The meaning of the Romney candidacy.

In economic theory there are classically four "factors of production": land, labor, capital and management -- that last often going by other names such as "enterprise" or "entrepreneurship". In a healthy market economy supply and demand causes each factor of production to be used efficiently and rewarded according to its contribution. I believe there exists today a macroeconomic distortion that benefits capital and management over land and labor. Evidence of this is not simply the historically outsized returns, (i.e. corporate profits and management compensation), to those favored factors and the stagnation of wages but also the damage allowed to the environment and neglect of infrastructure, (indicative of deficient demand for and undervaluation of land resources).

In my opinion, this results from the over-stimulation of the financial sector that excessively empowers organizations like Bain which represent the capital and management factors. Whenever we hear rhapsodic praise for somethings of value, such as the liquidity and deregulation enabled creativity of the financial sector, we must remind ourselves that there is always a point of having too much of a good thing and we should ask what such an occurrence would look like should it develop. We have had, and still have, too much bubble producing leverage in the system and it stems, basically, from too much money creation. It feeds into the financial markets and acts like "empty calories" to create fat, bloated financial organizations on something like a sugar high because they simply have more money than is good for them -- or us.

The situation has advanced to the point that capital and corporate management interests have developed an ideology, which I call "corporatism", to justify its continuation and its growing influence within government This is the meaning of the Romney candidacy.

Sarah Palin condemns crony capitalism.

Yesterday Sarah Palin condemned crony capitalism and was, apparently, cheered for it by her audience of supporters. This could be a sign that the Tea Party is beginning to realize that its ranting about "socialism" has been misdirected. Yes, there is a bit of socialism here and there in the US economy and in government policies, but it is really rather minor, not significantly more than it has been for decades and not a root cause of the Great Recession. That's much more due to government doing favors for selected business sectors such as housing and finance and carelessness about such matters as moral hazard, market distortion and fiduciary irresponsibility. Government spending through excessive use of credit, and encouraging the same by households, was also an underlying cause. This has little to do with "socialism" in any proper meaning of the term.

I prefer the shorter, simpler term "corporatism", especially as cronyism is not always a part of it, but "crony capitalism" definitely comes much closer to identification of the disease than "socialism".

Is it all Reagan's fault?

Chronologically, the Reagan Administration may mark a turning point but the main substance of the economic damage to the middle class occurred under subsequent administrations, both Republican and Democrat. Actually, I still look back with favor upon most of what Ronald Reagan did.

What has happened is bigger than any single President. It is the rise not of socialism, of which there is no significant evidence, but of corporatism -- a corruption of free market capitalism. Perhaps the chief virtue of limited government is that it has little to offer to wealthy special interests -- it is limited to that which benefits all citizens more or less equally. Government has, indeed, become too big and, even more importantly, too unrestricted in its scope.

Who has benefited? Taking the home mortgage crisis as an example, it may seem at first blush that under-qualified mortgage seekers benefited from the government's interventions in the market, from FHA to Fannie Mae and much in between, but where are they now? Who, meanwhile, has walked away with billions, not mere millions, from the bubble built with Collateralized Mortgage Obligations and credit default swaps -- instruments ordinary citizens never heard of before post-crash media reports? Who has suffered the damage to their pension funds and IRA accounts and the value of their homes?

This was NOT entirely an accident. The financial elite knew that whatever setbacks their strategies might suffer they would have protection. Understanding risk, after all, is basic to their professions. What hedging and insuring they provided for themselves would be further fortified by their networking connections and their "too big to fail" status virtually guaranteeing government bailouts. For them, the profit and loss market system had become the fabulous profit and merely huge profit rigged market system while the little people, middle class homeowners and taxpayers, bore risks they never even knew about.

Because of the government aid extended to under-qualified home buyers, popular even with the middle class at the time, "Socialism", (taken broadly to mean any government market intervention), is taking the rap in the prevailing propaganda with those buyers now paying the price of government meddling with foreclosers and payments they can no longer afford.
But beneath a layer of obscuring technicalities, the main damage to the wider economy, including very responsible home owners who never overextended themselves, was the work of the corporatists in the big banks and other financial institutions and the politicians bought with corporatist money. It was they who tore away the sensible post-New Deal regulations that would have contained the problem.