LPA Foundation
Advisor Veronique de Rugy

Advisor Veronique de Rugy — LPA Foundation

View all Articles by Veronique de Rugy

Elon Musk, Crony Capitalist

April 29, 2016

Creating something that people want is how one gets wealthy in a market economy. Sadly, there's another way to get rich. It's called cronyism, and it can make billions for the lucky businesses that get government support—whether their products are profitable or not. In the process, the taxpayers foot the bill.

Taxpayer insurance against unprofitability takes many forms, from loan guarantees to grants, which provide a no-lose scenario for beneficiaries. If the business is profitable, then the corporation makes massive profits. If the business goes bust, then the taxpayers take a hit. Either way, the crony capitalist wins.

Perhaps the most prominent case of cronyism in modern history is Elon Musk. A brilliant entrepreneur, Musk founded the online payment company X.com with profits he made off the sale of Zip2—another profitable company and the first online version of the Yellow Pages. X.com eventually merged with Confinity and became the wildly successful PayPal.

And there were many other successful ventures that made Musk into one of the most successful businessmen in the world. According to Forbes, Musk is worth $14.3 billion. Much of his wealth is the result of producing brilliant ideas, creating value for others and revolutionizing the way we do business.

More recently, however, Musk has used his wealth to invest in space travel, solar panels, and electric cars. There wasn't anything wrong with that until Musk dragged the government into it. Tesla Motors, SolarCity, and SpaceX—a few of his highest-profile projects—have relied heavily on government subsidies. According to a 2015 article in the Los Angeles Times, these three companies "together have benefited from an estimated $4.9 billion in government support." And though none of these projects is profitable on its own, Musk is making a mint.

Read the full article at Reason.com: Elon Musk, Crony Capitalist

Issue Categories :