If Amtrak can’t Operate Profitably we have No Business Getting in the High-Speed Rail Business

Posted by PITHOCRATES - November 12th, 2011

Week in Review

Before we commit to high-speed rail we probably should figure how to make the less costly type of rail not lose money first (see Amtrak’s true costs by N.B., WASHINGTON, D.C. , posted 11/7/2011 on The Economist).

AMTRAK, America’s government-run passenger rail service, received $1.4 billion in taxpayer subsidies in 2011. Critics reckon that’s too much, and say that the company should either be self-sufficient or privatised. Some surveys suggest that the majority of Americans agree. But Amtrak’s defenders are striking back, arguing that the railroad actually receives fewer dollars per passenger mile (ppm) than highways.

Yes, but Amtrak sells tickets.  Our highways don’t.  Except for private toll roads.  But private toll roads are private.  And typically the government doesn’t subsidize them with federal money.

Airlines don’t receive subsidies like Amtrak does.  That’s because there is a demand that they can meet profitably.  Passenger rail just can’t do that.  Their costs are just too great.  Which is why Amtrak can’t survive without federal subsidies.

And if Amtrak can’t operate profitably we have no business getting in the high-speed rail business.

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High-Speed Rail will do what Planes can do, only for a lot, lot more Money

Posted by PITHOCRATES - October 3rd, 2011

There may be only two High-Speed Lines in the World that Actually Pay for Themselves

There won’t be high-speed rail any time soon.  Chalk up another one in the ‘lose’ column for Obama (see Senate: ‘No confidence’ in Obamarail by Barbara Hollingsworth posted 10/3/2011 on The Washington Examiner).

… the $100 million the Senate left as a “placeholder” is likely to be zeroed out by the House, Orski notes, effectively killing President Obama’s dream of a high-speed rail network throughout the U.S.

In February, the president asked Congress to appropriate $53 billion through 2018 to provide high-speed rail service. The $100 million is the Democrat-controlled Senate appropriations committee agreed to keep in the budget (by a voice vote) is a drop in the bucket.

“Senate appropriators have done more than merely declare a temporary slowdown in the high-speed rail program. They have effectively given a vote of ‘no confidence’ to President Obama’s signature infrastructure initiative,” Orski says.

You know, $53 billion was a little light to begin with to provide access to high-speed rail to 80% of all Americans.  So that $100 million placeholder obviously wasn’t going to pay for much of anything.  Not even the environmental impact studies.  At best it could maybe pay off a campaign donor or two.

“Their posture is understandable,” he added. “After committing $8 billion in stimulus money and an additional $2.5 billion in regular appropriations, the Administration has little to show for in terms of concrete results or accomplishments. Aside from an ongoing project to upgrade track between Chicago and St. Louis (a $1.1 billion venture that promises to offer a mere 48 minute reduction in travel time between those two cities), no significant construction has begun on any of the authorized rail projects.”

And the only really high-speed rail project in the works – a 220 mph, 160-mile, $67 billion bullet train between Los Angeles and San Francisco – is in trouble because of public opposition (a new poll found that two-thirds of likely voters in California are against it) and the fact that the cost estimates have doubled since 2008.

Orski reports that analysts now believe that the California high-speed rail project cannot and will not be built without a substantial federal subsidy – which is not likely to materialize.

Gee, I wonder where that $8 billion of stimulus funds went to.  Campaign donors?

Can NOT be built without federal subsidies?  You know why?  There may be only two high-speed lines in the world that actually pay for themselves.  One in France.  And one in Japan.  High-speed rail loses money.  Just like Amtrak.  Only more.  They’re just so incredibly costly to build.  And to operate.  To get them to pay for themselves you need numerous trains per hour.  Packed with paying customers.  And, preferably, few automobiles.

Private Railroads aren’t Building High-Speed because Passenger Rail is not Profitable.  High-Speed or Otherwise.

Japan is the home of the Bullet Train.  They ushered in high-speed rail.  To move the people of one of the most populous nations on the planet.  They are so crowded that they use 747s for commuter jets.  Now that’s population density.  Which is what you need to make high-speed passenger rail work.  Which is why the Tokaido route works (see The Difference Engine: Fast track to nowhere posted 5/20/2011 on The Economist).

OF ALL the high-speed train services around the world, only one really makes economic sense—the 550km (340-mile) Shinkansen route that connects the 35m people in greater Tokyo to the 20m residents of the Kansai cluster of cities comprising Osaka, Kobe, Kyoto and Nara. At peak times, up to 16 bullet trains an hour travel each way along the densely populated coastal plain that is home to over half of Japan’s 128m people…

The sole reason why Shinkansen plying the Tokaido route make money is the sheer density—and affluence—of the customers they serve. All the other Shinkansen routes in Japan lose cart-loads of cash, as high-speed trains do elsewhere in the world. Only indirect subsidies, creative accounting, political patronage and national chest-thumping keep them rolling.

This one Japanese high-speed rail line makes money because they pack them in like sardines.  Affluent sardines.  Who don’t need subsidized tickets.  So these trains can charge enough to cover their costs.  And with 16 packed trains an hour each way during peak time keeps these expansive rails nice and shiny.  And shiny rails produce enough revenue to cover costs.

California wants a share of that bullet-train hubris. Where Florida, Ohio and Wisconsin have turned down billions of federal dollars for high-speed rail, the Golden State has been pressing on with its $43-billion scheme to build a high-speed rail service from Los Angeles to the San Francisco Bay Area, with spurs eventually to San Diego, Sacramento and San Luis Obispo.

The irony is that California has the highest rate of car-ownership in the country, if not the world. It also, despite years of neglect, has one of the best road networks anywhere—certainly leagues ahead of Japan’s. On top of that, it enjoys a highly competitive network of budget airlines serving its main cities. The Los Angeles Times got it about right when it editorialised on May 16th that “California’s much-vaunted high-speed rail project is, to put it bluntly, a train wreck”.

Lots of cars, good roads and cheaper gas than in Japan.  That’s three strikes already against high-speed rail in California.  Will people leave their cars at home to pay more to be packed in like sardines and travel according to a train schedule instead of their own whim.  Which you can do with a car.  You want to go somewhere.  Just hop in the car and go.  That’s nice.  And convenient.  And you have no one coughing in your face.  Or groping you in the crowd.  Pretty nice benefits.  Especially if you’re a young lady.

And an expensive one at that. Between them, the federal government, municipals along the proposed route and an assortment of private investors are being asked to chip in some $30 billion. A further $10 billion is to be raised by a bond issue that Californian voters approved in 2008. Anything left unfunded will have to be met by taxpayers. They could be dunned for a lot. A study carried out in 2008 by the Reason Foundation, the Howard Jarvis Taxpayers Association and Citizens Against Government Waste put the final cost of the complete 800-mile network at $81 billion…

The problem in making the case for high-speed rail in California is that, though it is the most populous state in the union, there are simply not enough people packed into the 50-mile wide coastal strip that wends its way 350 miles from Los Angeles to San Francisco. Put it this way: the Shinkansen plying the Tokaido route have access to some 180,000 potential passengers per mile of high-speed track. Even by 2025, when California’s population is likely to have grown from today’s 38m to 46m or so, the number of people within the coastal strip is unlikely to exceed 85,000 per mile of track.

No wonder the Los Angeles Times called it a train wreck.  Lots of cars, good roads, cheaper gas and lower potential passenger density along the line.  No wonder they need federal subsidies.  It’s a black hole for money.  That’s why private railroads aren’t building these things.  They can’t make money with passenger rail.  High-speed or otherwise.

We should not Invest in Rail because Track is Expensive whereas Airspace is Free

Passenger rail is not a working business model.  They bleed money.  Which makes them very attractive to politicians.  That’s why they love them.  Because they know they will require more and more taxpayer money.  And they are always happy to raise taxes to pay for this public good that the public prefers not to have.

As can be seen, rail projects don’t happen fast.  So including high-speed rail projects in a stimulus bill wasn’t going to stimulate anything.  So why do it?  I don’t know.  Pay off a campaign donor or two?

Japan is built for high-speed rail.  When your cities are so crowded that they have capsule hotels you are a candidate for high-speed rail.  You have the population density that will pack trains like cans of sardines.  When you have vast tracks of open country you’re not a good candidate for high-speed rail.  The U.S. has vast tracks of open country.  And is therefore not a good candidate for high-speed rail.

We should not, then, invest in rail.  Americans will drive their cars for most trips.  And fly when it’s too long to drive.  For planes cost less per passenger mile to operate.  Because all of their infrastructure is at airports.  Unlike trains.  This is why air travel is cheaper than train travel.  Because track is expensive.  Whereas airspace is free.

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Taxing Carbon to Fight Global Warming is Good as long as other Governments don’t get our Money

Posted by PITHOCRATES - July 20th, 2011

Barack Obama has Global Warming Immunity

Barack Obama was going to lower the sea levels.  By fighting global warming he was going to save the planet.  Because he believed in the righteousness of the cause.  You know, as long as it didn’t inconvenience him (see Boris fines Obama for not paying congestion charge by Nicholas Cecil posted 7/19/2011 on the London Evening Standard).

London Mayor Boris Johnson button-holed him at a State banquet in May to raise the issue of US diplomats in London not paying the congestion-busting levy. They have run up a bill of more than £5 million since 2003.

At the time, the Mayor of London also publicly made clear that he wanted the £10 congestion charge paid for Mr Obama’s security vehicle “The Beast” and other cars in the president’s motorcade.

But the US authorities defied the request and have now been hit with a £120 fine.

It seems like £10 is a small price to pay to save the planet.  Especially if you believe in this crap.  I mean ‘science’.  But no.  Not for Barack Obama.  Green Crusader.  Savoir of the planet.  A carbon tax is fine for others to pay.  But don’t you penalize him for driving his big, safe, polluting ride.  For apparently it’s okay for diplomats to pollute.  Guess they have global warming immunity.

The Fight against Global Warming is about the Money, not the Planet

Obama and the Democrats in Congress anxiously want a carbon tax.  To make our everyday life more expensive.  So we can save the planet from global warming.  Like the European Union is doing with its Emissions Trading Scheme.  Which is the exact kind of thing they want for the United States.  And yet, surprisingly, they’re challenging the EU’s plan to tax U.S. airlines that fly into or out of the EU (see U.S. Lawmakers Target Airline Inclusion in EU Emissions Trading System by Frank Jackman posted 7/19/2011 Aviation Week).

A bipartisan group of U.S. lawmakers — the rarest of birds on Capitol Hill these days — has decided to challenge the European Union’s plans to include aviation in its Emissions Trading System (ETS) come Jan. 1…

Congressional opposition to U.S. airline inclusion in the EU ETS isn’t really a surprise. The House version of the FAA Reauthorization Bill includes a Sense of Congress provision that says the EU directive extended the ETS to include international civil aviation without working through ICAO and that is inconsistent with the Chicago Convention. The Obama administration also is opposed to airline exclusion in the EU ETS.

I guess saving the planet is one thing but when another government taxes their airlines that’s another.  The planet be damned.  That’s our money.  And if anyone is going to tax it away by gum it’ll be the American government.  So I guess the fight against global warming is about the money.  Not the planet.  It’s just another tax for Uncle Sam to collect.

The Cost of Fighting Global Warming is…more Global Warming

So the American government is not interested in saving the parts of the planet outside U.S. territory.  So what about the parts within U.S. territory?  Well, that’s a different story.  They want to subsidize the building of windmills.  They want to subsidize the building of solar panels.  And they want to subsidize the building of batteries and electric cars.  None of which can happen without federal subsidies because none of them can compete in the free market.  They all have problems. 

Windmills only produce electricity when the wind blows.  Solar panels only produce electricity when the sun shines.  And electric cars have a limited range and it takes forever to charge the battery.  Until now, that is (see Israel to Get Electric Car Battery Swap Stations by Kevin Bullis posted 7/6/2011 on technology review).

Next month, Better Place, a startup based in California, will begin selling electric cars in Israel that come with subscription packages that include a leased battery and the cost of recharging it. Gasoline is expensive and taxes on gas-powered cars are high in Israel, and the company says the packages could make owning an electric car 20 percent cheaper than owning a gasoline-powered car.

Better Place is trying to solve the biggest challenge to the widespread adoption of electric cars: the limitations imposed by battery chemistry. A battery big enough to give an electric car the same range as the average gas car would be far too large and expensive; and recharging battery packs takes hours at standard outlets, compared to the minutes it takes to refuel a conventional car.

Better Place will sell a new electric sedan made by Renault that has a range of just over 100 miles on a charge—enough for most daily commutes. For longer trips, Better Place provides battery swap stations, where an automated system switches out a depleted battery for a fully-charged one in less than five minutes. Instead of owning the batteries, the car owners buy subscriptions for a certain number of kilometers of driving per year.

Problem solved.  For Israel at least.  Being a Jewish island in an Arab sea kind of makes their oil supply costly to say the least.  And Israel is a narrow state.  So you won’t need a lot of battery swap stations.  But there are some drawbacks.

To ensure that batteries are available at swap stations, the company has developed a system that charges the battery in one hour (compared to roughly seven hours for charging the Nissan Leaf at a home outlet). Such rapid charging can damage the battery if it causes overheating, so the swap stations have to keep the batteries refrigerated.

The company is working with local utilities to ensure that swap stations—or large numbers of cars being charged at night—won’t overload the grid. Better Place will manage charging for a central location, prioritizing cars that are low in charge (drivers can indicate if they need charging urgently).

Refrigerating batteries?  Why, that’ll take a lot of electrical power.  In addition to the enormous electrical demand of just the batteries charging.  The loads are so great that they have to be coordinated with the electrical utility so they won’t cause blackouts.

More electricity.  Produced by fossil fuels.  And more heat dumped into a warming atmosphere from the battery refrigerators.  So the cost of fighting global warming is…more global warming.  And more electrical blackouts.

Still a good idea for the Israelis due to their circumstances.  As long as they can beef up their generating capacity to handle those crushing loads.  But a very bad idea for the United States.  Due to the vast costs resulting from the vast geographic size of America.  And an already taxed electric grid and generating capacity.

For the Planet.  And Uncle Sam’s Pockets.

If President Obama believed the battle against man-made greenhouse gasses was about saving the planet he would have paid that £10 congestion charge.  That’s about $16.17.  I think the U.S. could have afforded that.  Even Obama himself could have flipped them a twenty and said, “Keep it.  For the planet.”

But he didn’t.  That was too much for him.  But the high cost of electric cars will be okay for us.  And the average taxpayer is going to pay a lot more than that $16.17.  How generous he can be with our money.  And tight with his.

And now the U.S. is challenging the EU’s authority to tax U.S. airlines.  Now this isn’t giving the finger to the junk science that is global warming like that congestion charge flap.  This EU ETS tax is a lot of money.  And as broke as the U.S. is, if anyone is going to shake down U.S. airlines it will be the U.S. government.  Who, if you haven’t heard, is desperately trying to raise their debt ceiling.  So they can borrow more money to pay their bills.  So you know they would love to shake down the airlines for a few billion.  Which they won’t be able to do if the EU beats them to it.

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Wind Farms don’t Deliver but a new Gasoline Engine May

Posted by PITHOCRATES - April 6th, 2011

During Peak Demand Wind Power Generated less than 5% of Capacity

Before President Obama banned U.S. deep water oil drilling he was for it.  But that support was only half-hearted.  More for political purposes.  Because he just doesn’t like oil.  And high gasoline prices don’t bother him either.  In fact, he likes them.  They’re more of an incentive for people to pay more for electric cars that don’t drive as far as those hated gasoline counterparts.  Which will please his liberal environmentalist base.  And please his crony capitalist Big Business friends who make green energy generation equipment.  To provide this huge new electrical demand to power all those electric cars.  Like General Electric.  Who builds a lot of green products.  Including windmills.

Renewable energy is all the rage in the Obama administration.  It’s the ‘in’ energy this season.  Clean.  High-tech.  Currently nonexistent so it will add a whole bunch of taxpayer subsidized jobs to the economy.  It’s win-win for the administration.  And best of all, for them, it doesn’t work (see Wind farm efficiency queried by John Muir Trust study posted 4/6/2011 on the BBC News Scotland).

The research, carried out by Stuart Young Consulting, analysed electricity generated from UK wind farms between November 2008 to December 2010

Statements made by the wind industry and government agencies commonly assert that wind turbines will generate on average 30% of their rated capacity over a year, it said.

But the research found wind generation was below 20% of capacity more than half the time and below 10% of capacity over one third of the time…

During each of the four highest peak demands of 2010, wind output reached just 4.72%, 5.51%, 2.59% and 2.51% of capacity, according to the analysis.

You know, there is a reason why ocean transports aren’t sail-powered anymore.  Wind was unreliable.  It sometimes didn’t blow.  And it wasn’t a concentrated source of energy.  It took a lot of rigging to hold up a lot of sail to push ships slowly across the ocean.  When the wind blew.  And it didn’t always blow. 

Coal and the steam engine changed all of that.  Shippers replaced their sail-powered ships with steam-powered ships.  And they’ve never looked back.  Eventually replacing their coal-fired engines with oil-fired engines.  Some of the world’s navies even took it a step further.  They replaced their oil-fired engines with nuclear reactors.  Some of these warships can stay on station for 6 months and longer without ever refueling.

See the trend?  Energy sources became more concentrated.  Engines became smaller.  Which allowed people to ship more stuff for less.  This is progress.  It’s why they can sell a lot of those electronic toys we so enjoy so cheaply.  Because they can ship so many of them that the shipping cost per unit is like the cost of a postage stamp.  Using wind farms, on the other hand, is the opposite of progress.  It’s going backwards.  This less concentrated energy source will take acres of windmills at a high infrastructure cost to produce a trickle of electricity.  All it will do is enrich the equipment manufacturers.  Who will show their gratitude with generous political contributions. 

Crony capitalism at its worse.  And because this technology won’t solve our energy problem, our energy problem will always be here.  Government couldn’t ask for anything more.  Please the environmentalists.  Throw subsidies at their cronies in Big Business.  Sustain political donations from same.  And never fix the problem.  Which means this cycle just keeps repeating.   Politics.  It’s a beautiful thing.  For some.

The Internal Combustion Engine is Reinvented

Wind power is not really a viable energy source.  When fleets of electric cars ‘plug in’ it won’t be windmills providing the power.  It will be either a coal-fired plant.  A natural gas-fired plant.  Or a nuclear plant.  To provide reliable power during peak demands will require an energy source less fickle than the wind.  So if we want those electric cars, the environmentalists will have to embrace that which they hate.  Fossil fuels.  Or their archenemy.  Nuclear power.

Is there another way?  Perhaps.  But it’s a fossil fuel alternative.  But one that the environmentalist may even warm up to (see New Car Engine Sends Shockwaves Through Auto Industry by Nic Halverson posted 4/6/2011 on Discovery News).

[R]esearchers at Michigan State University have built a prototype gasoline engine that requires no transmission, crankshaft, pistons, valves, fuel compression, cooling systems nor fluids. Their so-called Wave Disk Generator could greatly improve the efficiency of gas-electric hybrid automobiles and potentially decrease auto emissions up to 90 percent when compared to conventional combustion engines.

The engine has a rotor that’s equipped with wave-like channels that trap and mix oxygen and fuel as the rotor spins. These central inlets are blocked off, building pressure within the chamber, causing a shock wave that ignites the compressed air and fuel to transmit energy.

Sounds like a lot of science fiction.  But did you get that one number?  Reduce emissions by 90 percent?  An internal combustion engine that is almost emission-free?  What’s not to love about that?  Sure, it still uses gasoline, but it uses it so much more efficiently.

The Wave Disk generator uses 60 percent of its fuel for propulsion; standard car engines use just 15 percent. As a result, the generator is 3.5 times more fuel efficient than typical combustion engines.

Researchers estimate the new model could shave almost 1,000 pounds off a car’s weight currently taken up by conventional engine systems.

More efficient, lighter and near-emission-free?  It’ll exceed every CAFE and emission standard the environmentalist demands from the automotive industry.  This engine has everything.  It pleases the environmentalist.  Reduces our consumption of foreign oil.  And with such a small, efficient power plant, the auto companies can make the big cars people want to buy again.  What’s not to love about this engine?

Last week, the prototype was presented to the energy division of the Advanced Research Projects Agency, which is backing the Michigan State University Engine Research Laboratory with $2.5 million in funding.

Oh.  They used federal funding to develop this engine.  It would seem to the layperson that an engine as wonderful as this would have a market.  A big market.  And could attract private investors.  I mean, they’re building expensive cars that no one will buy without a massive federal subsidy (to both the buyer and the seller) just to please the government.  An engine like this would make life so much simpler for the auto companies.  And so much more profitable.  Which suggests this may be too good to be true.  For the best things in life don’t need federal subsidies.  If there is a market people will take risks.  If there is a profit to be made people will bring good things to market. 

More Power with Less Fuel is Progress

The Wave Disk Generator may be for real.  For it is a step in the right way.  It uses the same concentrated fuel we use today in our cars.  But it uses it more efficiently.  Reducing the size of the engine.  While providing more power.  With less fuel.  This is progress.  This is good.  The only thing of concern is the government’s involvement.  For this is the same government that is investing in wind-generated electricity. 

Yes, it’s possible that the government backed a winner here.  Anything is possible.  I mean, even a broken clock is right twice a day.  Time will tell.  Perhaps one day we’ll see the Wave Disk Generator under the hood.  But if the government is involved, don’t hold your breath.  It could be awhile.

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FUNDAMENTAL TRUTH #59: “When the Right partners with business the Left calls it crony capitalism. When they partner with business the Left calls that smart government.” -Old Pithy

Posted by PITHOCRATES - March 29th, 2011

The Right likes Capitalism, the Left likes Marxism

Crony capitalism isn’t capitalism.  At best it’s mercantilism.  At worse it’s autocracy.  But the critics of capitalism haven’t the foggiest clue of what capitalism is.  They think it just exploits the working class.  Like Karl Marx said.  Of course, Karl Marx was wrong.  His philosophy has never worked.  Whereas capitalism, true capitalism, has.  Try to point to a successful Marxist country today.  You can’t do it.  Because when you take from those according to ability and give to those according to need you have everyone trying to show as little ability and as great need as possible.  Put yourself in that position.  Do you want to show some genius and work 12-hour days and see all of your earnings go to people sitting at home collecting state benefits?  Or would you rather not work those 12-hour days, relax at home and collect those state benefits?  If these are your choices, you don’t have to answer.  Because everyone is going to choose to stay at home and collect benefits.  Because no one volunteers to be a slave.

In such a world try to imagine how many cellular towers people would install when no one wants to work.  Not many.  Which means no cell phones, no text messaging, no internet on your mobile device and no sitting in your favorite coffee shop Internet hotspot.  For no one will spend the excruciating time, money and effort to create something while he or she is paid less than those with greater need who do nothing.  In other words, there is no incentive to work hard.  So no one will work hard.  Just like you won’t work hard by working overtime hours for free.  And why won’t you?  Because when you work you sell your time to an employer.  It’s your time.  If no one is paying you for it, you’d rather do something fun.  We all would.  Because it’s our unalienable right to pursue happiness.  Like Thomas Jefferson wrote in the Declaration of Independence.  And pursue it we do.  Because when it comes to our happiness, we’re all Jeffersonians.  Even Alexander Hamilton.  Even though they often saw things differently.

And one of those things was capitalism.  Jefferson didn’t like bankers.  Especially when they were in tight with the government.  Hamilton, on the other hand, liked the bankers.  Because he knew the difference between money and capital.  Assume everyone has a few bucks in their pockets.  What is that going to buy these individuals?  Not much.  Certainly no cellular towers.  But when you pool that money together you get capital.  And capital can buy cellular towers and the other conveniences of modern society.  And this is capitalism.  There’s a little more to it but the point is capitalism provides incentive.  And incentive stimulates innovation.  People take risks, work hard and create great things.  Marxism, on the other hand, provides no incentive for anyone to innovate.  There are no risk takers and people work the bare minimum they can get away with.  And there is nothing great in a Marxist society except misery, hunger and fear.  North Korea and Cuba are about the last of the Marxist societies remaining.  The Soviet Union, Eastern Europe and Mao’s People’s Republic of China are relics of the Cold War.  Now on the ash heap of history.  And all of these countries have/had sealed borders.  People could not leave.  If they tried they often died.  Many still risked it.  Because life was horrible under Marxism.

Jefferson the anti-Capitalist turns to Capitalism

Now whenever you gather money in great big piles you invite corruption.  Especially in government.  Which is what Jefferson feared.  You need money to do things.  And if government had access to great pools of it, they could do a lot of things.  Build armies.  Build navies.  Fight wars.  Grow the size of government.  Increase the size of the federal payroll.  Buy favors.  Sell patronage.  So more and more people became part of a growing, bloated federal government.  Who then had a vested interest in seeing it continue to grow to protect and increase the power and money they had.  All the great cities in the old world (London, Paris, Madrid, etc.) were corrupt.  The bankers were in bed with the politicians.  And the people suffered.  In his beloved France, Jefferson saw firsthand this insidious combination of money and power impoverish and starve the masses.  He saw revolutionary fervor grow in the Jacobin clubs.  And witnessed the outbreak of the French Revolution.  To check the power of the absolute monarchy and instill republican ideals.  And he liked what he saw.

With the backdrop of history, two men (and their followers) pulled America in two directions.  The Hamiltonians wanted to model America after the British Empire.  Rich and powerful.  Jefferson envisioned a nation of citizen farmers.  Simple farmers toiling the land.  Free from the corruption of the banks and the merchants.  With limited government.  Working with a modest federal budget.  Without any debt.  Of course, this all went out the window with the Louisiana Purchase.  When he needed a big whopping pile of money.  And a little extraconstitutional authority as well.  Sort of like a European monarch.  Which he took.  And thanks to a little thing called capitalism, the British and Dutch put together some creative financing for the French and the Americans.  They paid cash to France in exchange for the American bonds they just underwrote.  Some would say it was a bit hypocritical considering his attacks against Hamilton, but the U.S. profited very well from that purchase.  The point being is that even an ardent anti-capitalist like Jefferson had to turn to capitalism to close this deal.  Because there was no other way a young and poor nation could ever come up with that kind of money without borrowing it.

But all politicians aren’t like Thomas Jefferson.  In fact, shortly after the Founding Father generation, government began to grow.  There were political favors.  Pandering.  And corruption.  As the quality of the politician declined more unscrupulous people were attracted to government.  A growing nation needed to grow.  It needed to build things.   Armies.  Navies.  Forts.  Government buildings.  Post offices.  Canals.  Railroads.  As the nation grew it collected more taxes.  It soon had a lot of money to buy these things.  And issuing contracts for these things could be a very lucrative endeavor.  For the unscrupulous politician.  Who would only contract with those who made it worth his while.  The unscrupulous businessman.

Buying and Selling Favors for Personal Gain

This is crony capitalism.  The joining of business and government in backroom deals.  This isn’t laissez-faire capitalism.  This is the buying and selling of favors for personal gain.  And this is what many people think capitalism is.  Especially those critics on the Left.  Who think in zero-sum terms.  The only way some people can have more money is if other people have less.  Some people are lucky.  Some just aren’t.  Ability and ambition have nothing to do with it.  It’s all based on who you know.  And when money and power is concentrated in too few hands, it shuts out others from the market place.  And that’s just not nice.  Good people will be unable to make other and more important things.  So unless someone smart steps in and coordinates this economic activity, that activity will be inefficient.  It will build the wrong things.  And the wealth will accumulate in the wrong hands.

These politicians want to partner with business to make the right things.  By the right people.  The things they want to see built.  And not the things they don’t like.  A good example of this today is the electric car.  And the internal combustion engine.  They love one.  And despise the other.  They put in policies to increase the cost of gasoline-powered cars.  And the cost of gasoline.  And provide subsidies to electric car companies to help them build cars no one wants to buy.  And subsidies to consumers to reduce the price on electric cars.  So they’ll buy something they don’t want.

Currently, there is no market for the electric car.  People are buying it now for one of two reasons.  Because of the subsidies.  Or the smugness.  Yet companies are building these cars.  Why?  Well, they’re not doing it to lose money.  They’re making money.  Somehow.  But it isn’t in the market place.  And if it isn’t the market place, it can mean only one thing.  They are getting some sweet federal subsidies to build these cars no one wants.  And this just isn’t capitalism.  It’s another example of crony capitalism.

The Left hates Shareholders, not Corporations

The Left attacks the Right for being the party of the big corporations.  They’re nothing but a bunch of crooks.  The corporations.  And the Republicans.  Republicans pander to the corporations.  They want to deregulate their industries.  While consumer safety suffers.  As does the environment.  And they want to cut their taxes.  Paid for by tax hikes on the poor and working class.  To those on the Left the business corporation is evil incarnate.  Unless they want to partner with them.  And build things together.  Then they’re okay.

The Left hates corporations.  Yet it’s always the left that favors corporatism.  The partnering of business and government.  Like in Mussolini’s fascist Italy.  Or outright nationalization of the corporation.  A complete takeover by the government. Like in Hugo Chavez‘s Venezuela.  It apparently isn’t the corporations per se they hate.  It’s the shareholders.  They have no problem with these corporations making obscene profits.  As long as the politicians can share in these profits.

So there you have it.  The difference between crony capitalism and smart government.  It all depends on the amount of money flowing into the government’s coffers.  If the shareholders keep the full return on their investment then the business and Republicans are practicing crony capitalism.  If the shareholders share their return on their investment with the Democrats, then that’s smart government partnering with business.

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