Crony capitalism
Encyclopedia
Crony capitalism is a term describing a capitalist
economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax break
s, and so forth.
Crony capitalism is believed to arise when political cronyism
spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving
economic and political ideals.
In its lightest form, crony capitalism consists of collusion
among market players. While perhaps lightly competing against each other, they will present a unified front to the government in requesting subsidies or aid (sometimes called a trade association or industry trade group
). Newcomers to a market may find it difficult to find loans or acquire shelf space to sell their product; in technological fields, they may be accused of infringing on patent
s that the established competitors never invoke against each other. Distribution networks will refuse to aid the entrant. That said, there will still be competitors who "crack" the system when the legal barriers are light, especially where the old guard has become inefficient and is failing to meet the needs of the market. Of course, some of these upstarts may then join with the established networks to help deter any other new competitors. Examples of this have been argued to include the keiretsu
of post-war Japan, the print media in India, the chaebol
of South Korea, and the powerful families who control much of the investment in Latin America
.
Crony capitalism is generally associated with more virulent government intervention, however. Intentionally ambiguous laws and regulations are common in such systems. Taken strictly, such laws would greatly impede practically all business; in practice, they are only erratically enforced. The specter of having such laws suddenly brought down upon a business provides incentive to stay in the good graces of political officials. Troublesome rivals who have overstepped their bounds can have the laws suddenly enforced against them, leading to fines or even jail time.
States often said to exhibit crony capitalism include the People's Republic of China
; India
, especially up to the early 1990s when manufacturing was strictly controlled by the government (the "Licence Raj
"); Indonesia
; Argentina
; Brazil
; Malaysia; Russia
; and most other ex-Eastern Bloc
states. Critics claim that government connections are almost indispensable to business success in these countries. Wu Jinglian
, one of China's leading economists and a longtime champion of its transition to free markets, says that it faces two starkly contrasting futures: a market economy under the rule of law or crony capitalism.
.
A famous early example in the United States would be the Interstate Commerce Commission
, which was established in 1887 to regulate the railroad "robber barons
"; instead, it quickly became controlled by the railroads, which set up a permit system that was used to deny access to new entrants and functionally legalized price fixing
.
An example from 2004 would be the case of Creekstone Farms
. After the mad cow
scare, Creekstone decided to test all its cows for mad cow disease. This would enable them to sell again to Japan, which had blocked import of all American beef that had not been completely tested. After the proper facilities had been built and the personnel hired to make such a change, the U.S. Department of Agriculture issued an injunction and refused to allow Creekstone to buy the kits necessary to test. This allowed the larger beef producers to keep costs low and not be out-competed by a smaller rival. Creekstone sued the USDA in response for abrogating free competition in the market. Economist Paul Krugman
commented that the incident showed that "the imperatives of crony capitalism trump[ed] professed faith in free markets," at least for the Department of Agriculture at the time.
The military-industrial complex
in the United States is often described as an example of crony capitalism in an industry. Connections with The Pentagon
and lobbyists in Washington are described by critics as more important than actual competition, due to the political and secretive nature of defense contracts. In the Airbus-Boeing WTO dispute, Airbus (which receives outright subsidies
from European governments) has stated Boeing receives similar subsidies, which are hidden as inefficient defense contracts. In another example, Bechtel, claiming that it should have had a chance to bid for certain contracts, said Halliburton had received no-bid contracts due to having cronies in the Bush administration.
Gerald P. O'Driscoll, former vice president at the Federal Reserve Bank of Dallas
, stated that Fannie Mae and Freddie Mac became examples of crony capitalism. Government backing let Fannie and Freddie dominate mortgage underwriting. "The politicians created the mortgage giants, which then returned some of the profits to the pols - sometimes directly, as campaign funds; sometimes as "contributions" to favored constituents."
In an article titled "The Occupy Wall Street Movement and the Coming Demise of Crony Capitalism", author and economics professor Ravi Batra
argues that "all official economic measures adopted since 1981...have devastated the middle class" and that the Occupy Wall Street
movement should push for their repeal and thus end the influence of the super wealthy in the political process.
, where any pretense of a free market is dispensed with. Bribes to government officials are considered de rigueur and tax evasion
is common; this is seen in many parts of Africa, for instance. This is sometimes called plutocracy
(rule by wealth) or kleptocracy
(rule by theft).
Corrupt governments may favor one set of business owners who have close ties to the government over others. This may also be done with racial, religious, or ethnic favoritsm; for instance, Alawites in Syria
have a disproportionate share of power in the government and business there. (President Assad
is an Alawite.) This can be explained by considering personal relationships as a social network
. As government and business leaders try to accomplish various things, they naturally turn to other powerful people for support in their endeavors. These people form hubs in the network. In a developing country those hubs may be very few, thus concentrating economic and political power in a small interlocking group.
Normally, this will be untenable to maintain in business; new entrants will affect the market. However, if business and government are entwined, then the government can maintain the small-hub network.
and other anti-capitalists
often assert that crony capitalism is the inevitable result of any capitalist system. Jane Jacobs
described it as a natural consequence of collusion between those managing power
and trade
, while Noam Chomsky
has argued that the word "crony" is superfluous when describing capitalism. Since businesses make money and money leads to political power, business will inevitably use their power to influence governments. Much of the impetus behind campaign finance reform
in the United States and in other countries is an attempt to prevent economic power being used to take political power.
Laissez-faire
capitalists oppose crony capitalism as well, considering it an aberration brought on by governmental favors incompatible with a true free market
. Laissez-faire advocates deride such government favoritism, referring to it as "crony socialism", "venture socialism" or "corporatism
, a modern form of mercantilism
" to emphasize that the only way to run a profitable business in such systems is to have help from corrupt government officials
. In this view, high levels of interaction between corporations and governments are considered socialist, which is taken to its maximum in the form of nationalization
of industries. Even if the initial regulation was well-intentioned (to curb actual abuses), and even if the initial lobbying by corporations was well-intentioned (to reduce illogical regulations), the mixture of business and government stifle competition, a collusive result called regulatory capture
. In his book The Myth of the Robber Barons, Burton W. Folsom, Jr.
distinguished those that engage in crony capitalism—designated by him "political entrepreneurs"—from those who compete in the marketplace without special aid from government, whom he calls "market entrepreneurs" who succeed "by producing a quality product at a competitive price"
Socialist economists have criticized the term as an ideologically motivated attempt to cast what is in their view the fundamental problems of capitalism as avoidable irregularities. The term "crony capitalism" made its first significant impact in the public arena as an explanation of the Asian financial crisis. This explanation is frequently dismissed as apologetics for failures of neoliberal policy and more fundamental weaknesses of market allocation. According to socialist economist Robin Hahnel
,
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax break
Tax break
Tax break is a slang term referring to any item which reduces tax, including any tax exemption, tax deduction, or tax credit. Tax break is also a pejorative term used in the United States to refer to purportedly favorable tax treatment of any class of persons, as in "individuals get a tax break...
s, and so forth.
Crony capitalism is believed to arise when political cronyism
Cronyism
Cronyism is partiality to long-standing friends, especially by appointing them to positions of authority, regardless of their qualifications. Hence, cronyism is contrary in practice and principle to meritocracy....
spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving
Public good
In economics, a public good is a good that is non-rival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good...
economic and political ideals.
Crony capitalism in practice
Collusion
Collusion is an agreement between two or more persons, sometimes illegal and therefore secretive, to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage...
among market players. While perhaps lightly competing against each other, they will present a unified front to the government in requesting subsidies or aid (sometimes called a trade association or industry trade group
Industry trade group
A trade association, also known as an industry trade group, business association or sector association, is an organization founded and funded by businesses that operate in a specific industry...
). Newcomers to a market may find it difficult to find loans or acquire shelf space to sell their product; in technological fields, they may be accused of infringing on patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
s that the established competitors never invoke against each other. Distribution networks will refuse to aid the entrant. That said, there will still be competitors who "crack" the system when the legal barriers are light, especially where the old guard has become inefficient and is failing to meet the needs of the market. Of course, some of these upstarts may then join with the established networks to help deter any other new competitors. Examples of this have been argued to include the keiretsu
Keiretsu
A is a set of companies with interlocking business relationships and shareholdings. It is a type of business group. The keiretsu has maintained dominance over the Japanese economy for the greater half of the twentieth century....
of post-war Japan, the print media in India, the chaebol
Chaebol
Chaebol refers to a South Korean form of business conglomerate. They are global multinationals owning numerous international enterprises. The term is often used in a context similar to that of the English word "conglomerate"...
of South Korea, and the powerful families who control much of the investment in Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
.
Crony capitalism is generally associated with more virulent government intervention, however. Intentionally ambiguous laws and regulations are common in such systems. Taken strictly, such laws would greatly impede practically all business; in practice, they are only erratically enforced. The specter of having such laws suddenly brought down upon a business provides incentive to stay in the good graces of political officials. Troublesome rivals who have overstepped their bounds can have the laws suddenly enforced against them, leading to fines or even jail time.
States often said to exhibit crony capitalism include the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
; India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, especially up to the early 1990s when manufacturing was strictly controlled by the government (the "Licence Raj
Licence Raj
Licence Raj, the Permit Raj, refers to the elaborate licenses, regulations and accompanying red tape that were required to set up and run businesses in India between 1947 and 1990....
"); Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
; Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
; Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
; Malaysia; Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
; and most other ex-Eastern Bloc
Eastern bloc
The term Eastern Bloc or Communist Bloc refers to the former communist states of Eastern and Central Europe, generally the Soviet Union and the countries of the Warsaw Pact...
states. Critics claim that government connections are almost indispensable to business success in these countries. Wu Jinglian
Wu Jinglian
Wu Jinglian is one of the preeminent economists of the People's Republic of China , primarily specializing in economic policy as it applies to China's ongoing series of economic reforms....
, one of China's leading economists and a longtime champion of its transition to free markets, says that it faces two starkly contrasting futures: a market economy under the rule of law or crony capitalism.
Cronyism in sections of an economy
More direct government involvement can lead to specific areas of crony capitalism, even if the economy as a whole may be healthy. Governments will, often in good faith, establish government agencies to regulate an industry. However, the members of an industry have a very strong interest in the actions of a regulatory body, while the rest of the citizenry are only lightly affected. As a result, it is not uncommon for current industry players to gain control of the "watchdog" and use it against competitors. This phenomenon is known as regulatory captureRegulatory capture
In economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as...
.
A famous early example in the United States would be the Interstate Commerce Commission
Interstate Commerce Commission
The Interstate Commerce Commission was a regulatory body in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads to ensure fair rates, to eliminate rate discrimination, and to regulate other aspects of common carriers, including...
, which was established in 1887 to regulate the railroad "robber barons
Robber baron (industrialist)
Robber baron is a pejorative term used for a powerful 19th century American businessman. By the 1890s the term was used to attack any businessman who used questionable practices to become wealthy...
"; instead, it quickly became controlled by the railroads, which set up a permit system that was used to deny access to new entrants and functionally legalized price fixing
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
.
An example from 2004 would be the case of Creekstone Farms
Creekstone Farms Premium Beef
Creekstone Farms Premium Beef, LLC is a beef processing company located in Arkansas City, KS. The company was founded in 1995 by John and Carol Stewart. Originally a purebred Black Angus farm in Campbellsburg, KY, Creekstone Farms entered the processing business in 2003 with the purchase of a ...
. After the mad cow
Bovine spongiform encephalopathy
Bovine spongiform encephalopathy , commonly known as mad-cow disease, is a fatal neurodegenerative disease in cattle that causes a spongy degeneration in the brain and spinal cord. BSE has a long incubation period, about 30 months to 8 years, usually affecting adult cattle at a peak age onset of...
scare, Creekstone decided to test all its cows for mad cow disease. This would enable them to sell again to Japan, which had blocked import of all American beef that had not been completely tested. After the proper facilities had been built and the personnel hired to make such a change, the U.S. Department of Agriculture issued an injunction and refused to allow Creekstone to buy the kits necessary to test. This allowed the larger beef producers to keep costs low and not be out-competed by a smaller rival. Creekstone sued the USDA in response for abrogating free competition in the market. Economist Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
commented that the incident showed that "the imperatives of crony capitalism trump[ed] professed faith in free markets," at least for the Department of Agriculture at the time.
The military-industrial complex
Military-industrial complex
Military–industrial complex , or Military–industrial-congressional complex is a concept commonly used to refer to policy and monetary relationships between legislators, national armed forces, and the industrial sector that supports them...
in the United States is often described as an example of crony capitalism in an industry. Connections with The Pentagon
The Pentagon
The Pentagon is the headquarters of the United States Department of Defense, located in Arlington County, Virginia. As a symbol of the U.S. military, "the Pentagon" is often used metonymically to refer to the Department of Defense rather than the building itself.Designed by the American architect...
and lobbyists in Washington are described by critics as more important than actual competition, due to the political and secretive nature of defense contracts. In the Airbus-Boeing WTO dispute, Airbus (which receives outright subsidies
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
from European governments) has stated Boeing receives similar subsidies, which are hidden as inefficient defense contracts. In another example, Bechtel, claiming that it should have had a chance to bid for certain contracts, said Halliburton had received no-bid contracts due to having cronies in the Bush administration.
Gerald P. O'Driscoll, former vice president at the Federal Reserve Bank of Dallas
Federal Reserve Bank of Dallas
The Federal Reserve Bank of Dallas covers the Eleventh Federal Reserve District, which includes Texas, northern Louisiana and southern New Mexico....
, stated that Fannie Mae and Freddie Mac became examples of crony capitalism. Government backing let Fannie and Freddie dominate mortgage underwriting. "The politicians created the mortgage giants, which then returned some of the profits to the pols - sometimes directly, as campaign funds; sometimes as "contributions" to favored constituents."
In an article titled "The Occupy Wall Street Movement and the Coming Demise of Crony Capitalism", author and economics professor Ravi Batra
Ravi Batra
Raveendra Nath "Ravi" Batra is an Indian-American economist, author, and professor at Southern Methodist University. Batra is the author of six international bestsellers, two of which appeared on The New York Times Best Seller list...
argues that "all official economic measures adopted since 1981...have devastated the middle class" and that the Occupy Wall Street
Occupy Wall Street
Occupy Wall Street is an ongoing series of demonstrations initiated by the Canadian activist group Adbusters which began September 17, 2011 in Zuccotti Park, located in New York City's Wall Street financial district...
movement should push for their repeal and thus end the influence of the super wealthy in the political process.
Creation of crony capitalism in developing economies
In its worst form, crony capitalism can devolve into simple corruptionPolitical corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
, where any pretense of a free market is dispensed with. Bribes to government officials are considered de rigueur and tax evasion
Tax evasion
Tax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...
is common; this is seen in many parts of Africa, for instance. This is sometimes called plutocracy
Plutocracy
Plutocracy is rule by the wealthy, or power provided by wealth. The combination of both plutocracy and oligarchy is called plutarchy. The word plutocracy is derived from the Ancient Greek root ploutos, meaning wealth and kratos, meaning to rule or to govern.-Usage:The term plutocracy is generally...
(rule by wealth) or kleptocracy
Kleptocracy
Kleptocracy, alternatively cleptocracy or kleptarchy, is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest...
(rule by theft).
Corrupt governments may favor one set of business owners who have close ties to the government over others. This may also be done with racial, religious, or ethnic favoritsm; for instance, Alawites in Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
have a disproportionate share of power in the government and business there. (President Assad
Bashar al-Assad
Bashar al-Assad is the President of Syria and Regional Secretary of the Ba'ath Party. His father Hafez al-Assad ruled Syria for 29 years until his death in 2000. Al-Assad was elected in 2000, re-elected in 2007, unopposed each time.- Early Life :...
is an Alawite.) This can be explained by considering personal relationships as a social network
Social network
A social network is a social structure made up of individuals called "nodes", which are tied by one or more specific types of interdependency, such as friendship, kinship, common interest, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.Social...
. As government and business leaders try to accomplish various things, they naturally turn to other powerful people for support in their endeavors. These people form hubs in the network. In a developing country those hubs may be very few, thus concentrating economic and political power in a small interlocking group.
Normally, this will be untenable to maintain in business; new entrants will affect the market. However, if business and government are entwined, then the government can maintain the small-hub network.
Political viewpoints
Critics of capitalism including socialistsSocialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
and other anti-capitalists
Anti-capitalism
Anti-capitalism describes a wide variety of movements, ideas, and attitudes which oppose capitalism. Anti-capitalists, in the strict sense of the word, are those who wish to completely replace capitalism with another system....
often assert that crony capitalism is the inevitable result of any capitalist system. Jane Jacobs
Jane Jacobs
Jane Jacobs, was an American-Canadian writer and activist with primary interest in communities and urban planning and decay. She is best known for The Death and Life of Great American Cities , a powerful critique of the urban renewal policies of the 1950s in the United States...
described it as a natural consequence of collusion between those managing power
Power (sociology)
Power is a measurement of an entity's ability to control its environment, including the behavior of other entities. The term authority is often used for power perceived as legitimate by the social structure. Power can be seen as evil or unjust, but the exercise of power is accepted as endemic to...
and trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
, while Noam Chomsky
Noam Chomsky
Avram Noam Chomsky is an American linguist, philosopher, cognitive scientist, and activist. He is an Institute Professor and Professor in the Department of Linguistics & Philosophy at MIT, where he has worked for over 50 years. Chomsky has been described as the "father of modern linguistics" and...
has argued that the word "crony" is superfluous when describing capitalism. Since businesses make money and money leads to political power, business will inevitably use their power to influence governments. Much of the impetus behind campaign finance reform
Campaign finance reform
Campaign finance reform is the common term for the political effort in the United States to change the involvement of money in politics, primarily in political campaigns....
in the United States and in other countries is an attempt to prevent economic power being used to take political power.
Laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
capitalists oppose crony capitalism as well, considering it an aberration brought on by governmental favors incompatible with a true free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
. Laissez-faire advocates deride such government favoritism, referring to it as "crony socialism", "venture socialism" or "corporatism
Corporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
, a modern form of mercantilism
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
" to emphasize that the only way to run a profitable business in such systems is to have help from corrupt government officials
. In this view, high levels of interaction between corporations and governments are considered socialist, which is taken to its maximum in the form of nationalization
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of industries. Even if the initial regulation was well-intentioned (to curb actual abuses), and even if the initial lobbying by corporations was well-intentioned (to reduce illogical regulations), the mixture of business and government stifle competition, a collusive result called regulatory capture
Regulatory capture
In economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as...
. In his book The Myth of the Robber Barons, Burton W. Folsom, Jr.
Burton W. Folsom, Jr.
Burton W. Folsom, Jr. is an American historian and author who holds the Charles F. Kline chair in history and management at Hillsdale College. He received his BA from Indiana University in 1970, his M.A. from the University of Nebraska in 1973, and his doctorate in history from the University of...
distinguished those that engage in crony capitalism—designated by him "political entrepreneurs"—from those who compete in the marketplace without special aid from government, whom he calls "market entrepreneurs" who succeed "by producing a quality product at a competitive price"
Socialist economists have criticized the term as an ideologically motivated attempt to cast what is in their view the fundamental problems of capitalism as avoidable irregularities. The term "crony capitalism" made its first significant impact in the public arena as an explanation of the Asian financial crisis. This explanation is frequently dismissed as apologetics for failures of neoliberal policy and more fundamental weaknesses of market allocation. According to socialist economist Robin Hahnel
Robin Hahnel
Robin Hahnel is a Professor of Economics at Portland State University. He is best known for his work on participatory economics with Z Magazine editor Michael Albert. He is currently a visiting professor at Lewis & Clark College....
,
- IMF officials Michel Camdessus and Stanley Fischer were quick to explain that the afflicted economies had only themselves to blame. Crony capitalism, lack of transparency, accounting procedures not up to international standards, and weak-kneed politicians too quick to spend and too afraid to tax were the problems according to IMF and US Treasury Department officials. The fact that the afflicted economies had been held up as paragons of virtue and IMF/World Bank success stories only a year before, the fact that neoliberalism’s only success story had been the Newly Industrialized Countries (NIC's) who were now in the tank, and the fact that the IMF and Treasury department story just didn’t fit the facts since the afflicted economies were no more rife with crony capitalism, lack of transparency, and weak-willed politicians than dozens of other economies untouched by the Asian financial crisis, simply did not matter.
See also
- SupercapitalismSupercapitalism (concept in Italian Fascism)Supercapitalism was a concept that developed in Italian Fascism. Italy's Fascist leader, Benito Mussolini, claimed that at the stage of supercapitalism, "a capitalist enterprise, when difficulties arise, throws itself like a dead weight into the state's arms. It is then that state intervention...
- Corporate welfareCorporate welfareCorporate welfare is a pejorative term describing a government's bestowal of money grants, tax breaks, or other special favorable treatment on corporations or selected corporations. The term compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less...
- Iron triangle (US politics)
- PatrimonialismPatrimonialismPatrimonialism is a form of governance in which all power flows directly from the leader. This constitutes essentially the blending of the public and private sector. These regimes are autocratic or oligarchic and exclude the upper and middle classes from power. The leaders of these countries...
- Political family
- Political machinePolitical machineA political machine is a political organization in which an authoritative boss or small group commands the support of a corps of supporters and businesses , who receive rewards for their efforts...
- Government-owned corporationGovernment-owned corporationA government-owned corporation, state-owned company, state-owned entity, state enterprise, publicly owned corporation, government business enterprise, or parastatal is a legal entity created by a government to undertake commercial activities on behalf of an owner government...
External links
- New York Times, "The Global Cost of Crony Capitalism"
- New York Times, "Vladivostok Journal: Out of Russia's Gangland, and Into Cafe Society."
- Joseph Stiglitz, "Crony capitalism American-style".
- Google Video, "Capitalism & Other Kids' Stuff".
- William Anderson, The Mises Institute, "Myths About Enron"
- Crony capitalism: The actors of change towards neoliberalism in Chile, by Patricio Imbert and Patricio Morales
- Will Africa Finally Take Off? Becker