The Wall Street Journal had an excellent piece by Charles Dameron chronicling the “crony capitalism problem” of newly announced Republican presidential candidate, Gov. Rick Perry of Texas. The piece describes a $200 million slush fund that the governor along with the leaders of the state house and senate have to “invest” taxpayer money in high tech start-ups in Texas:
The Emerging Technology Fund was created at Mr. Perry’s behest in 2005 to act as a kind of public-sector venture capital firm, largely to provide funding for tech start-ups in Texas. Since then, the fund has committed nearly $200 million of taxpayer money to fund 133 companies. Mr. Perry told a group of CEOs in May that the fund’s “strategic investments are what’s helping us keep groundbreaking innovations in the state.” The governor, together with the lieutenant governor and the speaker of the Texas House, enjoys ultimate decision-making power over the fund’s investments.
The piece goes on to document the extremely cozy relationship between the recipients of these funds (who have a proclivity for declaring bankruptcy) and Rick Perry’s campaign coffers. But the real problem of having the government fund businesses is not the actuality or appearance of conflicts of interest, as the WSJ article seems to suggest. The real problem is the hubris of thinking that a handful of government leaders can identify the “right” businesses to which capital should be allocated. Why should they think that they are smarter with public dollars than the market investing private dollars? In short, crony capitalism is an example of the errors of central planning.
The WSJ piece on Rick Perry is quite damaging, but ultimately we may have to sift through a set of candidates (from both parties) to see who has the least extensive and dangerous central planning fantasies.
I’ve often wondered why people are seduced by the thought that they know best which firms should receive investments or which standards should be used in all schools or which teaching methods are most effective for all children. The obvious answers are that people desire power or money, both of which can be grabbed by the successful central planner.
But there is another explanation for the tendency toward central planning that deserves our attention — youth. Young, smart people have an amazing abundance of confidence in their own abilities to identify the right way for others to act combined with an amazing shortage of disappointing experiences where that central planning has utterly failed. And, for better or worse, young people tend to play a very large role in policy-making.
I notice the youthful dangers of central planning every time I visit Washington, DC. Just sitting in a restaurant I often overhear some twenty-something describe (in some detail) how to restructure energy policy, deliver health care, promote virtue through the tax code, or reshape the nation’s schools. These twenty-somethings are usually congressional staffers or think-tank wonks. And I am just as likely to hear this central planning hubris from someone working for a Republican member of Congress or a conservative think tank.
I’ve never believed that teachers should determine education policy,that soldiers should determine military strategy, or that doctors should determine health policy, but there is something to be said for the wisdom of experience in policy-making.
Look at the folks who populate the DC education punditocracy. Very few of them have actually ever done anything — except dream up what others should do and persuasively write about it. They’ve worked in administrations, written policy briefs, and attended a whole lot of catered lunches, but they know remarkably little about the world. Most have never had a regular (non-policy) job. They don’t even know the world through scholarly inquiry, since almost none of them have ever conducted their own original empirical analyses of policies. They read studies that others conduct, talk with each other, and write about what they think should be done. The know about as much about policy as Entertainment Tonight hosts know about great acting. They’ve seen other people do it and then talk about it all the time.
In short, I have no idea why we ever listen to many of these DC edu-punditcrats. They may write very well (and often) and read a lot, but they don’t actually have any expertise. And, given their youth and inexperience, they are very often tempted to engage in dangerous central planning fantasies.
Plenty of good-old-boys out in the hinterland engage in central planning like Rick Perry’s crony capitalism. But their motivation to do so tends to be more cynical and obvious. The straightforward desire for money and power is easier to detect and check. The youthful central planning of the DC edu-punditcrats, on the other hand, is harder to contain because its practitioners enthusiastically believe in what they are doing. They are ET Hosts who think their performances are Oscar-worthy.
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Jay, I was less shocked by that WSJ piece, probably because I tend to assume everyone in political life plays this game to some extent. Any time I see someone who’s had political success I make an “ugliness assumption” that if you turn over the rocks you’ll find some ugly stuff under there. The actual ugliness revealed in the WSJ piece on Perry didn’t exceed the level of “assumed ugliness” (the lawyers out there in JPGB-Land may call it “constructive ugliness”) that I had already mentally assigned him. So my response was kind of “meh.”
But of course it’s important not to let yourself become so jaded that you stop regarding the ugliness as ugly and come to accept it as just background noise, so thanks for this great post.
Putting this together with the differences observed here, and adopting the rubric of Havel (truth) and Klaus (power) from this post, I’d say in general we’re both on the Havel end of the spectrum but I have much stronger Klausish tendencies than you do.
I agree with you, Greg. I don’t think this is fatal for Perry since I agree that almost all politicians engage in this to some extent. As I said, we have to compare the extent and danger of the various candidates’ central planning fantasies.
Is this an attack on anonymous DC restaurant patrons, or do you have someone in mind? Name names, please!
“Beltway” — You correctly note my caution in naming names. Let me suggest that you and other comment-writers offer names that meet the following criteria:
1) People who have worked in administrations, at think-tanks, or for advocacy groups but have basically never had a regular (non-policy) job.
2) People who have never (or barely ever) conducted their own empirical analyses of policy.
3) People who spend a lot of time writing and talking about how the nation’s school systems should be operated to achieve goals that they have in their minds.
Are you talking about Andy Rotherham, Kate Walsh, Mike Petrilli, and Rick Hess?
“Texas created over a quarter of a million jobs, meaning that the state’s 8% unemployment rate is substantially lower than the rest of the nation’s. The governor credits this exceptional growth to things like low taxes and tort reform.”
Oil prices above $70 bbl (the price at which many non-traditional, enhanced oil recovery methods become economic) did not hurt either – take a peek at North Dakota which had almost 5% job growth over the past year compared to a still strong 2.2% for Texas. The fastest growing regions (check out the Permian Basin) in the state are heavily dependent on oil extraction and support industries..
Shocked, no. Disgusted, yes.
Have we become so accustomed to the “business as usual” game that opts for self-interest over public interest that we as taxpayers declare this as somewhat acceptable because of its regular occurrence? Or do we state that this type of misuse of taxpayer funds will simply not be tolerated or explained away?
Fascinating post, Jay. I have had basically no experience with DC education politics/policy development, but I have seen this kind of stuff happen at the local level. It’s not always the young central planners; in my experience, sometimes it is the technocrat ideologue who is smart enough, communication-skilled enough, and egotistical enough to be dangerous, thinking he’s finally saving the youth of America without any real understanding of how the machine works.
Parry
Jay,
Aren’t these the same arguments launched against world-unwise academics, with their perfect models, cleaned data sets, and never-ending supply of egotism?
Your description of the DC punditocracy is quite accurate, except that you give the pundits too much credit for being original thinkers. Most of these people are just spouting out ideas that they believe their patrons will find agreeable, and then, in many cases, convincing themselves that they, too, sincerely believe most of what they’re saying and writing — however foolish and untrue it may be.
[…] implications for how he and other Republican candidates will approach education policy. Jay Greene commented on Wall Street Journal article outlining the crony capitalism charge: “The real problem is the […]