Costco exec epitomizes Obama’s love of crony capitalism

Sept. 7, 2012

By Steven Greenhut

Few political observers were surprised that President Barack Obama sees himself as the second coming of Franklin Delano Roosevelt, as he uttered these words at the Democratic convention Thursday night:

“And the truth is, it will take more than a few years for us to solve challenges that have built up over decades. It will require common effort, shared responsibility, and the kind of bold, persistent experimentation that Franklin Roosevelt pursued during the only crisis worse than this one.”

Virtually every Democratic official daydreams about being a modern-day FDR, someone who can use nearly unchecked government power to “save” the citizenry from the ravages of the private sector. Love of government is embedded deep within the Democratic DNA, so much so that media observers were surprised that a corporate executive actually gave a featured convention speech.

As the Huffington Post reported

“[Costco’s] top executives are also aligning themselves with the Democratic Party this election season — a rarity in the retail industry. At the Democratic National Convention Wednesday night, Jim Sinegal, the co-founder and former CEO of Costco, plugged President Barack Obama’s investment in education and affordable energy, as well as his immigration policies.”

Despite the apparent disconnect, having Jim Sinegal at the DNC is no more of a surprise than seeing Joe Biden there also. Costco is not an aberration in its support for the Democratic platform. It is, in fact, the embodiment of the kind of pliant, government-subsidized corporation that Democratic leaders prefer these days.

I’ve tussled with Sinegal in the past, back when his company was strong-arming local governments in Southern California into using eminent domain to clear away properties to make it easier for Costco to expand. Costco offers some great merchandise, but its success is built as much on special governmental privilege as it is on hard work and ingenuity. The company takes millions of dollars in subsidies from local governments chasing sales-tax revenue.

Mercantilism

As I wrote in the Orange County Register in 2002:

“Costco, the big-box discount warehouse company that sells everything from big-screen TVs to restaurant-quality food products, at first glance seems like a marvel of the free-enterprise system. … But think carefully before you use the words ‘free enterprise’ and ‘Costco’ in the same breath. The company certainly knows how to market goods and services to budget-conscious customers and to maximize profits. Unfortunately, Costco also is adept at manipulating the political process on its own behalf, in a way that smacks of mercantilism (government-controlled markets) rather than capitalism.”

I wrote about Costco’s “unholy scheme to deprive Cottonwood Christian Center of its 18-acre property in Cypress.” The Wall Street Journal also blasted the retailer in an editorial, which exhorted the privilege-seeking Costco to “buy their land in the open market instead of relying on local governments to seize a juicy location at below-market prices.”

“Rather than feel ashamed at its role in this land heist, Costco President and CEO Jim Sinegal fired off a letter to the Journal, published June 12, that echoed the city’s shameless demonization of Cottonwood,” I wrote. While Sinegal basically denied direct involvement in this horrendous property-rights-abusing scheme, his denial wasn’t credible.

“But if Costco is just an innocent bystander in a dispute between a city and a church, then why has Costco been involved in similar situations across the country?” I asked. “Such as in Lancaster, Calif., where in 2000 a federal district court struck down the city’s attempted use of eminent domain on Costco’s behalf. According to the court documents, immediately after a competitor, 99 Cents Only Stores, moved into a vacant store next to Costco in Lancaster in 1998, Costco demanded that the city use eminent domain to literally give the 99 Cents Only space to Costco. Otherwise, Costco said it would move to neighboring Palmdale.”

It seems fitting that the main corporate speaker at the Democratic convention comes right out of the crony-capitalism school of business. It seems fitting that it uses its muscle to arm-twist cities into taking others’ property and into filling its coffers with tax dollars.

Despite the childish anti-market rhetoric used by those union members who are ubiquitous in Charlotte, the free market is simply a system for exchanging goods and services. In such a system, individuals get to make choices. Not every business is good or fair, but in this system everything is about voluntary exchange. When individuals commit fraud or theft, that’s where government has a role – as a sort of referee. When the government allows individuals to invest and enjoy the fruits of their labor, the economy is more likely to grow.

Government as an end

Democrats — or at least the ones featured at the DNC — do not believe simply in using government to uphold the rule of law and protect against fraud and abuse. They believe in government as an end in itself, even though every cent it spends is taken from someone else.

They want government to meddle in the marketplace, by creating rules that favor those businesses preferred by the political class, often in the name of some high purpose such as “equality” or “protecting the environment.”

In fairness, both parties have shovel favors toward their favorite firms. Even the Solyndra boondoggle had roots in the Bush administration, which started the loan process. But Obama officials seem particularly committed to bailing out private firms and unable to make distinctions between the free market and private companies that use their connections to win government cash and favors.

It’s no wonder someone such as Jim Sinegal is more comfortable with Democrats than with Republicans, who despite their many flaws at least recognize the importance of a freer economic system.

The FDR shtick is all about rhetoric, but the Sinegal speech says more about the state of the modern Democratic Party. At least if Obama wins another term, more of us can get jobs pushing carts at Costco.

Steven Greenhut is vice president of journalism at the Franklin Center for Government and Public Integrity. He is based in Sacramento. Write to him at [email protected].

His book on this topic, “Abuse of Power: How Government Abuses Eminent Domain,” can be purchased on Amazon.com.

(This article was cross-posted from Watchdog.org.)