China Still Relies on Connections

An interesting article in today's Financial Times concerns the fall of Bo Xilai and his relationships while still party head in Chongqing. He relied heavily on recommendations from friends and family matters rather than following the party bureaucracy or other channels. This is always a problem in political rather than business settings, although big business often likes working with politicians in this way. Competing for access to an important political figure may be better than competing in marketplace. It happens here too, but fortunately not as often as in much of the world.

Is Obama Anti-Business or Anti-Markets, Part II

Now that I am back from Germany and done with the spring semester, I plan to post more regularly. In an earlier post, I discussed whether Obama is actually anti-business or anti-markets. The question is relevant because the two are not the same thing. Obama has said he is not anti-business, and offers support things like the bailout of General Motors. But, that act makes him anti-market. An op-ed piece in today's Wall Street Journal written by the governor of Indiana offers another explanation as to why that is the case. He reminds readers that the bailout of GM and Chrysler resulted in unique bankruptcy proceedings--proceedings that caused secured debtors to lose much more than would have been the case under normal bankruptcy procedures. This violation of the "rule of law" is anti market even if it helped two large firms. Once again, when government picks favorites in business they are not being pro-markets. They are also not being pro-business since some businesses are helped and others harmed by the favoritism.

Is Obama Anti-Business or Anti-Markets? Part I

Below is an e-mail I sent to Squawk Box this morning after hearing two of the hosts debate whether President Obama's policies are ant-business. In a CNBC interview yesterday, the president said that he was in favor of markets. My message was:

Three comments on the discussion this morning between Joe and Carl about whether the Obama Administration is anti-business. First, the financial firms on Wall Street and business are not one and the same. Obama is correct when he says that the financial sector is to facilitate business. Second, Obama is clearly in opposition to the market system since he wants to use taxes and subsidies to reallocate resources in the economy. Obama is smart and the danger of smart presidents is they think they know better than the market where to invest capital. Third, many business leaders, especially of large corporations, don't favor the operation of the market system. They want tariffs when facing import competition, or tax breaks, or subsidies and so on. Crony capitalism is often favored by business and members of both major political parties.

I will elaborate more later, i.e., when this semester is over.