America Needs a Better Kind of Capitalism

Welcome to our regime of political capitalism, where merit matters but political connections matter even more. In an unalloyed capitalist system, money flows to those who offer goods and services of value to consumers. In a political capitalism system, money flows to special interest groups with friends in high places.

In his 2018 book Political Capitalism, Florida State University economist Randall Holcombe defines it as a regime marked by cooperation between political and economic elites for their mutual benefit at the expense of the masses. Among the benefits pursued by elites, of course, is maintenance of their positions of power.

The Occupy Wall Street (OWS) movement was born from opposition to political capitalism. Indeed, OWS members rightly sensed that financial bailouts and the Federal Reserve’s rescue of the banking system during the Great Recession were products of a system favoring politically connected bankers and their friends in Congress. OWSers denounced the recipients of government favors as the “one percent” and contrasted them with the “99 percent” who were often left to shoulder the high costs of such policies.

What the OWS movement failed to see, however, is that it’s not just Wall Streeters who are favored by the political capitalist regime. This broad organizing force underpins most government spending and regulatory decisions.

Consider the export subsidies that have been around for decades. These handouts mostly benefit the same giant manufacturers, like Boeing and GE, that were the main beneficiaries decades ago. It doesn’t matter which party is in power: Big exporters will collect their largesse and express their gratitude to friends in Congress with campaign contributions and votes. This is why The