finally a few words on "net neutrality"

So I've had several people ask me to comment on the recent joint proposal by Google and Verizon for the FCC to regulate broadband internet while leaving wireless internet essentially unchanged.  I have wanted to comment on so-called net neutrality for a while because in my opinion a lot of the talking points involving this issue are very abstract and have little connection to reality.  Moreover, I think the debate comes down to the same issue that many of our current problems unfortunately come down to: a large company tries to sell the public that a regulation is "for the common good," but in reality it is simply a way to strengthen their business model or bottom line.  And enter Google.

So what is net neutrality?  According to its most fervent supporters the idea is that no internet traffic should be discriminated against based on the user or type of information.  And anyone who believes in discrimination is evil.  Hence net neutrality is a good idea because discrimination is bad.  But in all reality discrimination can be highly beneficial with regards to internet traffic.  Broadband providers have extremely complex networks that send an unimaginable amount of data from literally billions of sources.  Some is email, some is video, some is porn.  In order to keep the network from being hogged or to prevent a few high bandwidth users from slowing the access of others, it is perfectly reasonable to allow the providers to discriminate in order to properly maintain their networks.

And what's more is that the end goal of net neutrality supporters, an internet where packets are effectively treated the same regardless of source, size or user, is essentially exactly how broadband internet operates right now.  The free market has provided their end goal.  Absent a few examples like when Comcast chose to block ports used by torrent websites (in order to prevent bandwidth hogs from distributing copyrighted material illegally) or forcing people who operate email servers to upgrade to a commercial subscription, there is no serious packet discrimination that net neutrality supporters can point to and say "This is wrong.  The consumer is being hurt."  The reason for this is obvious: its not an actual problem to begin with.  There is nothing inherently wrong with forcing someone who needs to use more bandwidth to pay more.  

And like I said, enter Google.  This is company who owns youtube, provides over 8 GB of storage to anyone who uses their email service and who major source of income is based on people looking at and clicking online ads.  They are not only a bandwidth hog, but their entire business model is based on generating large amounts of traffic.  They understandably see a move by the government in the name of stopping discrimination as a way to prevent them having to realize the true costs of their network usage, and it would prevent broadband providers from either charging them more for the right to the priority access or slowing Google's packets to prevent network congestion.  In effect, people who use less bandwidth would be subsidizing google.

Now at this point, the FCC decided to step in.  Although the D.C. Circuit Court of Appeals slapped down the FCC in April when it ruled the FCC didn't have the authority to impose its net neutrality rules on Comcast based on broadband's definition as an "information service" under the Telecommunications Act of 1996, the FCC decided to simply redefine broadband as a telecommunications service under the act, giving it ample authority to regulate.  In fact, by doing so the FCC would be allowed to impose as much regulation on broadband providers as telephone companies, which includes price controls, right of access rules, and the ability to force geographical divisions and terms of service on providers.  In other words, we are taking one of the few industries that has been left unregulated, and has hence lowered prices, improved speed/service, and has grown by leaps of bounds, and imposing the heavy hand of government in order to protect the market position of a large multinational corporation.  There is little doubt that the internet is one of the great success stories of the market policing itself, both on the content side and on the access side.  Yet, according to net neutrality supporters all hell is set to break loose if the government doesn't get in there and .... ? That's just it, there isn't anything they can point to.  If it's not broke don't fix it.  They are fighting imaginary battles against imaginary villains down the road.

So although I don't believe that there are many, if any, benefits that could be derived from the net neutrality framework, I do believe it could impose a large number of negative consequences on access, competition, market efficiency, and costs of internet access.  In short, I have three major objections to the proposed regulations:

1) Network neutrality regulations threaten to set a precedent for even more intrusive regulation of the Internet;
This one is pretty obvious.  Once the FCC get their greasy little paws on something and it starts believing that it is what it does, and not the work of entrepreneurs and capital stake holders, that makes the internet open, free, expansive and a source of growth, it will inevitably argue for more control.  Sure right now they are claiming that they will regulate with a "light touch" so as to provide maximum freedom from regulation, when something inevitably goes wrong they will of course argue that they could have prevented it only if they had been in control.  They will never claim that any of these future bad consequences were due in part to their own regulations becuase that never happens - I'm pretty sure that is some kind of GOP myth or something.  If we don't nip this in the butt now, don't blame me when your transactions on amazon will be subject to FCC approval in about 15 years in order to "prevent fraud" or some bullshit along those lines.  And don't forget that little old surcharge on you bill that pays this "protection money."  But don't worry it will be hidden so that you won't be too disturbed by it.  It will come in the form of higher prices for both services and access.

2) Imposing such regulation will chill investment in competitive networks (such as wireless) and deny network providers the ability to differentiate their services;
This one is also pretty obvious I think.  When the FCC comes in and begins to impose rules like how you can charge your customers, how much you can charge and the types of services you must provide it inevitably limits consumers choices.  This in turn limits innovation and in essence codifies a singular business model.  Additionally, as regulation becomes more and more complex, it makes it harder and harder for anyone other than large corporations from being able effectively navigate the regulation thickets.  Currently there is a lot of innovation in the internet subscription market; besides traditional cable broadband, where there can be multiple players in a single market, there is DSL, increasing wireless broadband penetration, fiber optic infrastructure and satellite internet.  These all provide competition and innovation, preventing the types abuses that net neutrality supporters so abhor.  There is also a large risk that the regulations could have the perverse effect of cementing broadband providers market positions, thereby lowering their incentive, and the incentives of others, to invest in these alternative infrastructures.  Lastly, I addressed the lack of ability to control and maintain network stability above.

3) Network neutrality regulations confuse the unregulated Internet with the highly regulated telecom lines that it has shared with voice and cable customers 
This is similar to my first argument, but I just want to add a few more points.  Traditionally broadband was provided by cable companies and shares the line with both cable TV and telephone service.  Both these are highly regulated both with regards to network penetration and content, especially cable TV.  Therefore I find it unwise to further blur the line of the two.  If the FCC can prevent obscenity from being sent on cable TV, why should they stop there and allow it for a different service running over the same line they they now are in charge of.  Now I believe that all of this censorship is fundamentally wrong, and that it should be completely abandoned, but at the very least we shouldn't impose these stupid rules of the internet as well.  Therefore we should keep them as segregated as possible, preventing the kinds of regulatory abuse described above.

At the end of the day, this whole issue comes down to one thing for me: crony capitalism.  Look at the Google-Verizon proposal.  They want to impose net neutrality rules on the broadband providers while leaving wireless completely unregulated.  This is because it fits their business models best this way.  By allowing google to profit from forcing network providers to treat its traffic the same regardless of the effects on the network, while still allowing Verizon to discriminate traffic on its wireless networks.  This allows Verizon, whose major partner on phones like its best selling Droid is Google, to discriminate based on the type of plan purchased, importance of the traffic and the type of traffic - everything it wants to prevent for broadband.  They should rename the proposed legislation the "Google-Verizon Promotion at the Expense of Evil Comcast and AT&T Act of 2010."  There is a solution, however, and it has been working great for two decades: let the consumers decide.  If they want better or prioritized service, they can pay more for it.  If they think a broadband internet provider is being to restrictive with their network, they can switch to a DSL or wireless provider.  This would allow the market to continue to police itself and would prevent the government from inching its way further into one of the truly free markets in our society.

the truth is big business loves obama

"I'm generally supportive [of the financial reform bill]. To be sure, there are details of it that I think I'm less sure of, but I think, on the whole, financial reform is, absolutely is essential and I will say that last week, in New York, I listened to a speech by Barack Obama at Wall Street, and one of the points he made resonated with me because I’d said it myself. He said that the biggest beneficiaries of reform will be Wall Street itself.” 

- Lloyd Blankfein, CEO Goldman Sachs (Homeland Security & Government Affairs, Permanent Subcommittee On Investigations, U.S. Senate, Hearing, 4/27/10)

"We continue to believe that comprehensive health care reform will benefit patients and the future of America. That’s why we have been involved in this important public policy debate for more than a year and why we support action by the House to approve the Senate-passed bill along with the amendments found in the reconciliation legislation."

- Official Statement of the Pharmaceutical Researchers and Manufacturers of America (PhRMA), is the largest single-industry lobbying group in America on 3/21/10 regarding Obamacare.

"Climate legislation is one of the critical issues that will be considered this year on Capitol Hill.  The House passed the Waxman-Markey legislation, a comprehensive, economy-wide bill [that] represents a moderate approach that was supported by a wide range of major American companies who make up the US Climate Action Partnership – including companies with a strong Indiana presence such as AES, Duke Energy, Alcoa, Dow, DuPont, GM, Ford, and Chrysler . . . Exelon has been preparing for a low-carbon future for the last decade. [We have] [s]old or closed most of our inefficient fossil fuel plants, [i]nvested billions in our fleet of 17 zero-emission nuclear reactors. In summer 2008 [we] released Exelon 2020, our plan to reduce, offset, or displace 15 million metric tons of greenhouse gas emissions per year, equal to our 2001 carbon footprint, by 2020. We are one-third of the way to our goal, and have a plan to accomplish the rest."

- John Rowe, CEO Exelon Energy (Indiana Council on World AffairsMarten House Hotel, Indianapolis 1/20/2010)

So if you listen to any cable news network or read most any paper all you here is how Obama is "anti-business" and that it is for this reason that the economy is slowly recovering.  Well that is only a half truth in my opinion.  I don't think Mr. Obama is anti-business per se, although I do believe that he is anti-market, which is actually profoundly worse than being anti-business.  The three quotes listed above are all attributable to big business heavyweights: Blankfein is for financial reform, the PhARMA lobby was all for Obamacare and Exelon, one of the largest power producers in the midwest and mid-atlantic (the coal region), wants nothing more than a full cap and trade system.  Does any of this make sense?  Why would a financial giant like Goldman Sachs want more financial regulation?  Why would a power company that produces a majority of its power on fossil fuels want to have the price of those fuels increased dramatically?  The answer is easy of course: they see a future with less competition.

Take financial reform for instance.  Now I understand and agree that any sound financial system must have rules of the road.  However, I firmly believe that the rules should be clear and must be debated before they are enacted.  This is the opposite of what occurred in the Dodd-Frank Bill. There are no new clear cut leverage requirements, there are no new clear prohibitions on proprietary trading.  There are just directives.  These directives either require or authorize incompetent agencies like the SEC to issue rules it thinks are appropriate.  In total the U.S. Chamber of Commerce estimates that Dodd-Frank authorizes a total of 533 rules to be written over the next few years.  Are some of these rules probably necessary?  Of course, but instead of being written by the Congress in the full purview of the electorate they are going to be written in closed door meetings were you need to pay to play.  I bet Mr. Blankfein knows this and is happy about it.  Few firms have the regulatory, compliance and lobbying staff to compete with Goldman Sachs when the task becomes influencing the inept government agents writing these rules.  They will invariably benefit the biggest and most connected of the banks at the expense of their smaller competitors, hence their support for financial reform.  

The same can be said about Exelon's desire for cap and trade.  As Mr. Rowe mentions in his speech, Exelon has been moving away from carbon based energy for years now.  Exelon is a Illinois based power producer and was a major contributor to Barack Obama.  Now they want their reward.  Instead of having to compete on a level playing field where consumer demand requires energy companies to be as efficient and cost-effective as possible, Exelon wants the Obama administration to price its competition out of the market.  It's whole business model over the past few years is that it is trying to get into a position of strength by lowering its carbon footprint ahead of the U.S. legislation so that it could put its boot on its competitors once their costs were artificially higher because of diktats from Washington.  Now that cap and trade seems dead that are literally shitting their pants and demanding even more intervention from Washington on their behalf.  Notice how the other companies named in Mr. Rowe's comment are all major corporations with huge lobbying arms.  Their support is predicated on the belief that they will be able to influence who gets "free credits" and what parts of industry will be "exempt."  That sure is one way to compete effectively.

What these examples show is that government intervention in the economy always produces winners and losers.  For the most part the interventions most favored by Mr. Obama undoubtedly favor the largest and most connected businesses in the industries affected.  Be it the hundreds of new rules in Dodd-Frank that have yet to be written or the onerous requirement that all business entities must now file a 1099 for every supplier with whom they purchase over $600 per year in goods (courtesy one of the many unread provisions in Obamacare), red tape and government regulation most favors the largest firms with large legal departments and the funds to spend on lobbying.  Small businesses, the real economic and job growth engines in our society, have neither of those advantages.  They are forced to play by the rules negotiated by their larger competitors.  Usually this is to their disadvantage.  These same small businesses are not hiring for this exact reason.  

There are three costs that almost all small businesses face regardless of their type of business: the must pay for energy, they must pay for credit, and they pay for health care for many of their workers.  Under Mr. Obama's polices the price for all three is going up.  Throw in the fact that tens, if not hundreds, of thousands of these small business owners, who are often organized into partnerships, limited liability companies or Subchapter S Corporations, are about to see their taxes increased at the end of the year, it is completely logical that they are not hiring or expanding.  The best thing Mr. Obama could do to help the businesses is to be "anti-business" and instead be "pro-market."  Let them compete effectively with their larger competitors and stop disadvantaging them by enacting "reforms" that put these competitors in a position to write the rules of the game.  These businesses don't want handouts and special privileges, just the opportunity to compete fairly and let the market decide who has the best product.

corporations are bad, mmmkay?

That's common knowledge today, correct?  Corporations are evil, greedy entities that steal from the poor and give to the rich.  They don't care about anything but profits.  This type of greed is inherently evil, and money is the source of that evil.  For generations progressives and socialists have made that argument.  According to them, profit seeking is not a good thing, and without Big Brother there to keep them under control, they will eventually plunder the nation.  Look at the bashing BP is getting right now.  Obviously, they deserve a lot of blame of the spill itself.  However, criticism of BP is hardly limited to the spill.  Often the criticism has been aimed directly at allowing the profit seeking motive itself.  According to many of these commentators, the profit seeking motive is flawed, as companies will not consider the public interest in making decisions leading to less desirable social outcomes.  Instead, they believe that that the government should exercise huge amounts of control over these corporations in order to coax them into doing what they consider is "right thing to do."

As I mentioned in an earlier post, I am currently reading Atlas Shrugged by Ayn Rand.  Although I am only about half way done, a recent rant by one of the characters really caught my attention.  His name is Fransisco d'Anconia, and this rant was aimed to be a defense of the profit seeking motive.  He said it better than I could say it myself, so here it is in his entirety.  I know it is really long, but I think it is right on point.  (Note: Also, I just want to say that although Ms. Rand's estate obviously owns the copyright to the following excerpt, I am reprinting with the intention to comment on its meaning, so as to explain its significance and relevance today.  I believe this is consistent with the fair use doctrine codified under 17 U.S.C. § 106.  I encourage any and all, if they find the following passage interesting or through provoking to purchase the entire book and read it for themselves.  A link is provided at the end of this post.)

"So you think that money is the root of all evil?" said Francisco d'Anconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value.   Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears not all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor--your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money, Is this what you consider evil?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions--and you'll learn that man's mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

"But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man's capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made--before it can be looted or mooched--made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can't consume more than he has produced.'

"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss--the recognition that they are not beasts of burden, born to carry the weight of your misery--that you must offer them values, not wounds--that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade--with reason, not force, as their final arbiter--it is the best product that wins, the best performance, the man of best judgment and highest ability--and the degree of a man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality--the men who seek to replace the mind by seizing the products of the mind.

"Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

"Only the man who does not need it, is fit to inherit wealth--the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it. Is this the reason why you call it evil?

"Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

"Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

"Or did you say it's the love of money that's the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It's the person who would sell his soul for a nickel, who is loudest in proclaiming his hatred of money--and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it.

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another--their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich--will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt--and of his life, as he deserves.

"Then you will see the rise of the men of the double standard--the men who live by force, yet count on those who live by trade to create the value of their looted money--the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law--men who use force to seize the wealth of disarmed victims--then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world? You are.

"You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it's crumbling around you, while you're damning its life-blood--money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men's history, money was always seized by looters of one brand or another, whose names changed, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves--slaves who repeated the motions once discovered by somebody's mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer, Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers--as industrialists.

"To the glory of mankind, there was, for the first and only time in history, a country of money--and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man's mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being--the self-made man--the American industrialist.

"If you ask me to name the proudest distinction of Americans, I would choose--because it contains all the others--the fact that they were the people who created the phrase 'to make money.' No other language or nation had ever used these words before; men had always thought of wealth as a static quantity--to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words 'to make money' hold the essence of human morality.

"Yet these were the words for which Americans were denounced by the rotted cultures of the looters' continents. Now the looters' credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide-- as, I think, he will.

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns--or dollars. Take your choice--there is no other--and your time is running out." (My emphasis added)

 Like I said, I am only about half way done, but this passage struck me as one of the most succinct, well-reasoned defense and applications of the principles first put forward by Adam Smith when he described the invisible hand of capitalism those hundreds of years ago.  With the America turning 234 on Sunday, it is important to keep in mind what made America great.  It was not those who wish to spend other peoples money for the "public good" but those who freely did what was in their best interest and along the way made a lot of money and just so happened to raise the rest of us up with them.

crony capitalism

So thanks to a recommendation by my Dad I have been on a reason.com kick.  This article is one of the best articles I have read about capitalism in America today.  It is entitled Let's Take the "Crony" Out of "Crony Capitalism."  As I mentioned in my last post, we currently do not have free markets in most industries in America.  Over-regulation has made many markets pseudo-competitive.  Because of these regulations, there are tremendous capital and legal barriers to entry, making it very difficult for new firms to enter the market.  And guess what?  Established firms are completely for this.  Less competition for them.  Thats why you see auto-makers lobbying for stricter regulation for emissions, insurance companies in favor of Obama's health care bill and energy companies in favor of cap and trade.  In a truly free market all these ideas would be fought by these companies because it drives up their costs.  But in today's crony-capitalist America, the major corporations understand that these regulations mean it will be harder for competitors to enter their market and that they will cement their market share.  Then can then game the system down the road.  As long as we try to put these huge regulatory regimes in place, it is the inevitable outcome.  Anyway, the article does a better job of articulating that point than I do, so please read it.