Crony capitalism and the auto bailout (2011)
In a July 2011 episode, Bob Zadek argued that “pro-business” is a deceptive concept, because business and free markets are basically unrelated. He offered General Electric as his example, calling it a government agent disguised as a business, so in-bed with the political process and so dependent on it for profitability and survival that it would fear the free market. Don Boudreaux agreed and extended the list, naming General Electric, Archer Daniels Midland, Martin Marietta and Boeing as so-called businesses that suckle at the teat of government. The Second American Revolution – NOW (2011)
Zadek then turned to the Obama administration’s announcement doubling the CAFE fuel mileage standards, describing the automobile CEOs who appeared with the president as puppets nodding in agreement. He said they had no choice, because government owned one of them or a substantial portion and was a creditor of another, leaving them so dependent that they did not dare protest a policy he called bad for the automobile buying public, bad for the manufacturers and stifling to competition. It was in this context that Zadek said the executives “might as well be working for the US Department of Commerce,” calling them “just arms of the federal government.” The Second American Revolution – NOW (2011)
Boudreaux framed the same phenomenon as wanting to take the “crony” out of “crony capitalism,” arguing that crony capitalism is not capitalism at all but cronyism, and that General Electric is a monument to it. The Second American Revolution – NOW (2011)
The Lacey Act and the Honduran fish case (2015)
In a February 2015 episode on overcriminalization, Brian Walsh told the story of Abner Schoenwetter, an importer of seafood for about 20 years with no violations, who had conformed to all USDA and FDA requirements and inspections. A bureau of the Department of Commerce received an anonymous fax claiming that his shipment was going to be illegal, and his ship was boarded. “You’re Under Arrest!”: Overcriminalization with Brian Walsh (2015)
Walsh said Schoenwetter had not violated any U.S. law per se; he had allegedly violated Honduran regulations, which the Honduran government later said were not valid and enforceable at the time. One such regulation required seafood to be packaged in cardboard boxes under Honduran law; Schoenwetter had used un-leakable plastic bags. Under the Lacey Act, Walsh explained, every violation of any nation’s fish or wildlife regulation on earth becomes a violation of federal law punishable by time in a federal penitentiary. Schoenwetter served eight years in prison. “You’re Under Arrest!”: Overcriminalization with Brian Walsh (2015)
Walsh noted that the Honduran regulation was not promulgated by the legislature but created by a bureaucrat in another jurisdiction in Honduras, and that the Attorney General of Honduras gave a sworn statement that the regulation was not valid and enforceable during that time. He added that Congress did not look at every law or regulation of every nation on earth when it enacted the Lacey Act. Zadek called it lazy, thoughtless legislation and legislative malpractice, and asked listeners to imagine being in prison for eight years for that act. “You’re Under Arrest!”: Overcriminalization with Brian Walsh (2015)
Agency capture and industrial policy (2022)
In a May 2022 episode, Scott Lincicome described what happens at agencies under the public choice model: agencies that start out with a perfectly altruistic intent, started to benefit the public, over time become captured by the industries they are trying to regulate and become de facto arms of the industry itself. He said this is visible with the Department of Energy and with the Department of Commerce, which he said is “effectively part of the steel industry.” He added that the maritime regulator is effectively an arm of the shipbuilding sector, which benefits from the Jones Act. Rethinking Industrial Policy (2022)
Lincicome gave three examples of how consumers are harmed. First, government investment in renewable energy in 2009 and 2010 crowded out private investment, leaving workers at companies that did not get government money without capital, unemployed, struggling financially or bankrupt. Second, steel tariffs — including President Trump’s 25% tariffs on all sorts of steel — are an involuntary transfer of dollars from steel consumers to the American steel industry, which along with the United Steelworkers union lobbied heavily for them; domestic producers raised prices and got windfall profits at the expense of steel-consuming manufacturers. Third, the Jones Act restricts shipping between US ports to American-made ships owned and crewed by Americans, inflating US shipping costs and acting as an effective blockade on trade between the United States and other parts of the United States, particularly Puerto Rico, Hawaii and Alaska. Rethinking Industrial Policy (2022)
Lincicome said studies show the Jones Act increases prices in Puerto Rico substantially while delivering windfall profits to the Jones Act shipping industry, and that Puerto Rico buys its natural gas from Russia instead of the United States, denying American oil and gas companies that business. Northeastern refineries do the same because it is cost-prohibitive to get oil from the Gulf of Mexico up to Boston. Rethinking Industrial Policy (2022)
Zadek framed industrial policy as the opposite of economic freedom, saying it takes away the right to select what we choose to purchase, and argued that the weakest lobby in government is the one representing ordinary citizens. He said industrial policy is directed to benefit the few always at the expense of the many, invoking Frédéric Bastiat’s reference to the unseen. Rethinking Industrial Policy (2022)
Across episodes
The three episodes treat the Department of Commerce differently rather than developing a single argument. In 2011 Zadek used the department as a simile for captured automakers, saying the CEOs might as well be working for it; in 2015 Walsh described a Commerce bureau acting on an anonymous fax in a case that sent an importer to prison for eight years; in 2022 Lincicome described the department as effectively part of the steel industry. The earlier treatment is rhetorical and the later treatments are institutional, but the excerpts show no explicit development from one to the next, and no guest in a later episode responds to an earlier one.
What the sources do not cover
The excerpts do not describe the Department of Commerce’s founding, its statutory authority, its secretary or its full range of bureaus. They do not state what the Lacey Act says beyond Walsh’s summary, nor which amendment or constitutional provision any case turned on. They do not give the outcome of the Gibson Guitar raid, which is announced as a section heading but has no content in the excerpt. They do not say whether any of the described policies were changed, repealed or upheld.