Definition and moral foundations
Free-market capitalism, as discussed on The Bob Zadek Show, is presented as a system resting on mutual respect, property rights and voluntary exchange rather than on force. In an episode aired days before a presidential election, Bob Zadek framed the contest as a referendum on capitalism itself, saying that “capitalism is running for office,” and introduced Tom G. Palmer of the Cato Institute to explore the morality of capitalism The Morality of Capitalism (2012).
Palmer described free-market exchange as the absence of coercion: if he does not want to buy a book or eat at a restaurant, he does not have to, whereas government intervention takes money from one person and gives it to another “with the force of law.” He distinguished this from government-subsidized bailouts for big banks and subsidies for large agribusiness companies, which he called government interventionism rather than free-market capitalism. Palmer said the best cure for cronyism is free markets — getting rid of privileges, subsidies and bailouts, which he called despicable, shameful and fundamentally immoral The Morality of Capitalism (2012).
Zadek argued that capitalism presupposes a legal, moral, cultural and social system, not merely an economic one. Palmer answered that the legal foundation is rule of law, well-defined and legally secured property rights, and the ability to transact at relatively low cost. In poor countries that do not benefit from free-market capitalism, he said, property rights are not well-defined, people spend their time fighting over water or land, the police and legal system do not work, and the government is typically the biggest robber and predator around. He added that a culture open to the future and to innovation is a second necessary element The Morality of Capitalism (2012).
Creative destruction and the democratic vote
Palmer invoked Joseph Schumpeter’s phrase “creative destruction” to describe capitalism’s constant introduction of new products, new ways of doing business and new kinds of organizations. He contrasted this with a static view of business firms and noted that the last 200 years have seen more change than all previous millennia, citing electric lights and the shift away from reading by whale oil. Zadek added that this change is the direct result of a free-market system, which he said improves the well-being of the planet more than any other political or economic system The Morality of Capitalism (2012).
Zadek described capitalism as the most small-d democratic economic system because everyone votes every minute of every day with dollars and labors, choosing which products are good and how to spend the day. He contrasted this with government dictation of the kind of car a buyer may purchase and what kind of lightbulb may be used in a bathroom fixture. Palmer agreed, saying people are generally better judges of what is good for them than others are, and that officials who claim to know what is good for you “always find ways to do what’s really good for them at your expense.” He pointed to the highest per capita income counties in the United States being in Washington, D.C., where government salaries and lobbyists concentrate The Morality of Capitalism (2012).
Cronyism, bailouts and the erosion of property rights
Zadek said the GM bailout showed government stepping over the rights of creditors of General Motors, taking charge of the bankruptcy case and destroying creditors’ property rights to favor the UAW and other unions. He also cited the EPA’s broad powers of confiscation over wetlands or alleged wetlands as an example of the creep of government over property rights. Palmer called the General Motors case an example of egregious corruption, saying settled and established bankruptcy laws were overridden and creditors’ rights eliminated to hand out goodies to buddies. He also cited the Solyndra case, in which a fundraiser he identified as the president’s good buddy received over $600 million in loan guarantees before the company went broke, and said such actions violate fundamental property rights and legal equality before the law The Morality of Capitalism (2012).
In a later episode, Zadek and guest Sean McElwee found agreement on the diagnosis. Zadek said governmental policies commonly called crony capitalism favor a few, usually the rich and powerful, at the expense of the many, and that the system is sick in that regard; he called it a perversion, not free-market capitalism. McElwee had opened by distinguishing pro-market from pro-business policies, saying much of what is pushed in Washington as pro-market is actually pro-business, and described middle-out economics as a response to a narrative of cutting taxes for the wealthy in the expectation that the wealth would be invested to create jobs Inclusive Capitalism: Economic Savior or Socialism in Disguise? (2015).
Competition and the universal-service constraint
Bill Frezza offered an industry case study. He recalled a Bell System Technical Journal article stating that for the Bell System to introduce a data service to homes, it could never run faster than 9,600 bits per second. He attributed that belief to the premise of universal service: any service introduced anywhere had to be available everywhere, so a high-speed service limited to certain areas would create a digital divide. Frezza contrasted this with the PC industry, which was not looking at universal service but at who would buy its products; early machines were underpowered and overpriced, and profits from a small sampling of buyers funded higher-power machines at lower prices in a virtuous cycle until everybody could afford one — not because of universal service, but because of free-market capitalism Bill Frezza’s History of Telecom Innovation (and Not) (2015).
Frezza called cell phones the perfect testament to free-market capitalism, noting that Research In Motion created the smartphone category and that its position was not permanent in a competitive market. He observed that no one owns their position in a competitive market and that the iPhone’s dominance remained to be seen, describing the area as one of constant ferment Bill Frezza’s History of Telecom Innovation (and Not) (2015).
Across episodes: the same question in two eras
The 2012 and 2015 episodes both take up the distinction between free-market capitalism and crony capitalism, and the excerpts show no development between them: Zadek states the distinction in 2012 and restates it in 2015, while Palmer supplies the bailout and subsidy examples in the earlier episode and McElwee supplies the pro-market versus pro-business framing in the later one. Frezza’s 2015 episode touches the topic through the universal-service constraint and the PC industry’s virtuous cycle rather than through the cronyism question.
What the sources do not cover
The excerpts do not state the outcome of any election, the fate of any bailout or loan guarantee beyond the Solyndra company going broke, or the legal disposition of the GM bankruptcy. They do not give the founding date or full text of any statute, the holding of any case, or the amendment any case turned on. Palmer’s book is mentioned as downloadable for free as a PDF, but the excerpts do not describe its contents beyond the first part’s statement about privilege and plunder. Several sections end mid-sentence or at a break, and nothing is reported from beyond those points.