Skip to comments.How Corruption Is Strangling U.S. Innovation
Posted on 12/09/2012 1:14:03 AM PST by Usagi_yo
If there's been one topic that has entirely dominated the post-election landscape, it's the fiscal cliff. Will taxes be raised? Which programs will be cut? Who will blink first in negotiations? For all the talk of the fiscal cliff, however, I believe the US is facing a much more serious problem, one that has simply not been talked about at all: corruption. But this isn't the overt, "bartering of government favors in return for private kickbacks" corruption. Instead, this type of corruption has actually been legalized. And it is strangling both US competitiveness, and the ability for US firms to innovate.
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(Excerpt) Read more at blogs.hbr.org ...
This really gets my goat.
The Obama administration has transplanted Chicago politics to D.C. Stimulus, the green energy loans, even Obamacre has all been about lined the pockets of Obama supporters. It’s not just giving favors to contributors. If you don’t pay, you don’t even get to play.
Institutionalized corruption. We have turned into a third-world country in that regard.
In a previous business that dealt with both the private sector and state government, the only times I have been asked for a bribe was once from a politician and once from a high state bureaucrat.
But as with all things liberal, we must be very careful about the meaning of words. So, what exactly is “corruption”? I would suggest that corruption has become so sophisticated that it wear a suit (or pants-suit) and stand in front of a press conference and tell us with a straight face what it plans to do, and the media will cheer it on.
What is it when a politician signals to his supporters that anyone who presents a plan for a brand new business, using brand new technology that could be touted as advancing the green agenda would quickly receive full funding via grants with no strings attached and little oversight?
The Solyndra debacle has the appearance of a vast plan to payoff friends, where there was no downside, and only upside. How many press conferences was Solydra good for touting? Now that it has collapsed, of course the government investigation is “ongoing”, but we are assured it will be thorough and any wrongdoing will be dealt with. But should this not be true, even in part, will it also be a form of corruption if these efforts turn out to be kabuki, that is elaborate theater which has a known outcome, mainly to excuse those involved so they escape.
We all know that when the bartender waters down the drinks, that is a form of embezzlement or theft. If the owner of the tavern told all his bartenders they must water down the drinks, we would say he ran a corrupt company.
If so, then what is it when government deliberately by official policy stated in study papers, Congressional testimony and in press conferences, tells us its targeted rate of money dilution? Well, just Google “Federal Reserve targeted rate of inflation”. There will be lots of news stories and even speeches by members of the Federal Reserve’s Board of Governors.
Here is the subhead from one news story, a Reuters story from January 25, 2012: “The Federal Reserve took the historic step on Wednesday of setting an inflation target, a victory for Chairman Ben Bernanke that brings the Fed in line with many of the world’s other major central banks.”
And there is this press release from the Federal Reserve itself:
Release Date: January 25, 2012
For release at 2:00 p.m. EST
The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. ...
Keep in mind that the price (in dollars) of assets like land and homes held by US citizens will generally respond to inflation. If the monetary policy of the Fed causes the general price level to double, the market price of a home or piece of land should also roughly double. But government has given itself to define what exactly it considers to be “income” for purposes of taxation, and it taxes changes in the number of dollars as if it was “income”.
So, if you bought a field for $100,000 and ten years later sold it for $150,000, your “gain” was $50,000 and you owe taxes on that gain. But what if that “gain” was solely due to the Fed’s monetary policy of printing money? What if your field was not really more valuable in relation to any other nearby field and the gain was just because of Fed inflation?
This is corruption on such a massive scale that many people cannot see it. To them, it is like when a fish cannot see the water he is swimming in.
Yes, corruption is strangling the ability of the private sector to create wealth. And the vast majority of that corruption originates in government. That corruption started with the corruption of the 13 enumerated powers and the corruption of the Courts and legislatures to allow government to break the bonds of those powers. Since personnel is policy, it also is rooted in people who love the power that government gives them more than they love the moral law that God gives all of us.
As a result of all of this, we are lurching towards socialism, a system that is corrupt, a system that is based on lies, coveting and theft. In the end, socialism corrupts the human spirit. This is exactly the theme of Václav Havel’s essay on life under socialism: The Power of the Powerless 
Our system is most frequently characterized as a dictatorship or, more precisely, as the dictatorship of a political bureaucracy over a society which has undergone economic and social leveling. I am afraid that the term “dictatorship,” regardless of how intelligible it may otherwise be, tends to obscure rather than clarify the real nature of power in this system...
To wandering humankind it offers an immediately available home: all one has to do is accept it, and suddenly everything becomes clear once more, life takes on new meaning, and all mysteries, unanswered questions, anxiety, and loneliness vanish. Of course, one pays dearly for this low-rent home: the price is abdication of one s own reason, conscience, and responsibility, for an essential aspect of this ideology is the consignment of reason and conscience to a higher authority. The principle involved here is that the center of power is identical with the center of truth....
Havel goes on to explain that under socialism, government must seize control of what it defines as “truth” for the sake of maintaining power. But the “truth” it seeks must violate economic laws and the truth about socialism is that its economics are not sustainable, a concept the left loves to scold us about. This was proved by economist Ludwig von Mises  
The more that truth must be subverted to sustain the State, the more natural tension builds up in society. The more conflicted the average person must be and the more corrupt that government must become in order to sustain its version of the truth. And many people give themselves over to lies in order to gain access to power.
Socialism is massive corruption of the economy and the human spirit. Sadly, we are headed in that direction at warp speed.
 Economic Calculation in the Socialist Commonwealth by Ludwig von Mises— http://mises.org/pdf/econcalc.pdf
 Why a Socialist Economy is “Impossible” by Joseph T. Salerno— http://mises.org/econcalc/POST.asp
It is often the case that some of the “corrupt” practices the article talks about don’t meet the measure of “corrupt” if you employ even a minimum of critical thinking skills.
In the case of Apple and auto companies, both have complex relationships with retailers that have every right to expect fair treatment.
Retailers have the expectation that they will not be disadvantaged by having to compete against special deals from “company owned” outlets.
I personally do not like the way Apple engineers everything to be incompatible with third party peripherals and software, but I don’t want a Federal regulation to step in and force them to change. I wouldn’t be very happy if Bill Gates was the only supplier of the PC related components either.
Speaking of corruption:
GAO Report Confirms Pigford Designed for Undetectable Fraud
Breitbart News has been reporting for years now that the Pigford settlement allowed people to collect $50,000 just for claiming that they “attempted to farm” and that no other proof was needed. As a result, many claim that billions of dollars in fraudulent attempted to farm claims were paid out by the federal government. The new GAO report actually confirms what the late Andrew Breitbart pointed out time and again: the Pigford settlement is a massive swindle on the U.S. taxpayer, and it was designed that way from the start...
The USA is basically closed for business.
You missed the point on that particular example. It stiffled an innovation from "company owned" developer who couldn't market their product and couldn't innovate as a direct result thereof. Vertical markets are self-limiting by way of contractual agreements between "Retailer" and "Company" to the mutual benefit of both. No need for government to even be there.
Then again, with Obamacare, the younger we die the cheaper the costs.
Yea, but there's always the politicians themselves needing extended healthcare.
It isn’t just government. Here’s a true story.
At a multinational corporation a new president is assigned to a mediocre performing division. Instead of taking what all too often is the short term fix it approach of slashing headcount and outsourcing production he persuades the corporate CEO to give him two years to beef up the new product pipeline. He hires the most talented design people in the industry from competitors. Two years later this company is the fastest growing and within three years is the most profitable in the corporation.
At the three year mark the innovation team develops an idea that will revolutionize the industry and potentially create an entire new business. It will take 5 years to develop and bring to market at a cost of $2 million per year. Based on his track record, the division president persuades corporate management to let him make the investment. Another two years passes and the project is on track but due to a recession sales and profit growth at the division have slowed. The president who started the innovation program is dismissed and a new cost cutter is brought in. He wipes out the innovation team immediately dropping several million to the bottom line. Once he has “fixed” performance he moves on to the next assignment. The revolutionary innovation is ultimately brought to market by a foreign competitor which acquired the intellectual property by hiring a fired member of the design team. The once strong performing division, without a new product pipeline to sustain its reputation as the leading innovator in the industry, rapidly loses customers and market share. Ultimately it returns to mediocre performance and is sold to a private equity firm that strips its assets and drives it into bankruptcy.
Innovation in America is being killed as much by the short term profit mentality as it is by government regulation. innovation can take years to develop and bring to market. In today’s short term profit driven environment, few companies have the resources or courage to make investments with a long incubation period and long term payback. The days of JP Morgan financing the building of ships, railroads, and factories is over.
Sounds like the company I work for. You are correct, short term solutions suck.
True, but it will not be just the cost of the development of new technologies and drugs, it will be the stifling of original thought.
The Soviets and other despotic countries always ended up using the free world to treat their leaders at whatever cost was incurred. Since the free world is now being almost totally eliminated all over Earth original thought and breakthroughs will slow to a crawl no matter how much money is thrown at it.
Government directed research is almost never as effective as the free market. There are exceptions, but not many.
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