Outside the Beltway

Rick Perry’s Crony Capitalism

Rick Perry's vision of capitalism doesn't exactly comply with what Adam Smith had in mind.

Doug Mataconis · Thursday, August 18, 2011 · 9 comments

While Rick Perry’s entry into the Presidential race has been treated positively by most on the right, there have been a few critics of the Texas Governor and his record. Karl Rove, for example, has been among those criticizing Perry for his intemperate remarks about the Chairman of the Federal Reserve Board. To be fair, though, Rove and Perry have a contentious history that goes back to the days when Perry was George W. Bush’s Lt. Governor, and Rove ran Kay Bailey Hutchinson’s effort to defeat Perry in the 2010 GOP Gubernatorial Primary. Another issue where Perry has been receiving fire from the right has been his decision in 2007 to require Gardisil injections for all 11 year olds entering Texas schools, which I wrote about on Tuesday and Michelle Malkin has covered this week as well.

Of all the conservative/libertarian criticisms of Perry that have come out so far, though, the most interesting has been the one that goes right to the heart of what is clearly his proudest achievement, Texas’s job and business creation record. Charles Dameron fired the first shot at Perry on this issue in a Wall Street Journal the day after Perry entered the race. Dameron focuses on something called the Emerging Technology Fund, which was set up by Perry in 2005 to act as a sort of public-funded venture capital firm that would invest in companies developing promising technology. That was the theory, at least, the practice has been a bit different:

Among the companies that the Emerging Technology Fund has invested in is Convergen LifeSciences, Inc. It received a $4.5 million grant last year—the second largest grant in the history of the fund. The founder and executive chairman of Convergen is David G. Nance.

In 2009, when Mr. Nance submitted his application for a $4.5 million Emerging Technology Fund grant for Convergen, he and his partners had invested only $1,000 of their own money into their new company, according to documentation prepared by the governor’s office in February 2010. But over the years, Mr. Nance managed to invest a lot more than $1,000 in Mr. Perry. Texas Ethics Commission records show that Mr. Nance donated $75,000 to Mr. Perry’s campaigns between 2001 and 2006.

The regional panel that reviewed Convergen’s application turned down the company’s $4.5 million request when it presented its proposal on Oct. 7, 2009. But Mr. Nance appealed that decision directly to a statewide advisory committee (of which Mr. Nance was once a member) appointed by Mr. Perry. Just eight days later, on Oct. 15, a subcommittee unanimously recommended approval by the full statewide committee. On Oct. 29, the full advisory committee unanimously recommended the approval of Convergen’s application. When asked why the advisory committee felt comfortable recommending Convergen’s grant, Lucy Nashed, a spokesperson for Mr. Perry, said that the committee “thoroughly vetted the company.”

It’s worth noting that all of the funding decisions of the ETF are left, in the end, to a three-person committee consisting of the Governor , the Lt. Governor, and the Speaker of the Texas House, all Republicans at this point in time. Now, it’s entirely possible that Nance’s company was doing work of value and that his contributions to Perry’s campaigns are just a coincidence, but he’s not alone:

Muckrakers at the Los Angeles Times and the Austin American Statesman have shown a strong correlation between Perry’s biggest campaign contributors and the money handled by these funds and Perry’s other public-private partnership. Almost half of Perry’s “mega-donors,” according to the Times, have received profitable favors from the Texas government. Poultry magnate Joe Sanderson, for instance, gave Perry’s campaign $165,000 and received $500,000 from the Texas Enterprise Fund to open a facility in Waco, the Times reports.

All told, the Dallas Morning News has found that some $16 million from the tech fund has gone to firms in which major Perry contributors were either investors or officers, and $27 million from the fund has gone to companies founded or advised by six advisory board members. The tangle of interests surrounding the fund has raised eyebrows throughout the state, especially among conservatives who think the fund is a misplaced use of taxpayer dollars to start with.

“It is fundamentally immoral and arrogant,” says state representative David Simpson, a tea party-backed freshman from Longview, two hours east of Dallas. The fund “opened the door to the appearance of impropriety, if not actual impropriety.”

In The Washington Examiner, Timothy Carney points out that there’s a connection between Perry’s apparent history of crony capitalism and the Gardasil story:

Perry’s little bit of pharma welfare was his 2007 executive order requiring all sixth-grade girls to be vaccinated for human papillomavirus, which can cause cervical cancer. Drugmaker Merck happened to have exclusive rights to the HPV vaccine, and Merck’s top lobbyist in Austin happened to be Perry’s former chief of staff, Mike Toomey. Also, Merck’s political action committee had cut a $6,000 check to Perry.

Both Dameron and Carney document other cases of Perry’s corporatism, and they all lead to this conclusion:

Perry’s actions as governor suggest that for him, “pro-business” means “corporatism.” His words are telling, too. While critiquing Franklin Roosevelt’s New Deal in his book “Fed Up,” Perry states that economic recovery came from “World War II, when FDR was finally persuaded to unleash private enterprise.” Is he talking about the Emergency Price Control Act of 1942, complete with its rationing? Or maybe FDR “unleashed private enterprise” through the War Production Board or the War Manpower Commission?

Or maybe Rick Perry simply conflates private enterprise with private profit.

That certainly seems to be the case here. The Bush and Obama years have seen a troubling increase in corporatism, the merger of corporate and federal power, usually in the name of “efficiency” or some other laudable goal. The management of TARP, which was originally sold to Congress as a bailout of the troubled assets of America’s banking sector, but quickly expanded far beyond that once the bill had become law and virtually unfettered authority had been given to the Treasury Department,  was a perfect example of it, as was the auto bailout. What happens is that business and government (and, in the case of the auto bailout, big labor) team up and decide for themselves how the business sector should be run, even it it means screwing competitors and consumers. In the long run, such policies  inevitably stifle competition, empower corporate and federal bureaucrats, and protect entrenched interests,

Before fiscal conservatives, defenders of the free market, and advocates of limited government jump on the Rick Perry bandwagon, they’d be advised to examine his record closely and ask themselves if Texas Crony Capitalism is really what American needs.