The Golden Era of Crony Capitalism & Venture Socialism | 8/7/25

The politics of favors: when populist rhetoric meets corporate patronage

There is a peculiar tension at the heart of contemporary conservatism: public anger at concentrated economic power, paired with private policies that accelerate its rise. That contradiction is not merely rhetorical. Decisions unfolding in government now—tariff carve-outs, tax and zoning breaks, expedited environmental reviews for hyperscale computing projects—reveal a pattern in which the institutions that promised to champion the forgotten worker instead cultivate a new class of winners. The result is a politics that looks like populism but behaves like patronage, reshaping local economies, utility bills, and even the physical landscape to suit a handful of enormous corporate projects.

Venture socialism by another name: the data center as a national project

What once was a promise of private innovation has hardened into a form of subsidy-driven expansion that resembles public planning more than market allocation. Hyperscale data centers require land, power, cooling, equipment and tens of billions of dollars in infrastructure—upfront capital no single company should lightly expect taxpayers and local utilities to underwrite. Yet federal and state incentives, sales and property tax exemptions, preferential utility contracts, and even the release of federally owned land to tech firms are being pitched as routine economic development. The practical effect is to socialize the costs—grid upgrades, water and power capacity, taxpayer-funded transmission—while privatizing the upside for a tiny number of companies that already command vast market value.

Why this matters for towns and households

Small counties sell rezoning and tax promises as jobs, but data centers create a modest number of well-paid technical positions and a long tail of low-density local employment. The bulk of benefits are corporate, while the costs fall to ratepayers through utility surcharges and to communities through land-use changes. Where power demand expands dramatically, the response has been a steady stream of utility rate-hike proposals to fund new plants or lines—charges that land disproportionately on ordinary households and small businesses already squeezed by persistent price increases.

AI’s hidden accounting: high earnings, falling cash flow

On paper, an AI boom looks transformative: blistering earnings reports, surging valuations, and big capital commitments to chips, servers, and real estate. A closer look reveals a counterintuitive dynamic: heavy investment in hardware and hyperscale facilities is draining free cash flow even while net income rises. Earnings can be inflated by intangible returns and paper gains, but free cash flow—the metric that measures actual ability to invest and weather downturns—has slipped for major tech firms. That tension turns an engine of productivity into a capital sink that depends on continued favorable financing and policy support, raising the systemic risk if the flow of subsidies or cheap money changes abruptly.

Investment without market discipline

Markets historically supported heavy infrastructure when there was a clear, durable demand and transparent profitability. Building vast new power plants and purpose-built campuses for speculative AI workloads changes that calculus: the projects are costly, front-loaded, and reliant on regulatory favors. When states and the federal government accelerate approvals and provide long tax holidays, they are effectively underwriting bets that private capital alone might not take—a classic example of venture socialism, where political leverage displaces pure market signals.

Economic ground truth: the silent depression beneath headline growth

Macroeconomic headlines and equity-market strength can mask a harsher reality on Main Street. For a large share of households, housing, insurance, food, utilities, and credit costs have reset permanently higher, compressing discretionary income and savings. This is not a sudden collapse but a grinding deterioration in affordability—higher rents, elevated mortgage delinquency in vulnerable segments, and rising household debt. Consumer spending that props up GDP is increasingly concentrated in the top decile, while most families experience stagnation or decline in real living standards.

What policy choices have done

• Tariff policies that exempt large corporations but hit smaller manufacturers increase input costs for mid-tier producers.
• Incentives for hyperscale infrastructure shift energy and environmental burdens onto local communities.
• Monetary and fiscal measures that favor asset price support widen wealth inequality and obscure underlying demand weakness.

These trends are not inevitable; they are choices. The combination of concentrated corporate power, state-enabled incentives, and a political culture that mistakes spectacle for strategy has produced an economy that looks robust for a select group and precarious for most. The dilemma facing policy makers and political movements is whether to reverse course—reorienting incentives toward small business, rebuilding energy capacity before surrendering scarce power to single-purpose facilities, and restoring transparency to public-private deals—or to allow the current trajectory, which substitutes concentrated private gain for broad-based prosperity, to continue. The longer the drift, the harder the recovery will be for ordinary households, and the more permanent the distortions in land use, infrastructure costs, and democratic accountability.

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