Hardcover, $19ISBN: 978-0-9887267-2-7
Business/Economics, 360 pages
AC2 Books, September 1, 2013
When private interests need a political favor, they know whom to call. When politicians need money, they also know whom to call. The people involved try to keep most of it concealed behind closed doors.
This is the system that prevails in Russia after the fall of Communism. But increasingly it is America's system as well.
Many people regard Wall Street as the epicenter of American capitalism. In reality it is the epicenter of American crony capitalism. Where Wall Street stops and Washington begins is impossible to say. This situation was not caused, as many suppose, by the Crash of 2008. Rather the Crash was caused by the longstanding Wall Street-Washington partnership. But the problem extends far beyond Wall Street to every corner of America.
If we are going to do anything about our present economic problems, and also give the poor a chance at a better life, we will need to eliminate crony capitalism and restore an honest economy.
Although full of hair-raising stories, this book is also about solutions. It tells us in clear and simple terms what is wrong and what needs to be done about it.
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WOW!! This is the word that slipped from my mouth over and over with each turn of the page. I’ve never had more eye-popping, jaw-dropping moments than I did while reading this book. It read more like a horror novel, and I was absolutely appalled by some of the content.
I’m not blind to greed and corruption that plagues Governments worldwide, but I have to say that I was shocked by some of the things I learned about one of, if not The, most powerful leaderships on the globe.
Once again, it’s a case of the rich get richer, and the poor get poorer, but things become more sinister when people who line the pockets of those in power are afforded special privileges and are made to seem more important than the average Joe. It seems that just about any law can be overlooked for the right price, even if it is to the detriment of other human beings. This disregard for others is disturbing, and leads me to ask the question, what has this world come to?
As stated in my review of Free Prices Now!, another of Hunter Lewis’ eye-openers, everyone needs to read this book. I’m not American, but I drew many parallels between what’s happening in the US Government and what’s happening in the South African Government. No matter which form it comes in, it’s a deadly virus that spreads through those in power, along with their affiliates, inflating their sense of entitlement.
Lewis delivers a powerful message, and it’s about time that people are informed and that they take note of how those we trust to run our countries, are really in it for their own advancement, and very rarely look at uplifting the masses.
Q & A with author and global investor
What are you hoping people get out of reading the books? What kind of action should they
I think people know that something is terribly wrong with today’s economy, but have trouble identifying what it is, especially with all the partisan noise. These books explain what’s wrong in clearly understandable and completely non-partisan terms, and also what to do about it.
You’re the co-founder of a global investment firm. How did that insider experience affect the way you viewed economic issues?
As a global investor, I look at economics in practical terms. Understanding what is really happening in the economy gives an investor a tremendous edge. Many economists, including those at the US Federal Reserve, do not look at the world in the same practical way. Famed financial journalist Jim Grant talks about the “PhD standard” having replaced the “gold standard.” Fed chairman Ben Bernanke is a very smart man, but he is guided by theory, and there is little or no evidence to support his theory. We are betting the future of the world economy on an untested and I believe mistaken theory.
Overall, you’re saying that interfering with, manipulating or controlling prices is the difference between good and bad government law and regulation?
Yes. Government law and regulation of the economy is needed. But actions that destroy the price system are not regulation; they are dis-regulation. And most steps that governments are currently taking to improve the economy, when looked at closely, involve interference with, manipulation, or control of prices. No economy can continue in health for very long if honest prices, on which everything depends, are destroyed.
You believe the U.S. is following the footsteps of the fallen Soviet Union?
Yes. When the Soviet Union was created, there was a great debate about whether an economy could succeed with prices dictated by the government. They got along for a while by importing Western prices and trying to use those, but in the long run everything collapsed because there were no honest prices to guide decisions.
How do you remain non-political in your writing?
It’s easy. I don’t support either party. The Democrats have been captured by one set of special interests, the Republicans by another. I do not see public officials helping the middle class and especially the poor, the people they ought to be helping. Partly this is because they don’t understand what makes an economy work, but also partly because the middle class and the poor don’t make campaign contributions. Whichever party is in power, we still get the same destruction of the price system and the same crony capitalist deals.
You’ve written before about the role of the rich in society. How do these two new books follow up on that?
The role of rich is very confusing today. We have some rich who have made their money the old fashioned way, by doing a good job of meeting the needs of consumers. They produce better or cheaper products and by doing so help others. But today we have increasing numbers of people becoming vastly wealthy from deals they make with people in government, or because they are first in line to get all the money being printed by the government. This is crony capitalism, and it is impoverishing everyone else.
You claim that the Crash of 2008 did not cause the Wall Street-Washington partnership, but instead it is the other way around. How so?
We had a crony capitalist financial system long before the Crash, and its excesses brought the Crash on. Mistakes were made by the Federal Reserve, the federal government, and by Wall
Street, all of which are so closely intertwined that it is impossible to say where one stops and the other begins. The Fed printed far too much money and in George W. Bush’s memorable words,
“Wall Street got drunk on it.” If we really want to reform Wall Street, we need to cut its dependent relationship with Washington.
What exactly are honest prices and an honest economy, and how are they the foundation
All of our economic decisions are made based on prices. This is true both for business people and consumers. So if government steps in and manipulates or controls prices, it inevitably leads to very bad decisions being made.
Who makes prices when government doesn’t manipulate or control them? Ultimately, consumers do. Their buying and selling sets the prices. Those are honest prices. They are reliable guides to economic activity. When we don’t have those reliable guides anymore, we get a lot of needless spending and bad investments, such as during the housing bubble.
Contrary to the ideas of many economists today, spending does not help an economy. It has to be wise spending, We don’t advance with quantity of investment. We advance with quality of investment.
Where do the solutions start?
We need to take every government law and regulation governing the economy, and ask ourselves: is this interfering with, manipulating, or controlling prices? If so, we need to junk it.
Government should be the economic cop, enforcing the rules, not destroying the rules of the game. And once government can no longer dispense price manipulations or controls, crony capitalism will also subside, because crony capitalism consists in selling price interventions to private interests.
When are government bail-outs a good thing?
They are never a good thing. The price system works with carrots, the hope of profits, and sticks, the fear of bankruptcy. These carrots and sticks are amazingly effective in moving people to behave properly and work together to make a better society. Bail-outs destroy the discipline of the system and lead to ever worsening bubbles and busts.
You say Wall Street is the epicenter of crony capitalism. Where else is it found?
We see it everywhere:
• shady zoning regulations in a small town;
• taxpayer money diverted into political campaigns;
• deals that enrich the few at the expense of the many;
• billion-dollar bail-outs;
• trillions of newly printed dollars flowing from government to financial institutions located all over the world at giveaway interest rates;
• brand-name economists hired to defend the indefensible with a smokescreen of economic theory.
How does eliminating crony capitalism give the poor a better chance?
For most of human history, people born poor have remained poor. Then the economy got free enough from government price manipulations and controls in a few countries (the UK, the
US to start) that economic progress became possible. Millions of people were lifted out of poverty, especially in the US. Now we are going back toward government price manipulations and controls, and the main victims are the middle class and the poor. A properly run economy will thrive, and the poor will benefit the most, unlike in a crony capitalist economy, where the cronyists benefit most.
While the economy has been your main focus, you also write about moral philosophy?
I’m interested in both economics and moral philosophy. There is a sense in which they are really the same subject: how human beings go about making decisions. Economics is about material decisions; moral philosophy covers our other decisions.
What do you mean by “a prosperous society is a cooperative society”?
One human being can’t do much. We get ahead and make progress by working together, by cooperating. That’s just common sense. But in order to cooperate, we have to trust each other.
And today’s crony capitalist system is so full of lies that it destroys trust and cooperation. The place to start in trying to fix this is with honest prices, prices that have not been “fixed” to suit some special interest group.
ABOUT THE AUTHOR
He is the former CEO of Cambridge Associates, a global investment firm he co-founded after graduating from Harvard University. The company’s clients represent three-quarters of higher education endowment assets in the United States as well as other nonprofit groups and high net worth individuals. Lewis has also served on boards and committees of 15 leading nonprofit organizations, including environmental, teaching, research and cultural groups, as well as the World Bank. Lewis runs the successful watchdog website AgainstCronyCapitalism.org with fellow writer and political consultant Nick Sorrentino.
Reviewers across the globe have noted Lewis’ unique economic insights, and he’s shared his expert opinion on national television programs including CBS’ Money Matters and NBC’s TODAY. His writings have appeared in the New York Times, The Times of London, Washington Post, The Atlantic, Forbes.com and other media. The Charlottesville, Va. author’s newest book releases, “Free Prices Now!: Fixing the Economy
by Abolishing the Fed” and “Crony Capitalism in America: 2008-2012,” hit bookshelves on
September 1, 2013.
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