Yet Another Example Of Crony Capitalism Shows Itself

Crony capitalism has always been a problem, both here and in other countries. As much as I would like to think that here in the US that it's primarily a problem involving Democrats, I know that it cuts across all political lines. The latest example of that is the recent singing of a bipartisan bill by Michigan's Republican Governor Rick Snyder that makes it illegal for any automaker to sell vehicles through any outlet other than franchised dealers.

The so-called Anti-Tesla Bill, named after Elon Musk's Tesla Motors, prevents Tesla from selling its cars in Michigan unless the purchase and delivery is made by a dealer. In other words, they have to use the same old tired method all of the other auto companies have used since the dawn of the mass produced car. The problem: the old way of doing things is inefficient, adds cost, and requires middlemen to handle all of the sales. Tesla wants to sell through company owned showrooms, much like Apple sells most of their products. The legacy automakers are using legislation to prevent newcomers from taking a piece of their pie by forcing them into using the old and inefficient method of selling cars. It's a perfect example of crony capitalism. Rather than beating them through competition they beat them through lawmaking.

The Michigan bill, originally focused on franchise-dealership fees, included a last-minute amendment addressing direct-to-consumer auto sales through manufacturer-owned showrooms. That amendment, added by Republican State Senator Joe Hume, was tossed onto the bill at the very last minute, a procedural loophole that meant the amendment never underwent public comment or debate on the State Senate floor. Michigan Governor Rick Snyder just signed the bill into law.

Snyder, also a Republican, is up for re-election in a couple of weeks. If he didn’t sign the bill, he would have likely faced an immediate onslaught of attack ads paid for by Michigan’s auto dealers—something that would not have helped his cause in a race he leads by a slim margin.

“Not content with enshrining their ability to charge consumers dubious fees, on the last day of the legislative session, the dealers managed to make a last-minute change to the bill in an attempt to cement their broader retail monopoly,” Tesla said in a statement. “Using a procedure that prevented legislators and the public at large from knowing what was happening or allowing debate, Senator Joe Hune added new language in an attempt to lock Tesla out of the state.” Tesla’s statement goes on to point out that the Michigan Automobile Dealers Association is one of State Senator Hune's top financial backers.

The auto industry isn't the only businesses trying to prevent new ways of doing things. All one needs to do is look at the tactics of the taxi industry in their efforts to kill competition from companies like Uber and Lyft. Heaven forbid someone comes along that can do the job better, faster, and less expensively than the existing taxi companies. Rather than making changes to compete with the newcomers they're trying to get cities and states to ban these competitors entirely. That alone tells me that any such legislation should not be passed, and if passed, should be vetoed. The taxi companies have no inherent right to continue to exist if competition enters the market and provides better service. If the taxi companies can't evolve in order to stay in business, then they shouldn't stay in business.

These are but two examples of the rent-seeking and crony capitalism that infests government at all levels. Unless we can find a way to do away with it, we will become no better than so many other nations where cronyism runs rampant and cripples economic growth.