A colleague just handed me the latest issue of the Harvard Journal of Law and Public Policy (it’s hot off the presses, so an electronic link still isn’t available; here is a link to the previous issue). It features a short essay by Jonathan Macey of Yale Law School called “Crony Capitalism: Right Here, Right Now.”
The entire piece is worth reading. But this anecdote, which I hadn’t heard before, jumped out:
The Senate confirmed Jack Lew as Secretary of the Treasury in February 2013, and one of the striking things about that appointment is that his contract at Citibank, where he did administrative work with a hedge fund, stipulated that he would receive a bonus if, and only if, he were appointed to a senior position in government.
Macey cites this Bloomberg piece by Jonathan Weil.
It is tempting, of course, to blame Citibank. And part of me does. But P.J. O’Rourke has a nice line about this phenomenon which I quoted in The Pathology of Privilege. “When buying and selling are controlled by legislation,” he says, “the first things to be bought and sold are legislators.”
It may seem disgusting that, as Weil put it, “Citigroup might have agreed to pay Lew some sort of a bounty to seek out, and be appointed to, such a position.” But in today’s modern crony-capitalist economy, high-ranking government officials sometimes determine whether a firm lives or dies. When that is the case, it’s only prudent to have a man on the inside. Stories like this reinforce the point that government-granted privileges to particular firms sully the reputation of both government and markets.
H/T, Richard Williams.