Corruption Vs. The Nature of Capitalism
Posted on October 6, 2008
The future of the world economy stands as the central issue of this Presidential campaign. The central debate between the two candidates has not been fully explored nor fully explained. The American people need to understand the deeper implications of the two sides.
John McCain argues that free-market capitalism works as long as it is not tainted by corruption. Barack argues that the philosophy of free-market capitalism is inherently corrupt.
McCain believes that government corruption can contribute to marketplace corruption. He has long fought the influence of money interests on the political process. His most successful Congressional crusade was the McCain-Feingold campaign finance reform legislation that attempted (and failed) to decrease the influence of money on politics. McCain’s political hero, Teddy Roosevelt, was the first trust-buster, who took on the big monopolies (including John Rockefeller’s Standard Oil), and their influence on the political process.
Barack Obama has two intellectual Godfathers. One is Saul Alinksy, the Marxist “community organizer” who spent his career attacking free-market capitalism. The second is Mayor Richard Daley, who used machine politics, and a good deal of corruption, to make Chicago the “City that works”.
Obama has a great distrust of capitalism. He frequently chides George Bush for his “philosophy” in getting the country into the current financial mess. Bush’s philosophy, of course, is free-market capitalism. And to someone who learned about the failings of capitalism from Saul Alinsky, that philosophy is inherently corrupt.
Obama learned from the Daley machine the power of politics in the realm of business. From the very beginnings of his career, he understood that it was far easier to work with the machine than to fight it. By working with the machine, he was able to have immense power over the business sector. And he began to understand that the machine helped make business work better, because the machine got to pick winners and losers. The machine could make sure that labor was taken care of. The machine would take a little piece of the action, sure, but that was a small price to pay to make the city work.
McCain was burned when he got too close to one real estate developer in Arizona. When he was named one of the Keating Five, he learned first hand the perils of corruption in politics. It offended his sense of honor. And he vowed to himself that it would never happen again.
McCain is no naïf. He knows that business can play a corrupting role, especially when it interacts with the government. And when he has smelled corruption, he has gone after it. That is why he went after Big Tobacco and the prescription drug industry. He felt that they were betraying the people and that they were paying off the government to buy protection.
McCain and Obama’s past experiences have given them a prism from which to view the current economic crisis. To Obama, the Wall Street melt-down was caused by a lack of government supervision. These Wall Street bankers didn’t have enough regulation, were too greedy, didn’t give enough of their money to Obama’s political allies, and didn’t pay enough in taxes. This crisis means that Wall Street need to get closer to the government so that they don’t corrupt again.
To McCain, this crisis was caused by government interference. Government demanded that the banks make risky loans to people who couldn’t afford to pay them , and then with the backing of the taxpayers, through Fannie Mae and Freddie Mac, guaranteed those risky loans. Fannie and Freddie corruptly bought the support of prominent members of Congress, including Barack Obama, who then protected them from stricter government regulation.
Had the free market been able to function properly, without any of the corrupting influence of the government, the banks would have never made those risky loans. When companies are on the hook for bad decisions, they are less likely to make them. When companies are encouraged to make bad decisions and then shielded from the consequences by the government, they will make more of them.
The historic record confirms McCain’s view of the financial crisis, not Obama’s. But thus far, Obama has been better able to explain his position to the voters.
McCain believes that the free market is best generator of jobs and economic progress. Obama distrusts the free market and believes that the government must play a bigger role in picking winners and losers. McCain believes that corruption hurts capitalism, while Obama believes that capitalism is essentially corrupt. That is the big difference between these two campaign.