Crony capitalism is a pejorative term describing an allegedly capitalist Capitalism is an economic system in which the means of production and distribution are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning; profit is distributed to owners who invest in businesses, and economy in which success in business depends on close relationships between businesspeople and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth.

Crony capitalism is believed to arise when political cronyism CDE · CEDAW · CERD · ILO C100 · ILO C111 · ILO C169 · Protocol No. 12 ECHR 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 In economics, a public good is a good that is non-rivalrous 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 that no one can be effectively excluded from using the good. In the real world, there may be no such thing as an economic and political ideals.

Crony capitalism in practice

In its lightest form, crony capitalism consists of collusion Collusion is an agreement, sometimes illegal and therefore secretive, which occurs between two or more persons 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[citation needed]. It is an agreement among 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 An industry trade group, also known as a trade association, is an organization founded and funded by businesses that operate in a specific industry. An industry trade association participates in public relations activities such as advertising, education, political donations, lobbying and publishing, but its main focus is collaboration between). 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 patents A patent is a set of exclusive rights granted by a state (national government) to an inventor or their assignee for a limited period of time in exchange for a public disclosure of an invention 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 A keiretsu is a set of companies with interlocking business relationships and shareholdings. It is a type of business group of post-war Japan, the chaebol Chaebol refers to a South Korean form of business conglomerate. They are powerful global multinationals owning numerous international enterprises. The Korean word means "business family" or "monopoly" and is often used the way "conglomerate" is used in English of South Korea, and the powerful families who control much of the investment in Latin America Latin America is a region of the Americas where Romance languages (i.e., those derived from Latin) – particularly Spanish, Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,501 km² (7,880,000 sq mi), almost 3.9% of the Earth's surface or 14.1% of its land surface area. As of 2009, its and the drug and health insurance companies in The United States. A great example of this is between brand name and generic drugs and how brand name drugs buy out generic drug makers so they wont produce generic drugs leaving the brand name drugs monopoly in place.

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 b. ^ Simple characterizations of the political structure since the 1980s are no longer possible; India Home to the ancient Indus Valley Civilisation and a region of historic trade routes and vast empires, the Indian subcontinent was identified with its commercial and cultural wealth for much of its long history. Four major religions, Hinduism, Buddhism, Jainism and Sikhism originated here, while Zoroastrianism, Judaism, Christianity and Islam, especially up to the early 1990s when manufacturing was strictly controlled by the government (the "Licence Raj"); Indonesia Indonesia , officially the Republic of Indonesia (Indonesian: Republik Indonesia), is a country in Southeast Asia and Oceania. Indonesia comprises 17,508 islands. With a population of around 230 million people, it is the world's fourth most populous country, and has the world's largest population of Muslims. Indonesia is a republic, with an; Argentina The Argentine claims in Antarctica along with the Falkland Islands, South Georgia, and the South Sandwich Islands (administered by the United Kingdom) shown in light green;^[1] Brazil Brazil (pronounced /brəˈzɪl/ ; Portuguese: Brasil, IPA: [bɾaˈziw]), officially the Federative Republic of Brazil (Portuguese: República Federativa do Brasil, listen (help·info)), is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population. It is the only Portuguese-speaking; Malaysia ^ b. The current terminology as per government policy is Bahasa Malaysia but legislation continues to refer to the official language as Bahasa Melayu (literally Malay language). English may continue to be used for some official purposes under the National Language Act 1967; Russia Russia (pronounced /ˈrʌʃə/ ; Russian: Россия, tr. Rossiya, pronounced [rɐˈsʲijə] ( listen)), also officially known as the Russian Federation (Russian: Российская Федерация, pronounced [rɐˈsʲijskəjə fʲɪdʲɪˈraʦəjə] ( listen)), is a state in northern Eurasia. It is a federal semi-presidential republic,;^[2] and most other ex-Soviet The Union of Soviet Socialist Republics (USSR, Russian: Союз Советских Социалистических Республик, tr. Soyuz Sovetskikh Sotsialisticheskikh Respublik IPA: [sɐˈjus sɐˈvʲeʦkʲɪx səʦɨəlʲɪˈstʲiʨɪskʲɪx rʲɪsˈpublʲɪk] , abbreviated СССР, SSSR), informally known as the Soviet Union (Russian: states. Critics claim that government connections are almost indispensable to business success in these countries. Wu Jinglian, one of China's leading economists^[3] 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.^[4]

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 capture Regulatory capture occurs when a state regulatory agency created to act in the public interest instead acts in favor of the commercial or special interests that dominate in the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for large firms to produce negative. A famous early example in the United States would be the Interstate Commerce Commission The Interstate Commerce Commission was a regulatory body in the United States created by the Interstate Commerce Act of 1887, which was signed into law by President Grover Cleveland. The agency was abolished in 1995, and the agency's remaining functions were transferred to the Surface Transportation Board, which was established in 1887 to regulate the railroad "robber barons Robber baron is a term that revived in the 19th century in the United States as a reference to businessmen and bankers who dominated their respective industries and amassed huge personal fortunes, typically as a direct result of pursuing various anti-competitive or unfair business practices. The term may now be used in relation to any businessman;" 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 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. The group of market makers involved in price fixing is sometimes referred to as.^[5] A more modern example would be the case of Creekstone Farms. After the mad cow Bovine spongiform encephalopathy , commonly known as mad-cow disease (MCD), 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 4 years, usually affecting adult cattle at a peak age onset of four to five years, all breeds being equally susceptible 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 The United States Department of Agriculture is the United States federal executive department responsible for developing and executing U.S. federal government policy on farming, agriculture, and food. It aims to meet the needs of farmers and ranchers, promote agricultural trade and production, work to assure food safety, protect natural resources, issued an injunction and refused to allow Creekstone to buy the kits necessary to test.^[6] 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 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. In 2008, Krugman won the Nobel Memorial Prize in Economics for 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.^[7]

The military-industrial complex Military-industrial complex is an emergent process between politics and businesses that causes and is caused by wars, businesses who create military weapons, and propaganda funded by such politics and businesses to increase the demand for such wars and weapons so they can be paid to increase the supply in the United States is often described as an example of crony capitalism in an industry. Connections with 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 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 Transatlantic relations refers to the historic, cultural, political, economic and social relations between countries on both side of the Atlantic Ocean. Sometimes specifically those between the United States, Canada and the countries in Europe, although other meanings are possible, Airbus (which receives subsidies A subsidy is a form of financial 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 (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire from European governments outright) has stated Boeing receives similar subsidies, which are hidden as inefficient defense contracts.^[8] 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 former Vice Presidant Cheney. Cheney retired from the company during the 2000 U.S. presidential election campaign with a severance package worth $36 million. As of 2004, he had received $398,548 in deferred compensation from Halliburton while Vice President. Cheney was chairman and CEO of Halliburton Company from 1995 to 2000 and has received stock options from Halliburton

Gerald P. O'Driscoll former vice president at the 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. The Federal Reserve Bank of Dallas is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., make up the nation's central bank. The Dallas Fed is the only one stated that Fannie Mae The Federal National Mortgage Association (OTCBB: FNMA), commonly known as Fannie Mae, was set up as a stockholder-owned corporation chartered by Congress in 1968 as a government-sponsored enterprise (GSE), but founded in 1938 during the Great Depression. The corporation's purpose is to expand the secondary mortgage market by securitizing and Freddie Mac The Federal Home Loan Mortgage Corporation , known as Freddie Mac (OTCBB: FMCC), is a government sponsored enterprise (GSE) of the United States federal government. Freddie Mac has its headquarters in the Tyson's Corner CDP in unincorporated Fairfax County, Virginia became classic 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." ^[9]

William K. Black, the Litigation Director of the Federal Home Loan Bank Board during the savings and loan crisis who exposed the Keating Five, has described the S&L crisis and the current financial crisis as examples of crony capitalism.^{[10] [11]}

Continuous expansion of intellectual property areas and extending the protection period may be viewed as a symptom of crony capitalism in which the businesses patenting non-technological solutions and major record labels force the governments to pass laws that are otherwise unjustified and harmful to economy.

Creation of crony capitalism in developing economies

In its worst form, crony capitalism can devolve into simple 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 private persons or corporations not directly involved, where any pretense of a free market is dispensed with. Bribes to government officials are considered de rigueur and tax evasion Tax avoidance is the legal utilization of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast, tax evasion is the general term for efforts to not pay taxes by illegal means. The term tax mitigation is a synonym for tax avoidance. Its original use was by tax advisors as an is common; this is seen in many parts of Africa, for instance. This is sometimes called plutocracy The word plutocracy is derived from the ancient Greek root ploutos, meaning wealth and kratos, meaning to rule or to govern (rule by wealth) or kleptocracy Kleptocracy, alternatively cleptocracy or kleptarchy, from Greek: κλέπτης and κράτος (rule), is a term applied to a government that takes advantage of governmental corruption to extend the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds (rule by theft).

Corrupt 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 private persons or corporations not directly involved 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 The Alawis, also known as Alawites, Nusayris and Ansaris are a prominent minority religious group in Syria who describe themselves as a sect of Shī‘ah Islam. Alawis are distinct from the Turkish-based Alevi religious sect, although the terms share similar etymologies in Syria Syria , officially the Syrian Arab Republic (Arabic: الجمهورية العربية السورية‎), 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 Dr. Bashar al-Assad is the President of the Syrian Arab Republic, Regional Secretary of the Ba'ath Party, and the son of former President Hafez al-Assad is an Alawite.) This can be explained by considering personal relationships as a social network A social network is a social structure made up of individuals called "nodes," which are tied (connected) 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. 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 socialists Socialism is an economic and political theory advocating public or common ownership and cooperative management of the means of production and allocation of resources and other anti-capitalists 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, OC, O.Ont was an American-born 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 (1961), a powerful critique of the urban renewal policies of the 1950s in the United States. The book has been credited with reaching beyond described it as a natural consequence of collusion between those managing power Power is a measure of an entity's ability to control the environment around itself, 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 humans as social beings. Often, the study and trade Trade is the voluntary, often asymmetric, exchange of goods, services, or money. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern, while Noam Chomsky Avram Noam Chomsky is an American linguist, philosopher, cognitive scientist, and political activist. He is an Institute Professor and professor emeritus of linguistics at the Massachusetts Institute of Technology. Chomsky is well known in the academic and scientific community as one of the fathers of modern linguistics, and a major figure of has argued that the word "crony" is superfluous when describing capitalism.^[12] 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 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.

Capitalists oppose crony capitalism as well, but consider it an aberration brought on by governmental favors incompatible with true capitalism. Sometimes it is referred to as "state corporatism Corporatism is related to the sociological concept of structural functionalism. Corporate social interaction is common within kinship groups such as families, clans and ethnicities. Aside from humans, certain animal species are known to exhibit strong corporate social organization, such as penguins. In nature, cells in organisms are recognized as." In this view, crony capitalism is the result of an excess of socialist-style interference in the market, which requires active corporate lobbying to reduce red tape. In fact, some have advocated use of the term "crony socialism" instead to emphasize that the only way to run a profitable business in such systems is to have help from corrupt government officials. These advocates point to the higher levels of interaction between corporations and governments that are considered more socialist, taken to its maximum in the form of nationalization Nationalization, also spelled nationalisation, is the act of taking an industry or assets into the public ownership of 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 transferred to the public sector to be operated by or 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 eventually proves poisonous.^{[citation needed]} 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."

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,

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.^[13]

See also

Show All>>

What Links Here:

Recently Viewed Pages:

• Political: Dictionary
• Home
• Search Terms
• Society: Issues: Business: Allegedly Unethical Firms: Boeing: Directory
• Referrers
• Society: Issues: Business: Allegedly Unethical Firms: Global Crossing: Directory
• Anthropocentrism: Encyclopedia
• Oppression: Encyclopedia
• Discrimination (Employment and Occupation) Convention, 1958: Encyclopedia
• CERD: Encyclopedia

Most Popular Pages:

• Foto Hantu
• Harga Emas: Blogs
• Indonesia Bokep
• Tangki: Blogs
• Jerawat: Blogs
• Dankie: Blogs
• Efek Samping: Blogs
• Karoseri
• Enron: Answers
• Morissan: Blogs

Related 'Crony Capitalism' Searches: