The Lowdown on “Vulture Capitalism”

Increasingly desperate to knock GOP frontrunner Mitt Romney off track, would-be nominees Newt Gingrich and Rick Santorum have made the former Massachusetts Governor’s tenure at Bain Capital a campaign issue. The core of their criticism is that while capitalism and its venture variant are institutions to be upheld and promoted, Romney had been an emissary of “vulture capitalism,” invested in looting companies and laying people off.

Since criticisms of “our system of capitalism” from politicians, particularly Republicans, are few and far between, these rebukes of Bain are causing something of a stir within GOP ranks. For her part, South Carolina Governor Nikki Haley jumped to Romney’s defense, saying, “[W]e have a real problem when we have Republicans talking like Democrats against the free market. We believe in free markets.”

But Haley’s pleading for Mitt muddies the waters still further, broaching an important if complicated question: Is it fair to call what we recognize as “capitalism,” represented by the likes of Romney and Bain, a “free market?” Market anarchists contend that it’s not, and point to a dynamic tradition of American individualism that drew definite distinctions between the two.

Anarchists like Benjamin Tucker saw free and open competition as the optimum natural equalizer, inherently destructive to great mountains of concentrated wealth and economic power; they contrasted their system of genuine free markets with capitalism, a system that depends on a catalog of state-granted and -enforced privileges,

Tucker’s periodical Liberty attended to the same issue we’re faced with today, that of sorting the “bourgeois individualism and sham economic liberty” of capitalist apologists like Nikki Haley from free markets. Tucker argued that monopolies of all kinds could not survive the unabating pressures of competition, that they could only survive through the application of authority, state coercion used to hold up elites.

“[T]he only reason,” Tucker argued, “why the banker, the stockholder, the landlord, the manufacturer, and the merchant are able to exact usury from labor lies in the fact that they are backed by legal privilege, or monopoly …” The capitalism that Washington politicians defend as a “free market” today is the successor of the falsely-named laissez faire of Tucker’s day, and is likewise defined by the parasitic privilege of a connected ruling class.

Among these privileges to big business are subsidies (direct and indirect), intellectual property protections, regulatory barriers to entry that demand high costs, and state safeguarding of illegitimate land titles. Taken together, the benefits that the economically powerful derive from the state are staggering. The irony of the Bain story, then, is that the Bain Capitals of every age couldn’t persist for any meaningful stretch of time without a legal and regulatory framework that precludes competition.

The language of the free market is a handy PR tool for CEOs and politicians, but that’s where it stops; the real principles of individual rights and free, voluntary exchange are anathema to the huge, multinational corporate monopolies that run Washington.

Mitt Romney is a “vulture capitalist.” It just so happens that no one in politics seems to take issue with what that really means, which has nothing at all to do with truly free markets.

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Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory