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Yes, Corruption Cripples the Economy

in Business and Economy, Economic Liberty, Economics, Liberator Online, News You Can Use by Alice Salles Comments are off

Yes, Corruption Cripples the Economy

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

When analyzing the potential ramifications of picking one presidential candidate over the other, many prefer to overlook claims of corruption. On one hand, voters might not be exactly aware of what corruption may entail, but on the other, they might not be entirely sure of how corruption taking place in high levels of government will ever impact their personal finances. Unfortunately for those who do not seem to understand how corruption affects them, the consequences of rent-seeking and influence-peddling schemes go deeper than we expect.

corruptionIn Protectionism vs. Corruption: Which Is Worse for the Economy?, economist D.W. MacKenzie writes that while “an overwhelming majority of economists have agreed on the benefits of free trade since 1817,” many contemporary politicians believe that some trading restrictions help boost the U.S. economy.

But when it comes to analyzing the impact of corruption, few seem to take into consideration that political corruption “impairs economic efficiency and lowers living standards.”

Traditionally, corruption has always been treated as a legal affair, which might explain why the population’s attention is steered away from the real-world consequences of the practice.

According to MacKenzie, the problem with widespread corruption is that special interest groups take advantage of it, lobbying government elements directly to provide them with special treatment, therefore transferring wealth “from the general population into their pockets.” When analyzed closely, these special relationships between private industries and the government “make us all worse off” because the resources used to ensure these groups’ needs are being met could have been spared. In other words, taxpayer money spent on what many call corporate welfare could have stayed in the consumer’s pockets and then used for other purposes, getting that amount back into the economy and helping to make it grow.

Another aspect of political corruption that is often ignored is that free trade is the necessary condition for economic growth to occur, but in countries where markets thrive, their governments are often less impacted by corruption. Considering political corruption is inefficient and bad for growth, MacKenzie concludes, giving more power to politicians known for being corrupt will further damage the economy.

As voters cast their ballots for president, they must have in mind that the only policy that will bring economic growth and peace to America is the complete elimination of barriers to commerce, getting the government completely out of the business of picking winners. Unless the link between the government and the rent seeker is severed, there will be no room left for prosperity.

Did the Government Offer a Contract to New Balance in Exchange for TPP Support?

in Business and Economy, Economic Liberty, Economics, Liberator Online, News You Can Use, Trade & Tarrifs by Alice Salles Comments are off

Did the Government Offer a Contract to New Balance in Exchange for TPP Support?

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

Government has a way of selling incredibly bad economic deals by calling them free trade agreements. Haven’t you noticed?

ShoesThe Trans-Pacific Partnership, or TPP, is a trade agreement between Pacific Rim countries, including the United States, that hopes to “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labor and environmental protections.” But according to information released by WikiLeaks, only five of TPP’s 29 sections deal with trade.

At the time, WikiLeaks’ Julian Assange claimed that many of the other sections dealt with Internet regulations, which includes details on what specific type of information Internet service providers will be required to collect once TPP is enacted.

To former congressman Ron Paul, TPP is dangerous because of the several items listed in its sections that benefit special interest groups. Instead of opening up the market, Paul argues, TPP would boost “world government,” meaning that international nations would unite for all the wrong reasons, such as spying on its citizens. Opening up the trade among individuals in different parts of the globe, Paul explains, has little to do with the effort.

To folks at Tech Dirt, TPP has always been bad, mostly because of the issues mentioned previously. But as reports claiming the US government has allegedly pressured a shoe company to back TPP in exchange for exclusive contracts hit the news, we learn that power players behind the TPP might be just as corrupt as the politicians under fire in South America over one of Brazil’s largest embezzlement schemes in recent history.

According to New Balance, an American footwear company from Boston, Massachusetts, the US government allegedly promised the shoe company would get a “big government contract” if the company stood by TPP.

Unfortunately for New Balance, the deal never came through.

According to the Boston Globe story, It wasn’t until 2015 that New Balance chose to stop criticizing the deal. Until then, the company resisted supporting the pact for years. If what New Balance now alleges is true, executives only chose to change their tune after the Department of Defense claimed it would consider choosing New Balance for a contract to outfit recruits.

So far, New Balance hasn’t received any official contract proposal, and New Balance now say Pentagon officials are intentionally delaying the purchase.

While the US government claims that the contract problem is not associated with TPP in any way, the company is now renewing its battle against the TPP. For all the wrong reasons.

According to Tech Dirt, New Balance claims that while most of the uniform purchased for the military is made in the United States, sneakers are the exception. With that in mind, New Balance decided to offer its products to the government, hoping to obtain a contract. That’s when a representative for the current administration “more or less” asked New Balance to accept a compromise version of the trade deal in exchange for a pledge of help in pressuring the Department of Defense to expedite the government’s purchase of American-made shoes.

According to the Defense Department, New Balance didn’t get the contract because its sneakers aren’t durable or inexpensive enough. Regardless of what the government alleges, Tech Dirt claims, the idea that the government may have offered the company deal if it sided with its trade deal is “highly questionable.”