Crony capitalism and the GOP fault line

Yesterday, I discussed a new study by the Pew Research Center. It identifies two main groups of Republicans — “business conservatives” and “staunch conservatives.”

The two factions agree on much, but they part company when it comes to their attitude towards corporations. Most steadfast conservatives say too much power is concentrated in the hands of a few large companies, and they are evenly split as to whether the economic system unfairly favors the powerful. Meanwhile, only about one-third of business conservatives say big corporations have too much power, and by a 2-to-1 margin they say the economic system is fair to most people.

I downplayed the policy ramifications of this divergence. Given their mutual distrust of government, I suggested, neither faction is likely to push for a large-scale increase in the regulation of large companies or for government-mandated redistribution of income.

However, I don’t want to leave the impression that policy tensions do not exist. The major tension centers on issues related to “crony capitalism.” While distrust of large corporations does not lead staunch conservatives to favor increased regulation, it does cause them to react bitterly against government efforts to bestow special privileges on businesses. By contrast, business conservatives typically are not bothered by such arrangements, and often support them.

Right now, for example, the GOP is split over Export-Import Bank. This agency provides tens of billions of dollars in financing every year to help foreign buyers purchase U.S. goods. Beneficiaries have included Enron, Solyndra, and Hollywood studios.

The Export-Import Bank’s charter is set to expire in September. The U.S. Chamber of Commerce is pushing for renewal, and counting on support from mainstream Republican congressmen. It cites the variety of American businesses that rely on overseas sales, noting that fewer such sales will kill jobs.

However, the Chamber has encountered substantial resistance. For example, Kevin McCarthy, the new House Majority leader, says he’s opposed to reauthorization. In the past, he has voted for the Bank. Paul Ryan and Jeb Henserling are also against reauthorization.

I take no position here on the merits of the Export-Import Bank. But on the general issue of crony capitalism, I believe the GOP will have to accommodate the “staunch conservatives.” For one thing, they frequently have the better of the argument. For another, a great many conservatives are willing to wage war over this set of issues. That’s probably why Kevin McCarthy switched on the Ex-Im Bank.

A GOP willing to battle crony capitalism can remain the party of choice for pro-business conservatives. Republicans will still be the party willing to protect business from over-regulation, high taxes, etc.

Moreover, we can expect the Democrats continue their strong tilt towards anti-business populism. In this context, opposing crony capitalism would move the GOP towards the center, enabling it maintain most of its business support while appealing to conservative populists.

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