Yuval Levin on Combating Cronyism

November 3, 2016

(Guest Post by Jason Bedrick)

The most recent issue of National Review contains an excellent essay by Yuval Levin on why conservatives should get serious about tackling cronyism. Noting that 2016 has exposed the failure of conservatives to “take seriously some key public concerns” and to “articulate some key conservative priorities,” Levin urges conservatives to do more to address voters’ concerns that “the economy is somehow rigged against them… to the benefit of some wealthy and powerful interests.” (This is sage advice not only for conservatives, but also for education reformers of various political stripes.) As it happens, the Left has proven much more adept that tapping into this concern, although as Levin points out, they exploit it to “empower greater government intervention — ironically creating new opportunities for the wealthy and powerful to lobby and to curry favor.”

To a great extent, the failure to address cronyism stems from the fact that too many conservatives–particularly Republican elected officials–have long confused being pro-market with being pro-business. As Levin explains:

Everybody knows that conservatives in America are champions of the market economy as an engine of prosperity. But too many Americans, including too many conservatives, seem to believe that defending the market economy means serving the interests of business. That is certainly how our government has too often approached its role as steward of the economy — advancing the priorities of established, well-connected interests, sometimes at the expense of the needs of individuals, families, communities, and the nation as a whole, and claiming to do so in the name of economic growth and freedom.

But a commitment to the goals and principles of the market economy is by no means the same thing as a commitment to the interests of the businesses that compete in that economy. On the contrary, markets require a government dedicated to open competition for the benefit of consumers and citizens — which very often means subjecting powerful incumbents to competitive pressures they would rather avoid.

Such fair and open competition is precisely what makes markets engines of prosperity and innovation, and what makes the free-enterprise system well suited to helping a free society address some of its biggest problems. Providing business interests (or labor interests, or any other established, well-connected group) with special benefits or shielding established market actors from competition is therefore anathema to the ethic of capitalism and of democracy. That our government now frequently engages in precisely such preferential treatment for the well connected is a grave danger to democratic capitalism in America. And that the public identifies such cronyism with capitalism itself is a failure of the friends of the market system. It is as such a failure of conservatism, and it threatens all that conservatives hope to achieve.

Levin goes on to enumerate many examples of cronyism, highlighting its existence in areas that conservatives should be doing more to expose and correct, including the realm of education:

Self-dealing is, for instance, at the heart of our primary- and secondary-education crisis, as schools and districts are run in the interests of administrators and tenured teachers rather than students. It is a driving force behind our higher-education dilemmas, as the already accredited run the accreditation system and keep out new competitors and new models of schooling and financing. It undermines upward mobility, as established players in one industry after another use licensing and certification requirements to keep out competitors.

The essay is worth reading in its entirety, particularly for Levin’s insightful diagnosis of the origins of the problem and suggested solutions, but JayBlog readers will be particularly interested in Levin’s treatment of education policy.

Noting that “parental choice is restricted by systems that protect incumbent teachers and their unions at the expense of students,” Levin argues that the state must “become a neutral arbiter of competitive marketplaces rather than a manager of inefficient monopolies.

In many large school districts, teachers’ unions use their financial and political muscle to control the election of school-board members and so effectively choose their own negotiating partners, leaving parents and the rest of their communities powerless to change things. Breaking up such monopolies, by allowing some of the public funds that now flow to school systems to be put instead in the hands of parents and by giving those parents a real choice among educational options, can help these public dollars serve the public rather than a particularly powerful pressure group.

As Jay has counseled, education reformers can’t afford to ignore politics. Reformers can’t expect to be effective unless they are speaking to the concerns that voters have. They shouldn’t expect those voters to get excited about policies that are intended to answer questions that voters aren’t asking. Education reformers must seek to understand what voters are concerned about and clearly articulate how our policy proposals would address those concerns. Sizable portions of the electorate, both right and left, are troubled by a system that appears to be rigged against them. Reformers must show them how the government-run education system is rife with cronyism and explain how choice policies will empower them to provide their children with a better education.  As Levin concludes:

The failure to advance this argument is an instance of a larger pattern in which conservatives have become disconnected from public concerns because we have forgotten the foundations of our own view of the world. A complacent repetition of vague slogans about freedom too often turns the Right into a caricature of itself. A concerted reengagement with the actual conservative case for freedom would instead let the Right offer serious answers to today’s most pressing public concerns.

Likewise, education reformers must resist the siren call of technocracy and seriously reengage with the foundational ideas of the ed reform movement in a manner that connects with today’s concerns.


A Union I Like

March 15, 2011

I just want to make clear, given my post yesterday,  that while I am adamantly opposed to public sector unions, I have no problem with worker’s attempting to negotiate over wages, benefits, and working conditions in the private sector.

In the private sector, if unions ask for too much, at least they experience the natural consequences of destroying their own companies or industries (to wit, the auto industry).  In addition, there are owners on the other side of the bargaining table who have strong incentives not to concede too much or they will lose their wealth.  Collective bargaining in the private sector is a voluntary negotiation over how to split the revenue of a company.  No one should be compelled to work for less than they think reasonable and no one should be compelled to pay others more than they think reasonable.  In the end, owners and workers have to reach a mutually acceptable agreement, whether collectively or individually.

But in the public sector, unions are almost entirely insulated from the consequences of making unreasonable demands since governments rarely go out of business.  Unlike in the private sector, public sector unions can drive total revenue for their industry higher without any improvements in productivity simply by getting public officials to increase taxes.  And the public officials on the other side of the table are at least  partially selected and heavily influenced by the unions themselves.  In the private sector, unions can only select the officials with whom the bargain to the extent that they are shareholders.  In the public sector, one only need be a citizen, and the unions are much better organized and financed citizens than is the average taxpayer.

One private sector union with which I am currently completely sympathetic is the NFL Players Association.  First, the owners are asking that owners be allowed to keep the first $2 billion of professional football’s $9 billion in annual revenue.  That assures them close to a 22% operating profit margin, since football teams have few expenses beyond the player’s salaries and stadium costs (some of which are stupidly subsidized by taxpayers).  What industry can guarantee its owners a 22% operating profit margin?

In addition, the owners have always managed to get players to agree to a cap on team salaries as a further way of ensuring their profits.  Anyone who is for the voluntary exchange of labor for pay should oppose industry-wide salary caps.  All that a cap does is prevent excellent workers from bargaining for a larger share of total revenue.  This discourages excellence and guarantees owner profits at the expense of workers.

And for those of you who say that salary caps are needed to promote equity in the competitiveness of teams…

1) Equity is not the prime goal of sports (or most other endeavors).  Excellence is.  If you want to watch contests that are always perfectly matched, I would suggest that you watch people flipping coins.

2) Rewarding more successful teams and players with the possibility of earning more money provides the proper incentives for them to try harder to win.  If you don’t think that revenue sharing with a cap undermines incentives I have two words for you — Cleveland Browns.

3) If you are afraid that larger market teams will always win, just look at baseball which lacks a cap.  Yes, big market teams are more likely to be in the post-season, but they don’t always win.  If you think big markets and big payrolls can guarantee winning I have three words for you — New York Mets.  Besides, what’s so wrong with larger markets more regularly having teams in the race for a championship?  Only a bizarre system would prefer having small markets, like Green Bay and Indianapolis, regularly in the hunt.

And if you think NFL players are a bunch of rich felons who don’t deserve extra money, I would remind you that the average career is about 3 seasons and many players end up as cripples for life.  The NFL is exploiting these workers like crazy and any decent liberal should be on the side of those who are exploited.

Unfortunately, the NFL players union has been awful in the past and failed to do nearly enough to protect their members from this exploitation.  I hope it is different this time.  And I hope that the unions prevail (as long as it is in the private sector and without government subsidies or coercion).


The Public Funding Perpetual Motion Machine

March 14, 2011

Both the NPR and public-sector union controversies make me think of perpetual motion machines.  In both cases organizations receive government funds which they can use to lobby public officials to receive more government funds.

Most people are familiar with this concern when it comes to public sector unions given that it is well-documented that unions use money automatically taken from publicly paid salaries and benefits to donate to campaigns, organize, and lobby for higher salaries and benefits from which they can extract higher dues to push for even higher compensation, etc… Wash. Rinse. Repeat.

Mind you, I have no problem with private sector unions since they can only negotiate over how to divide profits with management and shareholders and cannot lobby to increase revenues without also increasing productivity.  But public sector unions can lobby for higher revenues from which they can extract a larger share for themselves without having to do anything to enhance productivity.

But people are much less familiar with how NPR utilizes the same Public Funding Perpetual Motion Machine.  As Congress debates de-funding public broadcasting, NPR is making announcements alerting their listeners to this possibility and urging them to visit a web site to organize a push to maintain and increase taxpayer funding of NPR. So, NPR wants money so that it can tell its listeners to organize to lobby so that they keep getting money.  Wash. Rinse. Repeat.

Like all perpetual motion machines, these publicly funded ones are also frauds.  The system is not self-sustaining and requires that resources be extracted from somewhere else — in the case of NPR and public sector unions, it is extracted from the taxpayer.

I should also note that I like a number of programs on NPR.  But it is completely unacceptable for them to take money from me and others by force to pay for their broadcasts.  I’m confident they can generate sufficient funds voluntarily and may well soon have to do exclusively that.


Happy Labor Day

September 1, 2008

 

These stories are all from the last month:

3rd Union Leader on Leave Amid Financial Inquiry

August 31, LOS ANGELES (AP) — The executive vice president of the Service Employees International Union has stepped aside while accusations that she paid thousands of dollars in union money to a former boyfriend are being investigated, The Los Angeles Times reported Sunday.

The vice president, Annelle Grajeda, is the third major official of the union to be placed on leave in recent months amid accusations of misspending union money.

The Los Angeles Times reported the union’s Los Angeles local paid hundreds of thousands of dollars to companies owned by chapter President Tyler Freeman’s wife and mother-in-law and also spent a lot of money at luxury venues such as the Four Seasons Resort and Morton’s Steak House.

Enforcement agency announces 10 criminal convictions and 8 indictments for July 2008. The U.S. Department of Labor’s Office of Labor-Management Standards (OLMS) today announced its criminal enforcement data for July 2008. During the month, OLMS obtained 10 convictions, eight indictments and court orders of restitution totaling more than $500,000. The office’s totals for fiscal year 2008 (which began on Oct. 1, 2007) now stand at 87 convictions and 112 indictments, with restitution of more than $3 million. Since 2001, OLMS has obtained 889 criminal convictions. The bulk of the cases have involved the embezzlement of union funds.

EDITORIAL: Getting to the bottom of things

Aug 21, 2008 … The trial was hardly under way when former chancellor Roy Johnson was called to the stand to testify. Under oath, he discussed how the head of the Alabama Education Association, Paul Hubbert, and Speaker of the House Seth Hammett came to him to get a job for Schmitz — one of the AEA’s most dependable allies in the House. Johnson testified that the speaker and another legislator found a job and the money to pay for it, and that Schmitz took the job and the money but did no work.

Ex-bookkeeper allegedly embezzled longshore union

The Associated Press

Article Launched: 08/13/2008 08:59:32 AM PDT

LOS ANGELES—An ex-bookkeeper has been indicted for allegedly embezzling $108,000 from the South Los Angeles office of the International Longshoremen and Warehouse Union.

Ex-union secretary in Pa. accused of embezzlement

The Associated Press  Article Last Updated: 08/26/2008 03:38:18 PM EDT

PITTSBURGH—Federal prosecutors in Pittsburgh say a western Pennsylvania woman embezzled more than $87,000 from the United Steelworkers of America.

Prosecutors say between June 2006 and January, 42-year-old Donna Simpson of East McKeesport embezzled the money from a bank account for the Steelworkers Organization for Active Retirees. Prosecutors say Simpson was working as a field secretary for the union at the time and wrote 82 unauthorized checks to herself.

Former Union Secretary Convicted Of Embezzling

August 21, 2008

Two years on probation, with 90 days of those being served under house arrest is the sentence for a Lima woman convicted of taking money from an area union.  Amy Cross pleaded guilty to a charge of embezzling from the Utility Workers Local 308 according to the U.S. Department of Labor.