Crony capitalism is so entrenched, we scarcely even spot it

The Transport Committee met today for an evidence session on low carbon vehicles. It illustrated that crony capitalism is now not merely entrenched and passed over, but borne out of the good intentions of a global regulatory elite.

In the first session, we learned that “consumer demand is lagging policy”, which I translated as “people don’t want to buy these expensive vehicles” (I’ll link to the transcript later). We learned that electric vehicles are expensive and impractical: £30,000 for a subsidised car with a £15,000 battery and a short range. Of course the electricity comes mostly from carbon sources, although in the end we were asked to believe that combustion-kinetic energy-electricity-transmission-charging-discharging-kinetic energy is a more efficient process than combustion-kinetic energy. Perhaps.

In the second session, the motor industry welcomed the regulations that have created this new industry segment for them, calling for stability. Considerable effort went into avoiding my point that this particular set of product lines exist in the industry because of the global rules, not people’s free choices. The government were to be congratulated for creating jobs and so on. (But wouldn’t the jobs have been created somewhere else?)

Finally, the Minister, Norman Baker, explained how satisfied he is with the Government’s progress. He used the example of CD adoption to explain slow uptake of new technologies.

Superficially, all seems well. However, it is undoubtedly the case that considerable economic activity has been created by international government regulation to produce products which are more expensive and less useful than people want. I don’t doubt the industry like it: the rules push economic activity towards them, providing direct subsidy and underwriting the commercial risks of developing new technologies. Of course they want, as they said, stability of these rules across the world: their research and development risks have been socialised, which is good for the bottom line.

Whereas CDs were introduced as a technological innovation by private entrepreneurs with the risks carried by private investors, the same cannot be said of low carbon vehicles. Vehicle manufacturers are being guided by international government, not by the need to satisfy their consumers, consumers who are being taxed to subsidise the products most of them cannot afford to buy. And incidentally, when one witness, an engineer, quoted figures to illustrate the relatively poor cost-effectiveness of electric cars compared to conventional cars, he used the pump price of petrol: I pointed out that if he deducted the tax on fuel, the figures would be about three times as bad.

This way of organising ourselves may now be the norm, but it is not capitalism or liberalism. It’s true that the means of production are privately owned, but their use is being directed by state power not people’s choices. Whether private ownership has any meaning is doubtful in such an environment of rules, taxes and subsidies.

This may be called corporatism, crony capitalism or perhaps “socialism of the German pattern” (that of the 1930s) but what it is not is social cooperation based on choice and voluntary exchange, ie capitalism. Unfortunately, this system goes by that name and too few spot what it really is.

We seem to welcome this despotism and waste of resources in the name of a half-hearted commitment to what is supposed to be an existential threat to mankind. Given the miserable state of the world economy and the rising cost of living for normal people, society needs some clear thinking about how to allocate scarce resources to best meet the needs of humanity. Socialism, economic planning, has failed for a hundred years: in the midst of our present failing interventionism, why not try freedom?

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Comments & Responses

24 Responses so far.

  1. Easily my most favourite article of yours thus far.

    Keep up the brilliant work Mr.Baker!

    I consider only you and a handful of other like-minded MP’s as the true opposition to the ruling class that cares little for liberty.

    P.S. The article reminded me of a famous quote by Frederic Bastiat on jurisprudence: “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
    (Economic sophisms, 2nd series (1848), ch. 1 Physiology of plunder.)

    All the best!

    • therealguyfaux says:

      Bastiat is possibly better remembered for the Broken Windows parable. While we don’t begrudge the glazier his choice of profession and we wish him to be prosperous, we do not want him “drumming up his own business.” Bastiat used this analogy to mean that the other storekeepers and homeowners would now incur a cost they ordinarily would not, were the glazier not creating his own demand. It may be argued that the glazier still has to buy from the other merchants and that some of the money will be recouped, but it needed not be spent in the first place if the glazier were an honest man. And this pertains to the present discussion how, exactly? When a demand is created rather than allowed to emerge in the ordinary course, misallocations and malinvestments suck up that capital which could have gone towards addressing another need which might be just as pressing and a satisfaction for which need might be even more desirable for the consuming public. Boondoggle programmes send money into “favoured” industries at the cost of others less so, in the name of some ooey-gooey social goal that we are all made to feel like Philistines or barbarians for not supporting. It can be argued that you or I would have no way of knowing whether the freed-up money would be spent wisely by “the public” (i.e., us) if it were available. Of course, that sort of thinking presupposes someone in authority ought to tell us how to spend our money and not vice-versa (*cough*bought-off politicians*cough*).

  2. therealviffer says:

    Coming soon from Yeo’s Products You Knew You Didn’t Need – Square Wheels. Like electric cars, they are a sub-optimal solution searching frantically for a problem; however, they are heavily subsidized.

    That should please the lentil suckers and the Eco-Taliban in DECC.

  3. Ralph says:

    Good point about the effect of regulation. EU vehicle regulation has been a driver of demand for the motor industry over the past few decades.

    One doesn’t need to consider hybrid and zero emission cars. Take conventional cars, weighed down by safety features, diesel particulate filters and dual mass flywheels. These features are prone to premature failure, are prohibitively expensive to repair or replace and result in cars being prematurely scrapped.

    Catalytic converters only fulfil their intended purpose when warmed up, so are useless on short journeys.

    The whole essence of sustainability is not wasting resources. The fashion-driven motor industry has been an easy driver of economic growth whilst consuming up capital and driving up consumer debt.

    The NPPF promotes sustainable development, which is an oxymoron. It would be in the national interest to promote and facilitate measures to make the existing housing stock more energy efficient, yet the NPPF promotes a policy of building new homes, probably on greenfield sites.

  4. Nils Boray says:

    It interests me that you think the cure for crony capitalism is some kind of “pure” or “free” capitalism. I’d have concluded that it’s the nature of capitlaism itself that leads to the cronyism.

    I’d love to hear your thoughts on the plastic bag police in Supermarkets (OK it’s only vaguely linked to this – but I’m a lateral thinker !) Do you think current approaches will save the planet ?

    • blingmun says:

      @ nils

      The car manufacturer will stop colluding with the car safety commissioner if the latter is fired from his job. Collusion between the car makers and the Ministry for Car Safety will be eradicated if we abolish the Ministry.

      The lie that prevents us doing this is that car makers would try to get away with murder. Literally.

      Needless to say, car makers in a competitive market have much stronger incentive to make cars safe than any regulator.

      • Steve Baker says:

        I’m conscious that my skydiving equipment was sold to me without warranty as to fitness for use for any particular purpose. So far so good and I notice it is the reputation of United Parachute Technologies and Performance Designs which we trust with our lives, not state regulation.

  5. Matthew Newton says:

    I’m glad you’re interested in tackling crony capitalism. I presume, then, that you’ll be voting in favour of referring Hunt to Sir Alex Allan?

    • Steve Baker says:

      Interesting: why not get the state out of media?

      • Matthew Newton says:

        Perhaps there might be a case for that but I’m not sure the corporate-dominated media of America that would probably result is the right way to go in. “The giant corporations which suckle poisonously at the teat of taxpayer-backed funding”, as you so eloquently put it in an earlier post, need to be held to account. I agree that a broader range of perspectives on TV and radio would lead to a healthier debate, but media reform and reduction of barriers to entry for media providers needs to be accompanied by substantial reform of the party funding and lobbying systems as well to ensure that public debate can be allowed to become more vigorous and public policymaking more accountable.

        • blingmun says:

          No, corporate America is a consequence of the same creeping statism that afflicts Europe. Milton Friedman exposed the problem in great detail more than 30 years ago, from the US freight industry through to smoking to automobile manufacture. He pointed out that the general cost to society of given piece of legislation needs to be far higher than the benefit to a corporation in order for people to be sufficiently motivated to oppose it. This is for the simple reason that the entire benefit can accrue to the union/industry/corporation, whereas the cost is diluted, shared equally among 300 million Americans each paying a penny more for something.

          America’s skewed media is a product of corporate America. Which is precisely the kind of big government-big business bed fest people like us are most opposed to.

          • Matthew Newton says:

            “America’s skewed media is a product of corporate America. Which is precisely the kind of big government-big business bed fest people like us are most opposed to.”
            Well yes but how can this be avoided? Surely reform to lobbying and party funding would help.

          • blingmun says:

            <blockquote cite="Well yes but how can this be avoided? Surely reform to lobbying and party funding would help.

            No no no no no!!!!!

            Sorry to be a bit melodramatic. But really. NO.

            Any attempt to reform lobbying or party funding will itself – inevitably – become hijacked by lobbyists and influenced by party funding.

            The only way to kill the hydra is by NOT doing what you just did. And I don’t suppose you even noticed. So let me try to explain.

            Every time life turns out to be less than perfect you’ll always find someone on BBC Question Time or on local radio or on the comment section of a blog willing to demand that the government “does something about it”. In your case, you called for “reform”.

            When members of the public say things like this it provides strong justification for civil servants, bureaucrats and politicians to create new legislation, quangos and extra budget to solve X. And whenever this happens there’s an army of lobbyists out there working for big business, big charities and big unions ready to commission research, produce reports and imply that future job opportunities might be available to the person who managed to sort out that particular mess in the (ahem) suitable manner.

            It is simply inconceivable that powerful interests will sit idly by whilst bureaucrats and politicians debate and then decide their fate. For the reasons outlined in my previous posting, each single piece of legislation will work to the benefit of the lobbyists, even if the cost is much greater to everyone else combined.

            So the only solution is to stop asking getting government to involved. If we lived in a socialist paradise and government solutions genuinely solved the problems they purported to then of course I’d be a socialist. But the reality is that we don’t live in such a world and whenever government has money to spend or commercially sensitive legislation to dispense you can be sure as night follows day that the lobbyists will have had their say in the matter long before it arrives in the House of Lords.

          • Matthew Newton says:

            But all parties face incentives at the moment to do things that are not really good for the country as a whole. How are you going to prevent them having those incentives? Simply by voting for a party that says it’s committed to the smallest possible state? Well, if you think that’s UKIP, let me remind you of two of their policies: Spend an extra 40% on defence annually, another 1% of GDP; Invest an extra £3bn p.a. in the UK’s transport infrastructure. Are those policies libertarian?

  6. Roger Pascoe says:

    Crony capitalism in respect of electric cars, but why stop there?
    What about wind turbines and mini hydro plants that proliferate across the countryside, by their nature on marginal land, and enrich the landowners beyond their dreams of avarice, all in the name of Gaia, and enthusiastically endorsed by Greenpeace, the WWF, and associated ecoloons whose reading and experience of the realities of life never quite got beyond Narnia.
    Pity the poor salmon and sea trout of the Southern Uplands, where gravel extraction for the massive concrete founds and access road building for construction and maintenance of wind turbines disrupt and make turbid the spawning streams choking the ova, and the mini hydro screws set in tributaries that chew up ascending spawners whilst those they miss on the way up are chewed on the way down. 7000 of these archimedes screws are already set in Germany resulting in a piscatorial national disaster.
    With the CEO of the MET office an ex WWF director and a fervent advocate of the illusory AGW theory, Greenpeace and the WWF pushing protected bird and bat killing wind turbines, and careless of our rivers and their fauna, perhaps we should ask cui bono from the massive cumulative impost of the ROC and associated levies.
    Crony capitalism? Yes. But also an unlikely assortment of fellow travellers who WILL be held to account if, as seems increasingly likely, the whole climate change due to CO2 scam proves to be a fabrication of grant seeking psuedo scientists.
    Spain and Germany are now rowing back fast on the fantasy that was Green Energy. It is only a matter of time before the UK will be forced to do likewise.

  7. Steve Whitmore says:

    Good to see this has been picked up by the climate sceptic press have picked up this – see

    Keep up the pressure against the green nonsense!

  8. David C says:

    Great post Steve. Perhaps one day the apparently blind will see again.

  9. Ian_UK says:

    Hi, Got to your blog via Bishop Hill. Here’s a copy of an email I sent to my MP just today on this subject:

    Hi again,

    I’ve written to you before about my suspicions that the incentives to car buyers to go green are a waste of public money, because the way a car is driven, even an eco-oriented one, has a big impact on emissions.

    A report on Auto Express, about one of their fleet cars, tends to support my view. The car in question is a Lexus CT200 hybrid. As far as I’m aware, this car doesn’t attract the £5000 subsidy, so that’s one less issue. However, it’s road tax exempt and, I believe, Congestion Charge exempt. The nearest non-eco car to this is probably a Ford Focus model that would attract £120 purchase tax and £120/year road tax, plus congestion charge if used in London.

    Why this matters is summed up in the comments of the Auto Express Driver. The Lexus has a claimed mpg of 68.9, but Auto Express only manage 46.4 on average. The driver tried to better this and on one journey into London managed to get it up to 63.4 – very creditable. He then spoiled it by saying that he’s not be trying to repeat the success as it was too boring and, in any case, only saved himself £0.44. That’s OK, then. Over a 46 working week year, that would amount to >£200, so he can’t be typical of our oppressed hard working families.

    My message here is that the subsidies don’t work. Pollution still occurs. If he’d been driving a Focus, the planet would have been little or no worse off, but I would have been £480 better off over three years and Boris would have made a bit on the Congestion charge. If the car had been a Prius, I would also have faced a bill for a further £5000.

    My taxes are wasted on incentives that rely on a change of behaviour that is not going to take place,especially among the company car-owning population. This last point is made based on experience, not jealousy.

  10. matt says:

    Excellent article – just when I was thinking that there were no sensible politicians in parliament.

    If we had actually let capitalism do its job, then the public bail out of banks and the socialisation of privately amassed debt wouldn’t have happened. As a result ‘post credit crunch’ banks (operating without the taxpayer funded safety net) wouldn’t have exposed themselves to sovereign debt so massively. We wouldn’t be on the hook to prop up Greece, Spain, Portugal, Italy, Cyprus and the French (I think we were right to help the Irish out – they are our mates).

    Instead, we actively encouraged this sovereign debt crisis. We bailed out the banks after the credit crunch and then helped them to destroy their balance sheets again by guaranteeing any future losses with taxpayers money. Brilliant. Whilst piously claiming that banks are too big to fail; politicians happily destroy nation states. They have one default position: save the banks and the Euro at all costs.

    Corporatism and not capitalism is the cause of our financial problems. Do Osbourne and Iron-Clad Dave understand/agree?

  11. manstoke says:

    Good article but Im not sure about the conclusion.State power is not directing the economy, its the other way around. Big corporations through their easy access to government (they all move in the same circles)effectively dictate government policy in most of the areas that matter.
    Surely what we have is an oligarchy? The taxes, subsidies etc are imposed on their behalf by the state to benefit big corporations by effectively discriminating against smaller organizations which dont have the ability to avoid said impositions.Mostly this is unseen but occasionally it breaks the surface. Witness the fuss over Barclays and Vodaphone being let off billions in taxes on spurious technicalties unavailable to us mortals, or indeed the giant subsidies now paid to so called green energy producers paid for by the rest of us. In my industry successive excise increases are collected from the small firms but ignored or passed to the supplier by the big supermarkets. Or the attempts by the entertainment fatcats to criminalize copyright law so that they don’t have to pay for the cost of policing their “intellectual property”, but we end up dong so.
    The list goes on
    I’m not sure that socialism is much worse (I’m no socialist)
    Nor am I sure what the answer is – but if democracy is to work then its up to our elected representatives to start doing just that – represent us, not just do the bidding of a powerful few in London.
    Best wishes

  12. Sean says:

    Steve Baker, good luck fighting the good fight. If it does not work out, please consider this: you and people who think like you would be a welcome addition to Canada where there is still growing segment of the population who like you still have intact critical thinking skills.

    To borrow a phrase from the global warming cult, Europe has already reached the tipping point. The UK is doomed to sink along with the EU boat anchor that is attached to it.

  13. Matthew Newton says:

    This article might be of interest to libertarians who want to be consistent:

    • Roger Pascoe says:

      Guardian = ecoloons not economists.
      The actual output from the thousands of wind turbines varies from almost nothing to 8% on a good day.
      In the past 24 hours they provided 0.6% of total consumption – see
      We are apparently going to treble the turbines in the next few years at a cost of many billions, so on a day like today we will produce 1.8% of consumption, or on a good day 24%
      However 24% wind power generation will not run through the existing grid so we are going to invest/waste £100Bn on construction of a new grid that hopefully will cope with the fluctuations inherent in wind generation. Blackouts anyone?
      Renewable obligation certificates already secretly imposted on our bills (they are ashamed to show it) are costing us hundreds of millions and are set to rise every year to 2020.
      The promised green jobs were ephemeral and withered in the cold blast of economic reality blighting Europe. Germany and Spain can no longer afford the green stupidity, as CO2 continues to rise but temperatures fall back and invalidate the AGW scam more apparently each year that passes.
      George Osborne knows that the theory and its climate models have failed, his scepticism is barely concealed.
      Time foe Cameron et al to row back lest they be caught with the emperor with no clothes.