Crony Capitalism

One of the main reasons why a lot of people, not just in Italy, have a bad taste in their mouth whenever the concept or terminology of capitalism is discussed, is due to crony capitalism. I’ve got some news for you, crony capitalism is not real capitalism.

Crony capitalism is really all about closed markets, which is the antithesis of free market economics. When cronies control an economy, they establish monopoly position, not because they produce a lot of good products that people buy and thereby dominate the market, they do so to cut off competition. This is usually done through regulation. This is not done in a ham-fisted way.

It’s unmistakable. Through political capital, the right connections and right channels, somehow, someway competition is taken out of the picture, and what happens is closed markets. Closed markets lead to higher prices, lower jobs and lower quality service, and everybody loses.

This a hard concept to grasp because it’s easy to think that this is a win-lose situation. A few win at the expense of many. The government bureaucrats win because of the connections, the cronies win because they cornered the market, and everybody else subsidizes them.

This brings to mind the famous quote of the French economist, Basquiat, “Government is fiction when people seek to live at the expense of the work of others.” It’s not a socialist concept. It takes the garb of capitalism.

This is why a lot of economies suffer. There are distinct winners and losers being chosen, not by virtue of the ability to complete. It has nothing to do with the superiority of their marketing techniques, the inherent quality of their products, as well as their ability to make people happy. It has nothing to do with those because it’s not a product of competition, instead, it’s a function of connections and bureaucracy which this all leads to less choices, closed markets and a tremendous amount of suffering.

Looking Past the Confusion

So what is the solution here? I wish I could tell you, but maybe one potential remedy is to try real capitalism.

This is scary because real capitalism means real competition. It’s not fake competition where only a small list of companies, half of them being fully viable, get to compete. Instead, you dismantle a lot of apparatus and let those who want to employ and build businesses come in.

This can lead to more companies competing for the same pool, lowering prices, increasing quality and producing more employment.

Sadly, that’s what it says in the glossy outside cereal box design of capitalism. To get there, as we all know, there can be a lot of complications. It is definitely a straight shot from Point A to Point B. A lot is lost in translation. That’s how messy this thing you and I call life can be. But we need to press on. We need to be courageous.

We have to take concepts and press hard to truly unleash their promise. Capitalism is one of these. Far from a dead or discredited force, it continues to rage on, much like a weakened dragon. The only question is how do we maximize the social utility of its fiery breath.