Cronyism Is Not Today’s Biggest Problem
What’s the biggest threat to economic freedom? An answer I’m hearing more and more often today is cronyism—businessmen seeking special favors from government.
There’s no question that a lot of businessmen are in bed with government—that they are asking for and getting special favors, exemptions, subsidies, and controls. But that is only one part of today’s real problem: the mixed economy.
Cronyism is not a system all its own. It is a product of today’s mixture of capitalism and state control. Under capitalism, the government’s only role is to protect voluntary trade by barring the initiation of force from human relationships. But once the government itself starts initiating force—regulating this, redistributing that, picking winners and losers—then the only thing that can result is pressure group warfare. One group lobbies for its favor, another group lobbies for its, all resulting in more and more government burdens placed on the rest of us.
Frankly I think putting the focus on cronyism is a copout. I suspect that for some at least it’s a way to try to curry favor with the left by blaming businessmen for today’s problems.
10 Comments to “Cronyism Is Not Today’s Biggest Problem”
It’s easy to fall into this trap is because the only time you see businessmen in the non-financial news is when they’re being hauled off to jail for backdating their employees’ stock options, being dragged in front of a congressional panel to explain why one of their trades lost money, or to plead for a bailout, subsidy, loan guarantee, et cetera.
On the news, you never see businessmen delivering their products and services on-time, on- or under-budget, linking investment capital with new ideas, or fueling our civilization— because, frankly, that’s not news. These monumental achievements are every-day occurrences.
I don’t think its a cop out. Its a big problem when the businesses whose freedom we are defending are at the same time we’re defending them, pushing for more controls, e.g. google backing ‘net neutrality’ or PhRMA backing Obamacare. Cronyism needs to be despised so much that we advocates of freedom don’t have to fight the left and businessmen at the same time.
Cronies aren’t really businessmen. So criticism of cronies isn’t criticism of businessmen.
There are two parts to the business of influence peddling, a buyer and a seller. Most of the media attention and public approbation is focused on the buyer—the companies that use their money and influence to change laws in their favor. Very little attention is given to the sellers.
Why do businesses bribe public officials? Because public officials have something that they want. If the power and scope of government is reduced then businesses will be forced to be competitive in other ways—making better products rather than relying on government controls to hand them a market share by fiat.
Misha,
Good point. And you will find it made, with many examples, in my piece on cronyism, “The Economics and History of Cronyism.” It’s here: http://mercatus.org/publication/economics-and-history-cronyism
By the way, I agree with Don Watkins that the big problem is the mixed economy. That’s what leads to cronyism. It’s in piece also.
David, thanks for commenting and for linking to your piece. I have a post coming out later this week where I point to it. Here’s what I write: “Yes, I did write that cronyism isn’t today’s biggest threat to freedom. But it is a threat. Here’s a brilliant analysis of cronyism that actually reinforces my main point: cronyism is simply an outgrowth of the mixed economy.”
Thanks, Don. BTW, I’m taking Atlas Shrugged on my vacation next month to reread it. I read it twice in the late 1960s and haven’t read it since. I think that, among other things, Ayn Rand nailed cronyism back then.
Best,
David
The FED is the biggest problem today. Take away the FED and the government cannot print money of out thin air. Take away printing money and the welfare state will collapse under its own weight.
The only other way to finance the welfare state is free market Treasury bonds with rates that will soar and be unsustainable and high taxes which will cause a revolt.
Ron Paul has some issues, but he was right on with this one
Where does one draw the line between those businessmen who are only doing what is necessary to survive and stay competitive and those who are taking full advantage of the mixed economy by trying to muscle out their competitors via political pull? How do you distinguish between a business that is using Washington to protect its individual rights out of necessity and one that is actively using it to violate the individual rights of a competitor? Sometimes I wonder if we are using the current mixed economy as an excuse to support cronyism on some level.
Anyway, I look forward to reading the article linked above as well as the upcoming blog post here on this site.
Cheers.