Achieving the good life is easy in capital of crony capitalism 

An ominous report came from Bloomberg News last week: “Beltway earnings make U.S. capital richer than Silicon Valley.” According to the latest census figures, Washington, D.C., is now the wealthiest metropolitan area in the United States.

That’s good news for local property values, but I can’t say it fills me with hometown pride. Silicon Valley’s wealth was earned — justified rewards voluntarily given for producing innovations that dramatically improved our lives. In contrast, D.C.’s prosperity reflects a parasitic economy that battens on wealth created by others.

As former Slate reporter Jack Shafer once put it, “Washington doesn’t make anything except scandals.” But its “regulatory powers, its executive orders, its judicial decisions, its ability to conjure money out of thin air, and its budget-making authority,” give D.C. the ability to dictate “who can do business and how.”

This city’s wealth is largely based on what public choice economists call “rent-seeking,” using the political process to rig the game in one’s favor — through subsidies, tariffs, regulatory advantages and other benefits unavailable via free and fair competition. Spending on lobbyists set another record last year, at $3.5 billion, according to the Center for Responsive Politics.

Other factors that allowed Washington to edge out San Jose, according to Bloomberg, include “federal employees whose compensation averages more than $126,000 … the nation’s greatest concentration of lawyers,” and a glut of federal dollars that has kept regional unemployment three points lower than the national average.

Indeed, as the Wall Street Journal reported last year, the district and neighboring congressional districts in Maryland and Virginia soaked up more than $3.7 billion of the stimulus package — almost $2,000 per resident, “nearly three times the national average."

To the extent the Occupy protests aimed at Wall Street and K Street have a common theme, it’s concern about economic inequality. Given the occupiers’ complaints about “crony capitalism” though, this doesn’t look like simple leftist resentment of the productive.

As my former colleague Will Wilkinson argued in a 2009 Cato Institute study, “At best, income inequality is a distraction.” Wealth disparities are not, by themselves, some sort of automatic indicator of injustice.

Unequal wealth can be a just result of free and fair exchange, where talented Americans reap rewards from providing goods and services their fellow citizens greatly value — as in the case of Steve Jobs — in which case there’s no injustice to remedy. Or it can be the result of predatory behavior by political elites, in which case it’s the predatory behavior that should be tackled directly, Wilkinson argues, “the fire is the problem, not the alarm.”

That the hometown of the political class has passed the home of the creative class in wealth and influence is genuine cause for alarm. Washington is the capital of crony capitalism — and it’s only growing richer. That inequality is definitely worth worrying about.

Examiner columnist Gene Healy is a vice president at the Cato Institute and author of “The Cult of the Presidency.”

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