Last week I wrote about crony capitalism, with the suggestion that crony capitalism is undesirable. The next day Vice President Joe Biden was bragging that he and President Obama support crony capitalism, as if crony capitalism is a good thing.
Mr. Biden was criticizing Republican presidential candidates for their opposition to the auto industry bailouts. Any government bailout is an example of crony capitalism. Government funds are being used to support private interests. But these bailouts were even more obvious cronyism, because the bailout the Obama administration put together gave stock in the restructured company to his cronies in the United Auto Workers while stiffing the bondholders who should have been in line ahead of the union.
Vice President Biden said, “We’re about promoting the private sector. They’re about protecting the privileged sector.” He has this backwards, as is often the case with political rhetoric. The private sector is the part of the economy that operates without government support, and the privileged sector is the sector that has government supporting it.
If Vice President Biden wants to campaign on the support he and President Obama gave to General Motors and Chrysler (and Solyndra, and Beacon Power and others), that’s fine, because they are campaigning on their record. But when they call this “promoting the private sector,” that’s wrong. It is crony capitalism, and we should recognize it for what it what it is.