Stockman: Cronyism Is Destroying American Capitalism and American Democracy

I’ve recently read David Stockman’s book, The Great Deformation: The Corruption of Capitalism in America.  (You can buy it at Amazon, but it’s cheaper at the Mises Institute.)  Stockman explains how cronyism has grown throughout the 20th century in America, placing much blame on the Federal Reserve, and describing how businesses have managed to warp public policy to benefit the economic elite, creating unsound public policy that will inevitably lead the country to a fiscal collapse (p. 693).

Stockman describes in great detail one episode after another in which public policy was steered to benefit insiders with political connections.  The book is long, at more than 700 pages, and his narrative offers the insights of an insider.  (Stockman was a US Congressman, Budget Director in the Reagan White House, and a partner with a private equity firm.)

One frustrating aspect of the book for this reader (an academic by profession) is its lack of footnotes and sources.  The book has a five-page “Note on Sources” at the end, but no footnotes or references in the book, so the reader has no way to check the many facts in the book.  Even when Stockman directly quotes somebody, there is not a footnote to the source of the quotation.

Still, everything in the book is plausible and lines up with what is publicly known about the events Stockman recounts.  I did not identify anything in the book I would call an error of fact.  If you have the idea that the public policy game is rigged so that the political and economic elites design policy to benefit themselves, and the public be damned, this book offers lots of (poorly documented) evidence to back that up.

I have often thought that the best way to run a political campaign and gain popular support is to run against the status quo, rather than in favor of policies to replace it.  That’s why politicians run on slogans like “It’s Morning in America” or “Hope and Change” rather than offering real policy alternatives.  Stockman’s book reminded me of that idea because as I read through it, I was right with him as he railed against the rampant cronyism that has been growing in America.  That’s the status quo we are against.  But when I got to his recommendations, which include public funding of election campaigns and a 30% wealth tax to pay down the national debt, I found myself in disagreement.  We oppose the same things; we just don’t agree on what should replace them or how they should be replaced.

The book is a worthwhile read.  We need more books like Stockman’s, and like Peter Schweizer’s Extortion, to shed light on the state of contemporary American politics.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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