Friday, March 28, 2014

The Model T, free-markets, and ethanol cronyism

In a Real Clear Politics piece a few days ago, Blaine McCormick and Burton Folsom show us the difference between legitimate capitalism and crony capitalism.  Their subject of comparison is the American automobile industry, specifically Ford battling free-market forces in the early 1900s vs. Elon Musk and Dwayne Andreas buying political favor in the latter part of the 20th century.  Here's an excerpt from this informative article:
Ethanol, in the world of crony capitalism, has become the government's fuel of choice in the last generation. Dwayne Andreas, for example, was the long-time head of Archer Daniels Midland. His company held corn, and rather than let consumers choose gasoline alone, he lobbied every president since Lyndon Johnson to give subsidies for ethanol to be blended with gasoline. Since free market capitalism would not choose ethanol, Andreas contributed millions of dollars to politicians who would vote federal aid for ethanol. He once got into trouble in 1972 for sneaking 1,000 one hundred dollar bills into the White House to give to Richard Nixon, but Andreas accomplished his purpose of enriching politicians who would cancel market choices and force the use of more expensive ethanol in gas tanks.