Where are the pro-market Republicans?

September 21, 2012

Remember “Sam’s Club Republicans”? The term, which described Republicans who realized their party had to do more for the working class, was popularized in an influential Weekly Standard essay by Ross Douthat and Reihan Salam. But it was coined off a comment made by then-Minnesota Gov. Tim Pawlenty. Republicans, he said, are now “the party of Sam’s Club, not just the country club.”


Tim pawlenty and Mitt Romney. (Evan Vucci - AP)

Perhaps. But Pawlenty is now working for the members of the country club, not the bargain-hunters at Sam’s Club. On Thursday, he stepped down as co-chair of Mitt Romney’s presidential campaign and announced he would be taking a new job as head of the Financial Services Roundtable, making him one of Wall Street’s top lobbyists in Washington.

But it’s not just Sam’s Club Republicans who are dejected over Pawlenty’s choice. It’s a pro-market Republicans.

In recent years, an array of conservative elites have tried to persuade the GOP that Republicans need to be the party of markets, not the party of businesses. That might seem a slim distinction, but it’s not: It’s easy for a government that partners with incumbent corporations to think it’s helping “business” when really it’s helping “a business.” And that can be very bad for the market.

Imagine a government that’s convinced by its corporate friends to extend and broaden patent laws. The politicians might think they’re helping businesses innovate. In fact, they’re harming innovation by giving big, existing businesses with armadas of high-priced lawyers a weapon they can use to flatten would-be competitors. In that way, small firms can’t get into the market and big firms, rather than remaining big by competing, remain big by litigating.

That, Luigi Zingales says, is the very definition of being pro-business but anti-market. “Being pro market is being in favor of new entries into the market. If you’re a businessman, you’re pro freedom of entry when you enter an industry, and as soon as you enter an industry, you want to raise the bar of entry.

Zingales, an economist at the University of Chicago’s Booth School of Business, is the author of “A Capitalism for the People,” perhaps the single best manifesto for this school of thought. But others who’ve embraced this vision include the Washington Examiner’s Tim Carney, the National Review’s Reihan Salam, George Mason University’s Tyler Cowen, the New York Times’ Ross Douthat. The book is blurbed by Rep. Paul Ryan, who calls it a “must-read.”

Even the tea party seems broadly in sync. The movement formed partly in anger over the bank bailouts, and as Zingales writes, chose a historical event that perfectly embodies the fight against crony capitalism. “The Tea Act of 1773 had lowered the taxes on American tea importers. But it also granted tax-free status to the East India Company, a firm so politically connected to the British government that the two were almost indistinguishable.”

Yet when I reach Zingales in Italy, he doesn’t sound too happy. “I’m disappointed in this election,” he sighs. A real agenda for ridding Washington of crony capitalism -- or at least limiting the incentives for it -- would mean, in his view, ridding the tax code of all deductions (“It’s not because you can’t find a good justification for any deduction, but when you start with one, it never ends”), reinstating Glass-Steagall, reforming the campaign-finance laws, and ending the practice of subsidizing corporations as a way to help workers (“the agenda isn’t anti-welfare; it’s for individual welfare rather than corporate welfare”). He’s not seeing that agenda, or even anything close.

Consider Romney’s comments on the dependency of “the 47 percent.” While it’s true that some Americans are dependent on government -- though far fewer than 47 percent -- so are many corporations. But the difference between those corporations and those Americans is that those corporations are in the audience of the $50,000-a-plate fundraisers like the one where Romney made those remarks.

Indeed, if you were going to make the optimist’s case for the Romney campaign right now, it would come down to one word: Money. Alongside the Republican-allied superPACs, they’ve got a lot more of it than the Democrats do. That’s in no small part due to Wall Street, which has swung from donating to Democrats in 2008 to showering money on Republicans in 2012. Eight of Romney’s top 10 contributors are banks.

And yet, if you had to pick the single largest corporate recipient of government welfare in recent years, you’d have to go with Wall Street. The federal government bailed it out in 2008 and 2009 and the Federal Reserve has kept it awash in cheap cash ever since. Now, with the Dodd-Frank regulations being hammered out, Wall Street is spending heavily to try to elect a friendly president and get the best deal it possibly can. Romney, who has promised to roll back not only Dodd-Frank, but also the post-Enron Sarbanes-Oxley law, looks to be their best bet. And, by hiring Romney’s friend and campaign co-chair Tim Pawlenty, they're doubling down.

The shame is that the country could really use some Sam’s Club Republicans. It could also use some pro-market Republicans. Perhaps, if Romney falls short in this election, we'll get some.

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Sarah Kliff · September 21, 2012