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Elon Musk, Crony Capitalist

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Tags Bureaucracy and RegulationCronyism and Corporatism

05/25/2018

Elon Musk is at it again. The billionaire tech magnate continues to get richer and richer on the American taxpayer’s dime, highlighting the need to do as Murray Rothbard advised of reassessing the “partnership” of government and business.

At first glance, Elon Musk appears to be a quintessential capitalist success story. The South African born-American technology magnet, lead designer of SpaceX, and product architect of Tesla, Inc. is now ranked 25th on Forbes Magazine’s list of the World’s Most Powerful People, and as of February 2018, Forbes has Musk listed as the 53 rd richest person in the world.

One might conclude that Musk’s staggering wealth was produced via faithful adherence to the timeless and inexorable principles of laissez-faire capitalism, where personal wealth is accrued through the federal government leaving commerce alone and staying outside the affairs of private industry. However, this perception of Elon Musk’s economic independence from government interventionism is largely a fabrication and carefully manufactured distortion since Musk has personally enriched himself through a whole lot of government favoritism and statist interference in the private sector economy.

At this point, Musk has received well over $5 billion in government support. Previous reports have shown over 80 percent of SpaceX’s contracts come right from Uncle Sam. Given that the government is most space contractors’ top customer, this may not seem like a big deal. In fact, last July one Mises Wire columnist argued that Musk is a “mixed hero” because, although living largely off government largesse, he has “successfully [executed]” big ideas that benefit consumers in the “‘really existing’ world.”

To be fair, this characterization may have seemed to be the case last summer, but like all creatures of government, Musk’s so-called successfully executed ideas are already starting to come crashing down.

SpaceX’s selling point has always been that it can sell cheaper rockets than those of his competitors, but a new report from the space industry’ inspector general found that SpaceX will soon have staggering 50% price increases “compared to its final CRS-1 mission price.”

SpaceX has indicated that the reason it has increased prices is that the company now has a “better understanding of the costs involved after several years of experience with cargo resupply missions.” This just means it overpromised and underdelivered as is typical in the world of government. In recent months, policymakers have also discovered that SpaceX rockets are far less reliable than those of many of its competitors. This was outlined in reports from December 2017 and January 2018 , in which the Department of Defense Inspector General and NASA’s Aerospace Safety Advisory Council described a list of security concerns they have with SpaceX – among them: 33 significant nonconformities.

We can only guess that SpaceX would cease to exist in the absence of government. But given the recent history of tumbling sales that have come with the end of governments’ support for electric vehicles, it is almost a certainty with Tesla.

As an Asian Review article outlined last November, just months after Hong Kong cut its tax breaks for electric vehicle owners, Tesla sales dropped to near zero. A sharp decline in business also resulted in Denmark as the country undertook its own slashing of government incentives. It is only a matter of time before the same occurs in the United States, where Tesla’s $7,500 tax credit is expected to soon phase out. In fact, Tesla is already the largest short in the entire U.S stock market.

Yet, like a catfish that can’t resist shiny new bait, many American politicians and appropriators, enamored with even a hint of technological wizardry, just can’t say no to wasting taxpayer money on Musk’s latest pet projects that do not deliver as promised.

One can only hope that the public will soon wake up and realize what Murray Rothbard warned of – that government exists “precisely to set up such ‘partnerships,’ for the benefit of both government and business, or rather, of certain business firms and groups that happen to be in political favor.”

Politics is driven by culture, so the sooner the American people wake up to this realization, the sooner a smaller government footprint will result. I won’t hold my breath.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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