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Socialized Costs, Privatized Profits

November 5, 2013 in Economics

By Mises Updates


Crony capitalists know how to make the taxpayers pay for their costs to ensure subsidized profit forever.

Robert Batemarco explains in today’s Mises Daily: 

In trying to make sense of our recent financial difficulties, a key point that most commentators miss, is that capitalism is not merely a profit system, but a profit and loss system. As unpleasant as the losses may be, they serve a therapeutic function of utmost consequence. By withdrawing that therapy, such policies as TARP, ZIRP (zero-interest rate policy), quantitative easing, and too-big-to-fail, socialize the losses of — you guessed it — the cronies of those who wield power.

As bad as crony capitalism is in its own right, it does further damage by sullying the name of free-market capitalism, the most productive economic arrangement known to man. This adds “injury to insult,” since if free-market capitalism is the cause of our problems, then the solution must be greater regulation, which generally provides even more scope for the favoritism and corruption that characterize crony capitalism.

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