Friday, August 08, 2008

I just finished Free Lunch by David Cay Johnston. Subtitled "How the wealthiest Americans enrich themselves at government expense (and stick you with the bill)", it is a follow up to Perfectly Legal, his book on taxes that I discussed here.

Free Lunch has a lot of the same virtues of Perfectly Legal, and a lot of the same vices - Johnston does a good job of presenting a polemic that should raise anyone's ire about the current state of affairs, but falls down on explaining or understanding why this state of affairs exists or how to fix it.

The book goes into great detail on how free market rhetoric is used to push changes in regulatory systems that are really not deregulation, but just changes in regulation that favour one side over the other, and how government is used, often in secret, to funnel money to small groups of people. The most common terms for this are corporate welfare or corporate socialism.

But there are a number of problems with how the book is written. First, there are problems with organization - in the chapter on how sports franchises profits come mainly from subsidies, he gets derailed in talking about George Steinbrenner and ship building business. Second, there are problems with tone and journalistic standards - he mixes fact and one sided opinion very freely throughout the book without properly differentiating between them. Third, there are problems with math and argumentation - he counts discounted expected sales tax over many years as part of a subsidy, and then compares it to the single year earning of a business.

But all of those are minor flaws compared to the main one - he doesn't understand the political, and philosophical, context that underlies the facts he talks about. He discusses the growth in America post WW2, and contrasts that with more recent times, but doesn't understand that the expansion of government influence post New Deal, which accelerated after WW2 and got it's tendrils into every part of American life, is fundamentally to blame for the later results that he decries. Once this un-accountable system was in place, it is inconceivable that it wouldn't be turned from benefiting one group to benefiting another. And it is easy to understand why the group with the most resources, in every way, would come out on top. Once you have started the equivalent of gang war, why is it surprising that the strongest group comes out on the top of the heap?

But looking past those flaws, this is a valuable book that should be read as widely as possible so that people understand the extent of the corruption in the system, in order to make them understand that what is needed is not incremental fixes to the system, but a new understanding of the base of the system and why the gov't influence that exists is wrong. At times, Johnston sidles around this idea but in the end he seems to blame the problems on the emphasis on free markets, even though at other times he makes it clear that what are being set up are really fake free markets.

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