Crony Capitalism

[merjet]

I'm breaking this off from another thread to try to keep it separate.

----------------------------

Quoting William Scherk:

"Crony capitalism" is a pretty elastic concept in some hands. How does one differentiate among economic activities that deserve the label and those that do not?  What are the edge conditions, or detection thresholds that help determine what are and what aren't?
....
I must go find an adequate definition of Crony Capitalism, one that all can agree on. Link.

----------------------------

When you find an adequate definition, it might not be one we can all agree on. This page might help. I have not followed any of the links. Wikipedia might help. 

I don't claim to have a well-developed concept of it. I think it's a very complicated topic. They are plenty of easy examples, e.g. bribing government officials. Is such government official a "crony capitalist" or only an accessory?  I believe a complete separation of state and economics like Rand alluded to in Capitalism: The Unknown Ideal is impossible. The state must acquire things it needs to run -- especially for the military and police, phones, software, computers, and other supplies -- in the marketplace. It must buy or rent space. It must compete with the private sector for workers. All that needs considered.

I believe conflicts of interest make an important component. Scanning the Wikipedia article "crony capitalism", I saw nothing about conflicts of interest with its common meaning. Ayn Rand said there are no conflicts of interest among rational men, but apparently she was unaware of the common meaning. The only example she gave in her essay on the topic is one of competition. There are no examples that meet the common meaning.

A conflict of interest is a situation in which P1 engages P2 to act on behalf of P1, a relation of trust. Note that Wikipedia says, "could possibly corrupt", not "does corrupt". P2 may or may not commit an impropriety or breach that trust. P2 might exploit the situation, if not for himself, then for friends and relatives. There are often more than two parties involved. People (to some degree) trust government officials to act on their (the people's) behalf. The Wikipedia conflicts of interest page has a whole section about government officials.

----------------------------

Quoting MSK:

Crony capitalism is when there is collusion between the government and specific businesses to keep competitors off the market for insiders and, through different means (obscure and otherwise) siphon government funds into the coffers of those insider businesses. Link.

----------------------------

I think that's included but not enough, e.g. mentioning bribes. Anyway, has Donald Trump been a crony capitalist according to it? I don't know. A huuuuuge share of his businesses is overseas, including India -- where a big chunk is -- and Indonesia, places said to have plenty of corruption. Did he make deals with government officials where they would restrict competition? Were banks pressed by government officials to loan Trump money at favorable interest rates? Did he agree to use contractors hand-picked by government officials in order to close the deal? Did he "pay to play"? Again, I don't know, but these are conflict of interest questions. Also, even if 'yes', the accessory may deserve any blame. One might argue that standards differ outside the country versus in-country. Again, I think it can be a very complicated topic. 

 

 

 

 

 

[anthony]

I think it's an offshoot of 'special interest groups' and therefore, collectivism. When you, the state, start the rot by deeming by arbitrary, utilitarian or subjectively emotional 'standards' that certain 'groups' should be favored over others, it has to in practice extend to the economy, and select factions in industry and business. As a businessman, you're either in or out and your survival often depends on going along and getting in. I think the corruption is a two-way process, government of business and business of government, with no one prepared to call a halt.

[Michael Stuart Kelly]

3 hours ago, merjet said:

I think that's included but not enough, e.g. mentioning bribes. Anyway, has Donald Trump been a crony capitalist according to it? I don't know. A huuuuuge share of his businesses is overseas, including India -- where a big chunk is -- and Indonesia, places said to have plenty of corruption. Did he make deals with government officials where they would restrict competition? Were banks pressed by government officials to loan Trump money at favorable interest rates? Did he agree to use contractors hand-picked by government officials in order to close the deal? Did he "pay to play"?

Merlin,

Maybe and most likely yes where the structure is either do that or don't build.

It's silly to hold a monopoly on something, then blame an aspiring competitor for failing. The government (including foreign governments) has held a monopoly on large business for quite some time, now. You either play by their rules or you don't play. And the government has the guns.

Trump decided to play. He was quite upfront when he started his campaign that he judges the crony capitalism system as corrupt, even though he played it and won using the corrupt system's rules.

His redeeming quality is that he doesn't like it and doesn't seek corrupt money as his business model. He's not in business for government favors. He's in business to build and run hotels, golf courses, etc. He gets his money from paying customers. He paid to play so he could play, not so he could mooch off taxpayers and be the only one in the ring at that.

He wants a system where such corruption doesn't exist. And a system where that doesn't exist er... doesn't exist. So he's going to help build it.

It's that simple.

Michael

[merjet]

On 12/4/2016 at 2:14 PM, Michael Stuart Kelly said:

Merlin,

Maybe and most likely yes where the structure is either do that or don't build.

It's silly to hold a monopoly on something, then blame an aspiring competitor for failing. The government (including foreign governments) has held a monopoly on large business for quite some time, now. You either play by their rules or you don't play. And the government has the guns.

Trump decided to play. He was quite upfront when he started his campaign that he judges the crony capitalism system as corrupt, even though he played it and won using the corrupt system's rules.

His redeeming quality is that he doesn't like it and doesn't seek corrupt money as his business model. He's not in business for government favors. He's in business to build and run hotels, golf courses, etc. He gets his money from paying customers. He paid to play so he could play, not so he could mooch off taxpayers and be the only one in the ring at that.

He wants a system where such corruption doesn't exist. And a system where that doesn't exist er... doesn't exist. So he's going to help build it.

It's that simple.

Michael

"You either play by their rules or you don't play." 

I see. You make alibis for Trump, but rejected any alibis 2+ years ago for Comcast, even blaming Comcast for things it didn't do. Link.  Or was that dropped along with your love of Glenn Beck?

"He was quite upfront when he started his campaign that he judges the crony capitalism system as corrupt, even though he played it and won using the corrupt system's rules." 

Ergo, he is a crony capitalist.  Regardless, I give him credit for his wish to ban lobbying for 5 years after leaving government service for some people.

"It's that simple." 

To you. Anyway, I didn't start this topic in Stumping in the Backyard/Donald Trump, wanting to make Donald Trump the center of attention. I accept some fault for mentioning his name. I started it in Ethics to pose a theoretical question: How do government officials do their jobs -- engaging contractors, consultants, buying things, etc. -- while minimizing conflicts of interest or at least improprieties? We also already know Donald Trump's simple answer, "The President can't have a conflict of interest."

If not the President, then why not the cabinet and agency heads, and members of Congress, too?

[Mikee]

Merlin,

Let me get this straight. You're being mugged in a alley and the mugger says "Give me your money", if you say "No" you're a moral and honest man.  (Especially if you later support the mugger for mayor.)  If you willingly hand over your wallet and say "this is all I got"  but don't mention the cash you have in your money belt you are a liar and a collaborator and no better than the crook?  And if you come back later with the cops to clean up the alley you're a hypocrite?

[merjet]

Mikee, how exactly does what you wrote relate to anything I wrote?

[Michael Stuart Kelly]

14 minutes ago, merjet said:

Mikee, how exactly does what you wrote relate to anything I wrote?

Merlin,

He's talking about Trump.

It's kind of obvious.

Stretch your metaphorical muscle.

You don't even have to go far...

 

Michael

[Mikee]

1 hour ago, merjet said:

Mikee, how exactly does what you wrote relate to anything I wrote?

You lack imagination.  Years ago I remodeled my house.  I pulled a permit as an "owner-builder" which was my right.  In turns out the city building permit manager was not comfortable with "owner-builders" and I got hit with a number of nonsense rulings by his inspectors.  Evidently my city extorts contractors fees as well as permit fees (the builders have to pay the city a percentage of what they charge their customers).   I went down and talked to him and negotiated a compromise on several items and eventually got my projects signed off at additional expense.  Am I a crony capitalist for trying to talk sense into some asshole behind a desk at the city offices?  If my project was a 20 million dollar project instead of a mere 20 thousand would that make a difference?

[william.scherk]

On 12/4/2016 at 7:08 AM, merjet said:

Quoting William Scherk:

"Crony capitalism" is a pretty elastic concept in some hands. How does one differentiate among economic activities that deserve the label and those that do not?  What are the edge conditions, or detection thresholds that help determine what are and what aren't?
....
I must go find an adequate definition of Crony Capitalism, one that all can agree on. Link.

----------------------------

When you find an adequate definition, it might not be one we can all agree on. This page might help. I have not followed any of the links. Wikipedia might help. 

I found a brief course from the University of Puget Sound that zeroes in on Asia during their financial crisis circa 1998. It was useful for me to segment what can be part of the problem. They mention rent-seeking, corruption, crony capitalism,  (lack of) transparency, and moral hazard.

My mostly-naive impressions of crony capitalism were pretty high-relief cases such as recent Russia, Indonesia under Suharto. Family business success during a Presidential tenure, 'party of the President' economic success (ie, Moscow mayor and wife), that kind of thing, when the perks of power seemed to be being able to make your 'friends' rich.  Some oligarchs owe their leading economic position to the state leadership. But I couldn't pick out the crony capitalism from the general ethical-financial-statist-corruption mess in either place.

The naive impression deepened when it came to the Sochi Olympics.  Where corruption and lack of transparency and crony capitalism collided with authoritarian rule and rent-seeking and dirigisme and blind contracts and sleaze and what have you. How to segment that out? Big ass deficits on the rent-seeking contractors of favoured oligarch class,  dumped on the public banks. Debt pushed around to evade losses in the 'productive' class. It remains very difficult for me to analyze handily, just this one example.  I  know it makes Russia a bad place for unfettered competition and free-market rigor, for clean institutions. It is bizarrely corrupt on a scale that outclasses what we know in North America outside Mexico.

Here's what seems like a decent short heuristic -- how much of this kind of thing goes on where, to what degree and exceptional corruption? Which  practical regime is clean, cleaner, cleanest?

From the course page:

Crony capitalism - a variety of capitalism where the dominant political leaders use the power of the state to advantage family and friends who receive government created rents and/or the proceeds from corrupt behavior. Examples of crony capitalism include (1) a company owned by a member of the family of the dominant political leader that is granted an exclusive license to import automobiles, (2) a construction company owned a friend of the dominant political leader that always wins state contracts to build public infrastructure projects, and (3) a bank owned by a member of the family of the dominant political leader that receives domestic or foreign loans on favorable terms not available to other banks. [Some authors consider crony capitalism to include circumstances which features a very close relationship between government and favored big business conglomerates where government essentially serves as handmaiden providing subsidies, tax breaks and protection from competition to the favored companies.]

On 12/4/2016 at 7:08 AM, merjet said:

I don't claim to have a well-developed concept of it. I think it's a very complicated topic. They are plenty of easy examples, e.g. bribing government officials. Is such government official a "crony capitalist" or only an accessory?  I believe a complete separation of state and economics like Rand alluded to in Capitalism: The Unknown Ideal is impossible.

Some political regimes seem better at keeping it mostly at bay. I think the USA is usually found near the cleanest edge of such things like the Economist comparison "Comparing crony capitalism around the world." I screencap from the article, but first their concept of businesses most compatible (see too this other Economist article, "Our crony-capitalism index: The party winds down"):

Their reckoning as of 2014:

 

-- and as of 2016.  The USA looks almost as good as Germany by proportion. Some places are just sad:

 

[merjet]

WS, thanks for your post. The bar charts were interesting.

14 hours ago, william.scherk said:

From the course page:

Crony capitalism - a variety of capitalism where the dominant political leaders use the power of the state to advantage family and friends who receive government created rents and/or the proceeds from corrupt behavior. Examples of crony capitalism include (1) a company owned by a member of the family of the dominant political leader that is granted an exclusive license to import automobiles, (2) a construction company owned a friend of the dominant political leader that always wins state contracts to build public infrastructure projects, and (3) a bank owned by a member of the family of the dominant political leader that receives domestic or foreign loans on favorable terms not available to other banks. [Some authors consider crony capitalism to include circumstances which features a very close relationship between government and favored big business conglomerates where government essentially serves as handmaiden providing subsidies, tax breaks and protection from competition to the favored companies.]

Just a note on terminology. The first sentence of the definition focuses on the political leaders, whereas the second focuses on the businesses in cahoots with the political leaders. Who is the capitalist? Capitalist usually mean a business person. That may be why I used accessory for a government official. Of course, one person could be both a business person and an accessory, e.g. if said person is owner or even part owner of the involved business.

[kluss]

but cant country and ppl hide croney capitaalism behind trusts and holding companys in tax heavens? like cariben or pafic islands  so it or big stock market then it looks like?

[merjet]

19 hours ago, kluss said:

but cant country and ppl hide croney capitaalism behind trusts and holding companys in tax heavens? like cariben or pafic islands  so it or big stock market then it looks like?

Yes, I think crony capitalism can lurk behind trusts and such. I believe tax havens are more for minimizing taxes, but that doesn't preclude using them to mask crony capitalism. Off-shoring may also be used to avoid regulations. It's not clear to me what you are asking about the stock market.

[Samson Corwell]

Well, the desired separation is certainly impossible, but for different reasons. Political institutions dictate what form a society will take, so there really isn't any separation between "government" on one hand and "the economy" on the other. In laissez-faise, there is a set of laws that outline what is and is not permissible, and these laws are imposed on others who very well may want different ones.

As to "crony capitalism", I do not like to use it. Some call patents an instance of "crony capitalism" and justify this label by stating that patents only exist through "state intervention" when the same is true of normal property. I can also imagine some opponents of laissez-faire referring to privatization and deregulation as cronyism, as well.

[Samson Corwell]

On 12/4/2016 at 10:48 AM, anthony said:

I think it's an offshoot of 'special interest groups' and therefore, collectivism. When you, the state, start the rot by deeming by arbitrary, utilitarian or subjectively emotional 'standards' that certain 'groups' should be favored over others, it has to in practice extend to the economy, and select factions in industry and business. As a businessman, you're either in or out and your survival often depends on going along and getting in. I think the corruption is a two-way process, government of business and business of government, with no one prepared to call a halt.

And is egoism any less "arbitrary"?

[anthony]

16 hours ago, Samson Corwell said:

And is egoism any less "arbitrary"?

Quite - an entirely arbitrary construct. I mean, where is the physical, biological, psychological, metaphysical or epistemological evidence that men are separately unique and autonomously motivated-directed? Clearly happiness for one is happiness for all, and vice-versa. When one thinks, we all think. (and vice-versa). Rational egoism? Ridiculous, arbitrary idea.

[kluss]

alllso use tax hevanbs to avoide coustemes in countrys (countrys wherer its bad to earn much money or somboduy that dont want to brag abut his money if a country wher tax recoerds are offical , i dont know much abut it but too m it look like you have more creative options whit the mony  if you hve a holding company in virigin island then in for exampel holland  big stock makret  i mean go into big stock makret easyer to be anonyomuse and dont get noticed

[Brant Gaede]

On 12/22/2016 at 10:13 AM, Samson Corwell said:

Well, the desired separation is certainly impossible, but for different reasons. Political institutions dictate what form a society will take, so there really isn't any separation between "government" on one hand and "the economy" on the other. In laissez-faise, there is a set of laws that outline what is and is not permissible, and these laws are imposed on others who very well may want different ones.

As to "crony capitalism", I do not like to use it. Some call patents an instance of "crony capitalism" and justify this label by stating that patents only exist through "state intervention" when the same is true of normal property. I can also imagine some opponents of laissez-faire referring to privatization and deregulation as cronyism, as well.

"Imposed on others"? Laws which do not initiate force and laws that do. Who is objecting to what now? And if everybody of every stripe is imposing, imposing is morally and practically neutral. I suggest a little elaboration so the real subject is obvious. We could, however, propose depose of the impose.

--Brant

initiation of force is an imposition; non-initiation of force is an imposition to the initiation

[Brant Gaede]

On 12/22/2016 at 6:41 PM, anthony said:

Quite - an entirely arbitrary construct. I mean, where is the physical, biological, psychological, metaphysical or epistemological evidence that men are separately unique and autonomously motivated-directed? Clearly happiness for one is happiness for all, and vice-versa. When one thinks, we all think. (and vice-versa). Rational egoism? Ridiculous, arbitrary idea.

Horse feathers. Human social existence comes off the individual thinking autonomous brain which also sequentially links the four basic principles of Objectivism. Then off that egoistical foundation one gets social in the ethics and politics, but don't discard the base.

--Brant

that's America and Americans, ideally rendered anyway

[anthony]

5 minutes ago, Brant Gaede said:

Horse feathers. Human social existence comes off the individual thinking autonomous brain which also sequentially links the four basic principles of Objectivism. Then off that egoistical foundation one gets social in the ethics and politics, but don't discard the base.

--Brant

that's America and Americans, ideally rendered anyway

You don't see the sarcasm? Wow. After a thousand posts on egoism I'm misinterpreted.

Of course, "horse feathers".

[Brant Gaede]

13 minutes ago, anthony said:

You don't see the sarcasm? Wow. After a thousand posts on egoism I'm misinterpreted.

Of course, "horse feathers".

I have a cold.

You have to be careful with "sarcasm" when the tone of voice is missing.

Try one of these: 

--Brant

or all of them

Merry Christmas (not sarcasm)

[anthony]

6 minutes ago, Brant Gaede said:

I have a cold.

You have to be careful with "sarcasm" when the tone of voice is missing.

Try one of these: 

--Brant

or all of them

Merry Christmas (not sarcasm)

To you and yours, too.

[Samson Corwell]

On 12/22/2016 at 8:41 PM, anthony said:

Quite - an entirely arbitrary construct. I mean, where is the physical, biological, psychological, metaphysical or epistemological evidence that men are separately unique and autonomously motivated-directed? Clearly happiness for one is happiness for all, and vice-versa. When one thinks, we all think. (and vice-versa). Rational egoism? Ridiculous, arbitrary idea.

A utilitarian standard may be the wrong one, but is none the less NOT morally subjectivist. Unless, you are using "subjectivist" in the Randian sense of "that which I have no other criticism for".

[Samson Corwell]

On 12/25/2016 at 8:49 AM, Brant Gaede said:

"Imposed on others"? Laws which do not initiate force and laws that do. Who is objecting to what now? And if everybody of every stripe is imposing, imposing is morally and practically neutral. I suggest a little elaboration so the real subject is obvious. We could, however, propose depose of the impose.

No, every law is an imposition of value on those who disagree with it. Just as the current system is an imposition on libertarians, a libertarian system would be an imposition on non-libertarians who would find their views excluded from the public sphere.

[Mikee]

17 minutes ago, Samson Corwell said:

No, every law is an imposition of value on those who disagree with it. Just as the current system is an imposition on libertarians, a libertarian system would be an imposition on non-libertarians who would find their views excluded from the public sphere.

This reads almost like the definition of moral relativism.

[BaalChatzaf]

2 hours ago, Mikee said:

This reads almost like the definition of moral relativism.

No. It is a description of how government works.