Crony Capitalism And Politicians

“Jorge Luis Borges said, “the Argentine people suffered under too many messiahs.” Its current leadership, starting with the husband and now the wife, is continuing that trend. Cristina Kirchner, the Argentine President, is promising to “free the people” through “revitalized government,” however, this revitalized government is behaving much like Russia and Putin, leading to decreased independence of various agencies, such as the national statistics agency. The WSJ reported this morning that economic numbers reported by Argentina have become so corrupt that the Economist magazine, “now refuses to print its [Argentina] cooked numbers.”

Mrs. Kirchner has accomplished much when it comes to cronyism. She has destroyed the central bank’s independence, and intends to use the bank’s reserve to pay off its debts, which will probably result in higher inflation and a damaged currency. The Argentine middle class has tried to hedge against inflation by exchanging for US currency. In order to stop this “the government introduced draconian currency and trade controls,” resulting in multiple exchange rates. “If you are a friend of the government, a dollar will cost 4.5 pesos, for everyone else, it is more than 6.” Therefore, it pays to be a friend of the government. The result of these horrible economic decisions, and cronyism, stagflation, which is even more dangerous than inflation, has occurred. Prices may be going down, but the buying power of money has been reduced even more. And on top of that the cost of debt is stagnant. Keep an eye on Argentina, another socio-economic event to learn from.

On the home front, it appears that business is fed up with political partisanship. Dennis Berman reported this morning that the business message to Washington D.C. is to stop fighting and they’ll spend. John Ambroseo, CEO of Coherent Inc, Kevin Grant, CEO of CYS Investors are just two of the many business leaders criticizing government for its continued infighting. The reason for these statements involve the “fiscal cliff” just around the corner. December 31st, unless congress acts, there will be a resetting of tax rates and decreased spending. CEO’s are frustrated with the lack of decisions coming out of our congress. “If you can’t plan, you can’t spend. And if you don’t spend you don’t hire.”

I agree with these criticisms of our political leaders, but these business leaders are not taking the next step, holding back campaign contributions and PAC money until congress makes a decision. If they are really serious that is what they should do. When I was a part of the International Association of Machinists union, we would periodically go out on strike. I would never cross the picket line because I was a part of a collective bargaining unit. In my opinion being a scab is wrong. However, I always thought when there was a strike union and company negotiators should stop getting a check, just like the workers, until a settlement is reached. You hit em in the pocketbook and they’ll listen. If we want politicians to make decision then lets hit em in the pocketbook. That is the only way they’ll change.

And that is my thought for the day!

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