Dan Mitchell: Paul Krugman is Right

Source:New York Times left-wing columnist Paul Krugman.

Source:The New Democrat

“I like profits.

But let me qualify that statement. I like profits that are the result of businesses providing goods and services that consumers value.

Those profits are earned.

By contrast, I don’t like it when businesses get in bed with government and get money via cronyism, bailouts, subsidies, protectionism, or industrial policy.

Those profits are unearned.

Interestingly, there are some folks on the left who (sort of) agree.

In his column for the New York Times, Paul Krugman warns that cronyism is bad and that we can expect more of it under Trump…

From Dan Mitchell

“It’s late 2025, and Donald Trump has done what he said he would do: impose high tariffs — taxes on imports — on goods coming from abroad, with extremely high tariffs on imports from China. These tariffs have had exactly the effect many economists predicted, although Trump insisted otherwise: higher prices for American buyers.

Let’s say you have a business that relies on imported parts — maybe from China, maybe from Mexico, maybe from somewhere else. What do you do?

Well, U.S. trade law gives the executive branch broad discretion in tariff-setting, including the ability to grant exemptions in special cases. So you apply for one of those exemptions. Will your request be granted?

In principle, the answer should depend on whether having to pay those tariffs imposes real hardship and threatens American jobs. In practice, you can safely guess that other criteria will play a role. How much money have you contributed to Republicans? When you hold business retreats, are they at Trump golf courses and resorts?”

From Paul Krugman at The New York Times. 

A good definition of capitalism from Dictionary:

“Capitalism is an economic system where private individuals and organizations own and control the means of production, and prices and goods are determined by a free market. Some key characteristics of capitalism include:

Private ownership: Individuals and organizations privately own and control the means of production.

Free market: Prices and goods are determined by competition in a free market.

Limited government role: The government protects the rights of citizens and maintains an orderly environment for markets to function.

Profit motive: The essential feature of capitalism is the motive to make a profit.

Supply and demand: The market mechanism relies on supply and demand as the overriding economic principle.”

A good definition of crony capitalism from Dictionary:

“Crony capitalism is an economic system where businesses succeed based on their relationships with government officials, rather than free enterprise. It can involve:

Favoritism in the distribution of government grants, tax breaks, and legal permits

Businesses gaining undue influence over how the government deploys public goods

Businesses profiting from an anti-competitive regulatory environment

Crony capitalism can be harmful to the economy, creating market power and price distortions. However, it can also counteract inefficient programs.”

I feel crazy saying this, but I agree with both Dan Mitchell and Paul Krugman on the same subject. Imagine that, a Libertarian, getting together with let us say a hardcore Democratic Socialist (or Social Democrat, if you prefer) putting their heads together (even from a distance) and getting out of that experience without 2 migraine headaches.

As a Liberal (or Classical Liberal, for you pansy closeted leftists) I’m in favor of what I at least call liberal capitalism. Which is basically what all the big countries in the developed world operate under. That every person should have the opportunity to earn as much money as they can for themselves. But in a private, fair market, where individuals are protected by predators, and where everyone has to pay taxes on their income. Now what’s a fair level of taxation and how much everyone should pay, is really a different discussion. But to the point to fund a limited and responsible government, that doesn’t have to run high deficits and debt to fund itself and where taxes are at a point to encourage individuals to be successful on their own. Not encourage people to be dependent on government for their economic well-being.

Now crony capitalism is the opposite. Russia has essentially operated under crony capitalism, since the fall of the Soviet Union and became the Russian Federation. In Russia, your economic future, especially if you have knowledge and skills, as well as intelligence, in many ways is tied to how friendly you are with their Federal Government there. Which is essentially a nationalist oligarchy today. Which is what a lot people in Donald Trump’s MAGA orbit, perhaps including President Trump himself, as well as Elon Musk and his other billionaire investors, want to see in America.

I think the point of Paul Krugman’s column here is that he doesn’t want to see that Russian style of crony capitalism come to America. But he’s obviously worried that it is. 

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