What is the biggest economic problem that the U.S. is currently facing? Depends who you ask. Some social justice warriors would tell you that capitalism is ruining our economy, yet many who have studied and understand economics would argue the opposite. Capitalism is not to blame, but rather cronyism and protectionist policies are the ones wreaking havoc on the economy.
In a previous post, I discussed how occupational licensing as a form of cronyism is trapping people in poverty. However, cronyism is a much bigger problem than just occupational licensing. The U.S. struggles with other forms of cronyism too, such as protectionism through quotas, tariffs, and corporate welfare.
Quotas and tariffs make it extremely difficult for international firms to sell their product in the U.S., thus protecting U.S. firms from international competitors. Corporate welfare is government support of a private business usually through direct money transfers (subsidies) or tax breaks, often protecting big firms from the competition of smaller firms.
This form of cronyism typically occurs for two reasons: First, in an attempt to create new domestic jobs or prevent jobs from being sent overseas and second, because politicians promise “goodies” to corporations and individuals that help them get elected. (more…)