy. It is a completely predictable story of crony capitalism, featuring star-struck legislators and the hubris of a larger-than-life athlete completely unprepared to compete in business." Reason makes no bones about its view of this kind of public-private "partnership."
Reason, a libertarian magazine, is probably the most pro-capitalism publication currently available. The article is about how taxpayer-funded loans are almost always a bad idea. Schilling was unable to find private sector investors - which usually means that the business model is not very good. Crony capitalism is not capitalism, it's a corruption that wastes a whole boatload of our tax money.
Short story: Leave investing to investors and stop risking taxpayer money on ventures that will most likely not succeed.
Come on, son.
Neither the article nor the summary says anything that could even be remotely interpreted as an attack on capitalism. And you know it.
Strawman arguments are lies.
Not to mention that this entire deal had nothing to do with capitalism. Government guarantees a giant loan to a business driven by nepotism, greed and lies in an erratic industry headed by a former sports star with no management experience whatsoever? How is that capitalism?
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Crony capitalism is not capitalism
Crony capitalism is what actually happens when you implement captialism in the real world. Capitalism is the theory, cronyism is the practice.
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Crony Capitalism is when you use the state to get unfair private advantage. It's not like a builder who gets the state to "smooth things out" when building something for public purposes (ex. police station, highway, etc.). There are times when the government needs to help facilitate the work of private parties. This was not one of them. It was the government doing something with a marginal public purpose (the nebulous "it'll create more jobs" excuse).
Put another way, this is precisely the same sort of crap we saw Bush and Obama do with the banking sector (using public funds to secure private losses that were not incurred due to a public purpose). In either case, the government stepped in to do what the market should have done in an otherwise private transaction with minimal to no public purpose.
Crony capitalism is not capitalism
Crony capitalism is what actually happens when you implement captialism in the real world. Capitalism is the theory, cronyism is the practice.
In which real world?
It may have its problems, but capitalism is the best system ever devised for creating wealth and a higher standard of living for a population. Depart from it at your own risk.
Tax payer money was wasted by loaning it to a business nobody else would touch. When you depart from Capitalism, you reap the reward of inefficiency.
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Well, yes, in the sense that crony capitalism is what happens when various people try to "fix" capitalism by "protecting jobs" or "attracting business" or whatever, and politicians (both on the left and the right) have delusions of grandeur of being able to do this.
The solution, however, is not to get rid of capitalism, but to get rid of attempts to tinker with it. Let businesses fail and don't have the government "invest" in companies, period.
I mean, what alternative did you have in mind? If you don't like markets deciding where to put money and resources, and giving the responsibility to government leads to cronyism, who is left to make those decisions?
And the folks running Solyndra et al were committed Democrats. Selectively portraying only (R) as being greedy evil capitalists is disingenuous at best. BOTH The (D) and (R) parties are corrupt beyond repair. Government should not be making loan guarantees for businesses, period.
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You are correct, this isn't capitalism, it's crony capitalism, which is what the summary identifies it as.
Well done missing out the key word ("crony") and writing your own strawman.
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capitalism is the best system ever devised for creating wealth
I can agree with this part of your sentence
and a higher standard of living for a population
But not so much this part. Think mid-19th century industrial revolution, where people worked long hours, with no benefits, no labor restrictions (rampant child labor), no concern for safety, etc. Unrestrained capitalism isn't so great for the workers. It leads to sweatshop conditions we see in other countries.
Aye, a horrible system, but the best we have. Under certain conditions it works great.
And that condition is a free market. One with rational informed agents.
But guess what late-stage capitalism looks like? Feudalism. Someone starts to WIN. They own their turf and dictate what happens there. When there's just one guy in a market who bought out everyone else, that's a monopoly. The market is no longer free. It's owned. Sometimes bigger fish try to invade and take over their markets, and everything gets ugly. Now, since monopolies have been an obvious problem, they don't do that anymore. A group decides they're going to kinda-sorta compete and pay lip service the free market because otherwise uncle Sherman whips out his trust busting hammer. But if any of them get rich enough and/or powerful enough you're looking at regulatory capture.
But hey, where there's competition, low barrier to entry, a lack of natural monopolies, and moderately sane customers... yeah capitalism is great.
For everything else, there's regulation. To varying degrees.
This is what the parent poster is talking about, the picture isn't being missed. In theory, capitalism utilizes self-interested parties to direct scarce economic resources towards their most productive uses.
However, in practice, self-interested parties use any means available to get ahead, and that means if they can pull in government money to back their risky investment instead of having to get others to front their money, they'll do it.
In reality, economics, politics, and society are inseparably inter-linked. Changes to any one of these factors means changes in the others. Capitalism is useful as an economic theory for debate, but the undesirable side effects that pure capitalism has in practice means that society gets pissed off by the fallout, and invokes politics to restrain unbridled capitalism's effects. Pure free market capitalism isn't really used anywhere in the world because reality naturally invokes society and politics to bring the system to find an equilibrium, thus we find ourselves with the many different implementations in different countries and markets.
Excess government waste also pisses off society, and politics gets used to cut back on the policies that led to such waste. It's not a foolproof system, but you can be sure that the current local government officials are not in a hurry to fund another 38 studios given the recent backlash. They will abstain for the time being until public outcry dies down a bit.
TL;DR, parent poster is indeed getting the big picture, capitalism naturally manifests as crony capitalism in the real world. They're inseparable.