On the Nature of Capture

One of the most insidious ways of misappropriating surplus arises from capture. Capture of a government function by a special interest (as opposed to the public interest) allows the special interest to change the rules that bind the social contract (that government is mandated to enforce) in their favor. This change in rules advantages the special interest and, ipso facto, disadvantages everyone else.

If a lobbyist convinces a legislator to sponsor a bill providing farmers of a certain crop a subsidy and it passes the legislature then surplus expropriated by the government in the form of tax revenues (including your taxes) would be directed to those farmers. This is an appropriation of your wealth or income (i.e., surplus) for the benefit of those farmers. The farmers’ lobbyist has captured a small portion of the government and changed the rules to benefit a special interest.

A prime example of this would be the corn ethanol subsidy program that benefits Iowa farmers (no presidential candidate proposing elimination of these subsidies would get very far in the Iowa caucuses) and large corporations like Archer Daniels Midland. Corn-based ethanol receives multiple forms of subsidies (an indicator of the amount of capture) including direct payments to farmers, mandates to gasoline distributers to blend ethanol in their products and tariff protection from low cost producers like Brazil. They even stretched the authority of the Commodity Credit Corporation (an agency created by President Franklin Delano Roosevelt during the Great Depression and used by President Trump to compensate farmers for the negative impact of his tariffs) to finance the blender pumps required when ethanol is added to gasoline. Wow, talk about capture!

When most people think about lobbyists capturing parts of the government for their clients they presume that these “special interests” are Wall Street banks and large corporations. And in many cases they are. But there are many forms of “special interests.” There are, of course, banker and industry associations. But there are also unions (such as government employee and teachers unions), advocacy groups (such as the National Rife Association) and even charitable groups (such as the Parkinson Foundation). All of these groups (and their high priced lobbyists) push for benefits or special treatment for their members to be paid for by the government’s confiscation of wealth from other taxpayers.

You cannot, of course, totally eradicate capture. It is human nature to try and improve your position in the world and to increase your wealth. And it is often easier to capture other people’s surplus than to produce surplus yourself. And since government has the greatest power to extract wealth from the producers of surplus, it is no surprise that many people attempt to use that power in their own special interest.

But while monopoly, fraud and theft are illegal; capture reconfigures the structure of the law toward private interests. The ability to reconfigure the structure of the law is far beyond the capabilities of the average citizen. Only an infinitesimally small number of individuals and institutions wield such power.

This power tilts the playing field to the advantage of these special interests and, while it is beyond the power of most citizens to wield such power, the average citizen knows when the field is being tilted. And he or she knows instinctively that it is not being tilted in his or her favor. This knowledge undermines trust in the government and, because the government is supposed to be the protector of the social contract, in the social contract itself.

It has long been known as the “Establishment.” Hipsters (mostly aged by now) called it “the Man.” Now it is called the “Swamp.” Populists of the left and right try to convince their followers that they can easily break the grip that the elites have on government and free the surplus for the people (or at least the people with the identity favored by the populist leader). But populists do not liberate our democratic institutions from the grip of special interests. Instead they destroy these institutions retaining the ability to distribute the extracted surplus in their own hands (usually with the accompanying cult of personality).

Capture of the government is not just an American problem. It applies to all countries around the world. But in most countries the people just shrug their shoulders. In authoritarian states there is little they can do until they are driven to the point of bloody revolution. In much of Latin America, the playing field has been tilted for so long that they don’t know what a level playing field would look like. But in Western democracies there is an opportunity for reform.

But leveling the playing field is not an easy task despite what populist leaders claim. A lack of trust in the social contract makes citizens vulnerable to the enticements of populists so it is easy to fall prey to these false messiahs. Most of these institutions need reform, not demolition. We need to discuss reasonable reform that will restore our democratic institutions and lead us eventually to the restoration of our trust in the social contract that we call America.

Next we will look at how to institute needed reforms for the three main kinds of capture of the government; incumbency, deep state and revolving door.