KUNM

Is 'Crony Capitalism' Stalling NM's Economy?

Feb 2, 2016

KUNM Call In Show Thu. 2/4 8a: A new report says New Mexico’s economy isn’t growing because it’s based on “crony capitalism,” meaning our government responds to the needs interests of a few powerful, wealthy interests—leaving the rest of us pay the price. 

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A new report says New Mexico’s economy isn’t growing because it’s based on “crony capitalism,” meaning our government responds to the needs interests of a few powerful, wealthy interests—leaving the rest of us pay the price. In order to reduce that influence, the report says, the state should do more to expose money in politics, make sure tax breaks are working to grow the economy and assure the public that its bureaucrats and elected officials are doing the right thing by establishing an independent ethics commission.

The report, "Crony Capitalism, Corruption and the Economy in the State of New Mexico,” was prepared by UNM political science professor Michael Rocca, in conjunction a the Washington, D.C.-area business think tank, the Committee for Economic Development.

Rocca explained his findings Thursday in a discussion with political reporters Russell Contreras of the Associated Press and Sherry Robinson, who covers the legislative session for the Gallup Independent.“Economists and political scientists have known for 35 years that corruption and crony capitalism hurt economic growth,” Rocca said.

New Mexico’s dependence on federal dollars is one of the main drivers of this problem, he explained. The state’s economy depends heavily on how the state government decides to spend money, meaning that businesses that want to succeed have to convince lawmakers to invest in their industry. “The idea of crony capitalism is the idea that it’s an economy that is mostly free market, but it’s one that’s dictated by the government handing out benefits to groups based mostly on personal relationships or political connections,” Rocca said.

The report cited New Mexico’s lax regulation of the storefront lending industry as an example of how crony capitalism works. “It’s clearly there to benefit the very few over the very many,” Rocca said. In 2015 the industry had nearly two dozen lobbyists working in Santa Fe to defeat efforts to limit interest rates on storefront loans, which currently average about 300 percent. The industry contributed thousands to legislators.

“The amount of money flowing into campaign purses from this industry is appalling,” Robinson said, arguing that what are described as “predatory” loans disproportionately affect poor and minority populations.

The report also outlined solutions to limit the influence of special interest groups and lower the incidence of crony capitalism in New Mexico.

“One thing we need to reform here is our campaign finance laws,” Contreras said. He pointed out that increased transparency would force lawmakers to accept fewer donations from lobbyists and the public would get a clearer picture of how business is influencing the legislature.

Rocca suggested that the state create an ethics commission, and increase scrutiny of PACs and lobbyist activity. He also called for an improved website for the public to track the influence of industries in the political process.

Contreras and Robinson said there’s been some movement towards reform, but neither predicted Rocca’s suggestions would happen quickly or easily. “They’re going to say they ran out of time,” Contreras joked when asked about implementing an ethics commission during the current legislative session.

Rocca's three recommendations to eliminate “crony capitalism” include (as excerpted from the report):

  • Require full disclosure of campaign contributions and lobbying activity.
 Doing so would increase oversight and accountability in the government decision-making process.
  • Establish an independent ethics commission.
 Such a commission would educate elected officials about the state’s ethics laws to help prevent violations, and address and enforce ethics laws. New Mexico is currently one of seven states without one.
  • Conduct regular and rigorous evaluations of tax subsidy programs.
Elected officials and the public currently lack sufficient information about whether the benefits of current tax subsidy programs outweigh the costs. Items need to be studied often enough to provide policymakers with up-to-date information and to allow the time to produce thorough, detailed studies.