12 April 2012

For Capitalism to Survive, Crime Must Not Pay

There are too many people in the financial sector, with their enablers, familiars, and camp followers, engaged in distorting markets and public policy discussions while collecting their enormous and counterproductive entitlements from corruption, fraud, and the misery of others.

They are crippling the economic recovery. These are not 'job creators' or even real wealth creators; they are con men, parasites, and leeches.

I was planning on writing something like this, but Bruce Judson says it quite well.

If the people allow it, the crony capitalists will destroy the capitalist economy and the democratic republic that sustains it. They will destroy it because they hate it.

They hate the risk and the narrow profits of honest competition and productive work in a free and open society, and so they create monopolies, cartels, private privilege, and fraud. They also hate equality, and the freedom that threatens to give other people the ability to curtail their insatiable lust for power.

If the people allow it, they will destroy themselves in their vanity and greed, which might not be all that bad as in the case of Bernie Madoff, Ken Lay and Jon Corzine, for example, but they tend to take a lot of innocent and good people with them, and that is a shame, and most often a tragedy.

For Capitalism to Survive, Crime Must Not Pay
by Bruce Judson
04/12/2012 - 3:52 pm

Unequal enforcement of the law will distort and destroy any capitalist society, and we may be witnessing just such a downward spiral in the financial sector.

Capitalism is not an abstract idea. It is an economic system with a distinct set of underlying principles that must exist in order for the system to work. One of these principles is equal justice. In its absence, parties will stop entering into transactions that create overall wealth for our society. Justice must be blind so that both parties — whether weak or powerful — can assume that an agreement between them will be equally enforced by the courts.

There is a second, perhaps even more fundamental, reason that equal justice is essential for capitalism to work. When unequal justice prevails, the party that does not need to follow the law has a distinct competitive advantage. A corporation that knowingly breaks the law will find ways to profit through illegal means that are not available to competitors. As a consequence, the competitive playing field is biased toward the company that does not need to follow the rules.

The net result of unequal justice is likely to be the destruction of the overall wealth of our society. I don’t mean the wealth of individuals; I mean the total wealth of goods and services that are the benefits of healthy competition. To the extent that unequal justice prevails, entities that are exempt from the laws will, in all likelihood, be more profitable than law abiding competitors. Then they use their profits to further weaken competitors by using their illegal profits to further build their businesses at the expense of competitors. All of this business building activity is based on a foundation of sand, and ultimately the entire industry — or even the larger economy — becomes distorted. The “rogue” company gains power, changes markets, and destroys direct and indirect competitors because it is playing by different rules...

Read the rest here.