Crony capitalism collapses in Spain

From the time he burst onto the political scene as a leading Presidential candidate, Barack Obama has tried to convince us that he is a firm believer in free enterprise: “I believe in the free market. I believe in capitalism. I believe in free trade. I am not worried about us being able to compete anywhere on earth with American workers.”

Yet his policies indicate a different set of beliefs. Barack Obama believes in “capitalism,” but not in free markets. Instead, Obama’s faith lies in crony capitalism or mercantilism, if you prefer — an unholy alliance between business and government in which Big Business attempts to corner its share of the market by negotiating with Big Government for laws and regulations that guarantee generous corporate welfare and squeeze out smaller competitors. Big Labor is also involved, as it negotiates generous pay and “Cadillac” benefits for its blue collar Big Business employees, all of which of course are dependent upon Big Government largess, via guaranteed contracts, tax exemptions, regulations, fees, and mandates.

Because mercantilism inevitably causes a significant sector of the economy to be planned and controlled by the government, individuals lose a considerable portion of the freedom to choose how their money is spent. The end result is very similar to that of socialism — continual wealth transfers (i.e. taxes) from the private, non-mercantile sectors of the economy, or heavy government borrowing, in order to pay for the government expenditures necessary to prop up a crony capitalist economy.

America has been wealthy enough to be able to afford limited crony capitalism in specific, heavily subsidized areas of our economy like agriculture, steel, and coal. But through directed administration initiatives like TARP, the bailout (and subsequent acquisition) of GM and Chrysler, ObamaCare, the current Wall Street “reform” bill, and the looming Cap and Trade bill, President Obama has made it abundantly clear that he intends to establish a deep and permanent crony capitalist relationship between the Federal Government and Big Business leaders in the automotive, financial, health care, and energy sectors of our economy. Together, these sectors represent over half of our GDP. And despite the assurances from the administration, such a collusion between government and business won’t simply be “too big to fail” — it will be guaranteed to fail.

I present, for your consideration, the case of Spain and its much-touted “green economy” program, through which the Spanish government heavily subsidized the conversion of much of the nation’s energy production infrastructure from oil and gas to less efficient and much more costly “green” energy production systems, such as solar power and wind turbines. (…insert Don Quixote joke here …) President Obama has repeatedly used Spain as an example of a government that has “harnessed their people’s hard work and ingenuity with bold investments – investments that are paying off in good, high-wage jobs – jobs they won’t lose to other countries.”

But the emerging truth about Spain belies such pie-in-the-sky promises: “Spain admits that green energy as sold to Obama is a disaster

On eight occasions, the occupant of the White House referred to the Spanish model as an example to follow. The paradox is that it is a model that Obama himself wants Spain to abandon, as made clear in his call to [Spanish Prime Minister] Zapatero last week in which he asked him to change his strategy on the crisis.

The internal report of the Spanish administration admits that the price of electricity has gone up, as well as the debt, due to the extra costs of solar and wind energy. Even the government numbers indicate that each green job created costs more than 2.2 traditional jobs, as was shown in the report of the Juan de Mariana Institute. Besides that, the official document is almost a copy point by point of the one that led to Calzada being denounced [lit. “vetoed”] by the Spanish Embassy in an act in the U.S. Congress.

The presentation recognizes explicitly that “the increase of the electric bill is principally due to the cost of renewable energies.” In fact, the increase in the extra costs of this industry explains more than 120% of the variation in the bill and has prevented the reduction in the costs of conventional electricity production to be reflected on the bills of the citizens.

If the document indicates that the development of renewable energies has had a positive impact, especially in the reduction of emissions, it has also admitted that the evolution has been too fast, due to subsidies.

… The government itself says that the alternative energies sector will receive 126 billion euros in the next 25 years. Just an example: The owners of solar plants make 12 times more than what they pay for the energy coming from fossil fuel combustion. The majority are subsidies charged to the consumer.

The conclusion is that with the economy at the point of bankruptcy, it is not possible to keep injecting money in such a costly sector. And the government seems to realize this now.

A complete English version of the draft academic report, which was released in March 2009, is available in PDF form.

The collapse of the Greek economy due to its heavily subsidized public welfare system and the shakiness of the European Union are clear indicators that President Obama’s precious European-style social and economic engineering schemes are the true “failed economic policies of the past.” Hopefully he will get a reminder of that fact this coming November.

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You should also check out this fantastic segment of Bill Whittle’s “Afterburner” which explores the contrasts between free market and crony capitalism, and then marvel at the logic and eloquence of the late Milton Friedman as he valiantly defends the free market economic system in his classic encounter with uber-liberal Phil Donohue.

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