Crony capitalism is to free market capitalism what Mr Hyde was to Dr. Jekyll. I wrote a page about the various media outlets hyping student loan forgiveness plans. I warned in that page to be very careful.
I wrote about how I remembered during the most recent housing bubble crash, there were a large number of new ventures springing up that offered to stop the foreclosure process. Most were total frauds or just not effective.
Such is the story of crony capitalism. I do think that some people sincerely believe they can help the common person if they get elected to public office. But in very short order, it seems as though they are morphed into the system.
They are directed to support the party line. Or they are promised a vote on their favorite project if they vote for another pet project. Even if they do not see the value in that proposal.
And there are many that are just corrupt from the start and have no personal nor moral dilemma with wasting tax dollars. Do you remember the huge tax dollars allotted to solar energy operations and battery plants? Most ended as dismal failures. But it was just taxpayer money. So it wasn’t a big deal.
We saw big banks being swamped with bad mortgages. In a true free market system, companies, banks, and sole proprietors are given the freedom to build their business. But they are also responsible for the consequences. The crony capitalism system entrenched in the power elite circles, protects the big banks from responsibility for their bad decisions.
Rather than letting those “too big to fail” banks go and allowing the smaller banks that did things the right way pick up the slack, our esteemed leaders in Washington bailed them out.
David Stockman wrote a book titled,” The Great Deformation.” In that edition he details how members of both political parties let our country down by the rush to bail out the big hitters.
I wonder what would have happened had both of the last two
administrations, (one from each party) and the congress just let the market
solve the problems. It would have been
painful. It still will be painful at
some point. But I think we would have
been able to work through it and would be stronger and for sure smarter on the
Here is a link to a story from a couple years ago that gives a really decent observation of this situation. It also provides some interesting history.
I think prices would have found the real bottom on their own.. I think actual entrepreneurs would be hiring again. We wouldn’t have to rely on employment numbers that are “seasonally adjusted” to make them look better.
We see a similar pattern in the way multi-national corporations are able to go around the will of the electorate to maintain there profit flow. This entrenched crony capitalism protects them from laws that would expose that corporate dishonesty.
The close working relationship between major food corporations and big pharmacy is kept alive by the correct placement of congressional officials who can control the flow of voting patterns.
They can decide what measures come to a vote and which ones get pushed aside. They can use little known rules to get things through a session without even going through the voting process.
And the world of consumers pays the price as foods are contaminated with chemically altered substances that help fuel the rise in chronic disease. The illness leads to more prescriptions which leads to more cash for big pharmacy. And more tax money siphoned away.
Please don’t confuse true entrepreneurs and actual business owners with corporate CEOs. CEOs are corporate executives. They are very high paid employees. They do have plenty of political clout however. When they get in trouble, they can often reach out to their allies in power to funnel more taxpayer money their way.
Unfortunately our schools do not reach true free market capitalism. So many people equate the corporate executive with true capitalists. Here is an easy way to see the difference.
When a true capitalist makes an investment in a company or an oil well or even the duplex across the street, they are on the hook for the money put into that investment. If it fails, they go down with it. That is the nature of free market capitalism. A corporate executive could get a huge yearly bonus in the same week he or she eliminated 10,000 jobs.
Here is another example of crony capitalism in action. The sitting president announced his pledge to “invest” $7 billion toward electricity in Africa. It could go to $300 billion by the year 2030.
Now the obvious first two questions would be…
How can a country that is broke, (that would be us), invest $7 billion for electricity in another continent? And…
If we do have that much discretionary cash, why aren’t we using it in America?
Of course the answer to the second question is that we are promising that cash in Africa because China is throwing around money there. And the answer to the first question is that neither congress nor the administration has a grasp on basic accounting.
But that issue aside, this event brings laser focus to the hazard of crony capitalism. In this investment of these tax dollars, did any of you see an actual prospectus? Did any of you read a plan on how the money will be implemented and by whom? How about a strategy to recoup the original investment?
If this plan was presented on “Shark Tank”, the sitting administration would be informed that all the sharks were out. They can see a beagle right in front of them. And this dog of an idea is barking really loud.
We only need to review the government investment of tax dollars in Egypt, Libya and Syria. How well has that worked out? About as well as every government plan to throw cash at interim governments in unstable countries. We get waste, corruption and more crony capitalism to keep trying to fix the original mistake.
When there is an effective way to bring electricity to Africa in a safe manner, a true free market capitalist will risk their own money with the expectation of return on investment.
There you have the basic difference. Free market capitalism is geared to find a need and fill it, all the while expecting to profit from the investment put forward.
Crony capitalism is geared to extend influence and cover up mistakes while using taxpayer money with no regard for any return on investment. Which one makes you feel better about your tax dollars?
The overall idea of capitalism is getting knocked around quite a bit. But true capitalism lifts up nations and is truly transparent. You are rewarded for hard work, dedication and persistence.
It is crony capitalism that seeks to profit in any way, regardless of who gets trampled in the process. As I've written before, we can squelch this corrupt pattern with our buying patterns and our votes.