December 16, 2011

Crony capitalism vs. market capitalism

What exactly is crony capitalism?

All capitalism is driven by greed - the desire to not only achieve economic security, but to amass pools of capital beyond one's basic needs. This capital can fuel the kind of conspicuous consumption that offends egalitarians. But it also finances investments in new products and businesses, without which the economy cannot grow. More on that later.

What makes Crony Capitalists different is their willingness to use the coercive powers of government to gain an advantage they could not earn in the market. This can come in the form of regulations that favor them while hindering competitors, laws that restrict entry into their markets, and government-sponsored cartels that fix prices, grant monopolies, or both.

Crony Capitalists are also more than happy to help themselves to money from the public treasury. This can come from wasteful or unnecessary spending programs that turn government into a captive customer, subsidies that flow directly into their coffers, or mandates that force consumers to buy their products.

Examples abound. Heavily regulated industries attract and breed Crony Capitalists, who are highly skilled at capturing the agencies intended to regulate them.

Health Care
Military-Industrial complex

Market Capitalists do not go to Washington. They strive to please customers, not politicians. They put their own money at risk to earn their own rewards, never foisting losses on others. Because they are risking their own hard earned dollars, they are careful to invest where it makes the most economic sense, not where it curries political favor. They meet their rivals in open competition, may the best products win. They have no reason to be ashamed of their honestly earned wealth. Many are famous for their public spirit and generosity, whether it's in funding the arts or providing for those truly in need.
Posted by Jill Fallon at December 16, 2011 9:30 PM | Permalink