President Obama’s government depends on the merger of big government and large industry through a classic quid pro quo. In exchange for industry leaders ceding to the government control over critical aspects of their business, the government erects anti-competitive regulatory barriers to market entry, thus giving the industry leaders above-market rates of return. The deal works well for the government and big industry but harms all others.
The President’s banking reforms have caused the United States Treasury to exercise unprecedented control over lending practices by private financial institutions, turning them into quasi-governmental entities. The President’s reforms have also created a new federal regulatory agency with broad powers over credit card lending and other non-commercial lending. In exchange for cooperating with the government, the affected lending institutions are favored by the regulators, while those who present any opposition are encumbered with regulations that will reduce their ability to lend and compete.
In the corporatist state so beloved by our President, industry and government are partners. The government calls the shots, defines through regulatory carrots and sticks the direction industry will take, while ensuring through anti-competitive rules that the cooperative are rewarded with above market rates of return. This is to the distinct pleasure of the heads of leading firms because it at once takes away from them the necessity of making difficult choices subject to the vagaries of a free market and also gives them a protected rate of return.
The corporatist state constructed by President Obama is not true socialism, it is more akin to the national socialism favored by Benito Mussolini and Adolph Hitler. It does not replace private firms with public ones, it co-opts the decision-making apparatus of private firms to ensure that they pursue the President’s political objectives. Much like the national socialist regimes of the past, President Obama’s government is riddled with corruption (forged by corrupt bargains whereby power brokers in government and in leading firms exchange terms until they achieve agreements of mutual benefit at everyone else’s expense). The corporatist approach has been one employed variously by agents of the federal government since the 1930s, but in the Obama Administration the approach has become universal. It tramples over the rights of individuals to achieve political objectives and limits opportunity for advancement to those opportunities that exist within private institutions favored by the government.