This is Part II of the series “The Dangers of:” and today we are talking about crony capitalism and the conflation with an actual free market economy.
Crony capitalism has, in recent years, been deliberately misrepresented as an actual free market economy. A free market economy is the freest, most liberating economic ideology that could ever exist. Crony capitalism, on the other hand, is one of the more oppressive, totalitarian systems.
The calculated conflation of the two, by those on the left and in the media, is meant to deteriorate the public trust in a free market economy.
According to The Cambridge Dictionary crony capitalism is, “an economic system in which family members and friends of government officials and business leaders are given unfair advantages in the form of jobs, loans, etc.” The main idea is that there is essentially a ruling class, a mix of politicians and large business leaders that constantly exchange favors back and forth. These favors are done so to keep politicians in power and the large businesses with a plurality of the market share.
In order to stay in power the politicians get their business counter parts to rally up voters by endorsing the politicians and funneling almost endless cash flow into the politicians campaigns.
In return, the politicians help the business owners maintain substantial market share. Adding regulation, that small business can’t keep up with and by granting large government contracts to these big business leaders are just a couple examples. Countless other favors are granted by the political rulers to the business leaders in the upper echelon. They create a barrier to entry for smaller businesses and entrepreneurs, meaning the elites stay in the corridors of power and the rest of us remain as serfs.
A free market economy (capitalism), on the other hand, is a system that allows for the unregulated commerce of goods and services. It consists of voluntary transactions between a consumer and a merchant for an agreed upon price. It consists of an employee working for an agreed upon wage for an agreed upon number of hours. It allows the consumers to be the ones to choose who provides the best products and services at the best price. Those companies flourish while the others don’t.
With a free market economy the government essentially stays out of the business sector. It does not bail out businesses that failed because “they are too big to fail.” It does not play favorites. Even if it were to play favorites, it’s presence in the private sector is so small that it does not have the capability to set mass regulation and red tape or create barriers to entry. The government allows the market to provide for the common good at the most reasonable price possible.
On the far left we’ve seen the conflation of both of these economic systems. They do this to erode trust that the markets will provide. Socialist sites across the web have countless articles implying that “Crony Capitalism is just Capitalism.” This rhetoric is working. With a self proclaimed “Democratic Socialist” being a top contender for the Democratic nomination for president over the last two elections, we see first hand that this messaging is actually starting to create a distrust in a real free market economy.
Do we need to end the cronyism that is seeping it’s way into our system? Of course. Do we need to shrink the governments hold on the private sector? Of course. With that being said, we cannot have a large bloated crony government with its hand around the neck of the free market and then go on to blame the free market for its failings.
As the great Milton Friedman once said, “Underlying most arguments against the free market is a lack of belief in freedom itself.” The free market provides more liberty and individual freedom than any other economic system, and conflating it with crony capitalism to erode peoples trust in the free market is the same as trying to erode peoples trust in freedom itself.