Samuel Gregg | Crony Capitalism: Inefficient, Unjust, and Corrupting

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Crony Capitalism - For Sale (200x200)Crony Capitalism: Inefficient, Unjust, and Corrupting

by Samuel Gregg | March 24, 2016

Donald Trump’s candidacy has brought many topics to greater public attention: everything from frustration with the political correctness that the left uses to stifle debate, to wage stagnation and immigration policy. Another subject, however, that has gained significant traction because of the Trump campaign is the problem of crony capitalism—or, more simply, cronyism.

It’s not just that Trump has been accused of being a crony capitalist. Rather, it is growing awareness that cronyism is a way of life for many American business and political leaders, including plenty on the conservative side, despite claims of valuing economic liberty. The damage that cronyism has inflicted on the economy is considerable. But cronyism also creates significant political challenges that, thus far, Western democracies are struggling to overcome.

Understanding Cronyism

The collusion associated with crony capitalism is not new. There have always been business leaders who seek favors from governments. One feature of the mercantilist economic system that dominated the West from the 1500s until the late 1700s was the granting of monopolies and letters-patent by the state to specific merchants with close ties to ministers at court. This was accompanied by tax privileges for particular businesses, efforts to restrict competition through quotas and tariffs, monarchs directly subsidizing particular industries, and guilds working with governments to restrict entry into trades and suppress technological development.

Today’s crony capitalism is not outright corruption, though it often verges on or morphs into illegal activity. The expression itself first emerged in 1980 to describe how the Philippines’ economy functioned under the Marcos regime. It became prominent in explanations of the 1997–1998 Asian financial crisis, especially the role played in that crisis by government decisions that favored business “cronies” (many of whom were relatives) of political leaders, such as Indonesia’s then-President Suharto. (Read More)


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