Yaron Answers: What Is "Crony Capitalism"?

so let me start by saying that there is no such thing as crony capitalism there's no such thing as something capitalism it's capitalism and capitalism is about free markets it's about the separation of states of government from economics from any involvement in business and in the marketplace and and therefore there's no something capitalism this capitalism so yeah there's cronyism crony socialism maybe or just let's just call it cronyism let's just call it this is government involvement in the economy this is this is the inevitable consequence of the mixed economy so so let's talk about that this is inevitable you can't exist in this kind of economy in this kind of world without there being cronyism the reason is that that's how we've set up our economic that's the essence of a mixed economy so what is a mixed economy economy is this mixture of some freedom in some industries in some realms in some part of the business world and lots and lots of controls lots of regulations lots of redistribution of wealth taxes but but not even just simple taxes but complex taxes then incentivize some behavior and penalize other behavior that try to engage in social policy or trade policy or you know and NGO favoring manufacturing versus something else so this is government intervention in the economy so when governance it means an economy how does it do that it does that through businesses it does it through trying to manipulate businesses so what a business is supposed to do they're supposed to say oh none of our business government do whatever you want no they they are going to have to either fight back to try to protect themselves from it or they are going to because many of them don't know what capitalism is and don't know that virtues of capitalism and don't understand it they you know in many ways they're just like many most Americans who vote for this stuff right they're gonna try to manipulate those controls so that they minimize the hood on them and in the worst case scenarios that they are going to manipulate it so that hurts their competitors and benefits them and you're seeing all those behaviors you've seen the behavior of just in self-defense you've seen the behave you have self-defense plus a little you know favoritism and you've seen the the behavior of penalized trying to try to crush the other and you see it in so many different ways it's it's when I don't know steel companies lobby Congress to have high tariffs on steel so they can be protected from foreign competition and this is conservatives to put this and liberal support this and you know the steel industry does this periodically you see it when Netscape right can't compete against Microsoft on internet browsers and they go and run to the Justice Department to go after Microsoft and it wasn't just Netscape but they were joined by son who is competing Sun Microsystems which doesn't exist anymore really and by Allah Co which I think both son by Allah Co Larry Ellison's company the three companies went to the Justice Fonda Clough no Microsoft now they so here they were penalizing a competitor you see it when AMD and when Cargill lobby Congress heavily for corn subsidies because they own all the farms the way corn is grown where sugar farmers Inc you know once high tariffs on sugar so that they can sell sugar in the United States keep prices of sugar high because the fact is they can't compete with foreign raised sugar and you see every way an economy there is not a business it's not a business particularly a significantly sized business that is not affected in one way or another by significant government regulations and it's industries or its own attempts to manipulate those regulations and it's again it's inevitable soon as government steps in business is going to respond and you know the best example here is Microsoft before the just about partner went after Microsoft Microsoft attitude was you know what government is not it's a it's a vini that much in our business so we're now gonna try to lobby not gonna do anything and they spent no money on lobbying in Congress nothing justice bond goes after Microsoft completely in my view unjustly a complete waste of time but a huge injustice because it consumed huge amount of resources from Microsoft huge amount of time huge amount of talent and it crushed innovation at Michaels often Michael self would be the first to admit that over the last ten years very little innovation because they've been under the this this foot you know this fastest foot of the of regulators from Washington DC you know and it so what was Microsoft's opposed didn't say okay do whatever you want to us know they now expanded resources and now they Lobby and now they spend hundreds of millions of dollars and try to change regular regulation and legislation to their benefit and you know once in a while I read a story when Microsoft to say hey go after those guys they've got a monopoly and that's awful and it's horrible and they should be condemned for doing that but should we then condemn Microsoft that is should we then say Michael sucks an evil company because they do that you know cuz Apple does it Oracle does it Sun does it almost everybody does it I think we should condemn the activity but let's not ignore the context in which that activity happens and let's also not ignore the incredible productivity productiveness that these company exhibit on the other hand so yes it's wrong for them to use government in order to manipulate the market it's suddenly wrong evil I would say to use governor to go after their competitors they'd be put in this situation because the Hajis dente competitors using against them it's like you know they they feel like they have to do because other people are doing it not an excuse it's still bad but let's not forget we live in a mixed economy we live an economy with a sustain of practice and let's not forget the genius the productiveness the innovations these companies produce at the same time right so yes condemned them the chrony side of their business but you gotta still respect the amazing stuff that they do now this is probably more true in banking than in any other field that we know of and the reason is that banks are the most regulated industry in the United States now does that mean that no rational person should ever go and become a banker no you know this is just a matter of degree if you passion is banking if finance is something interesting to you sure you gonna go into banking of Finance I mean you can't escape government regulation this is the world we live in this is why we need to fight against it but if you go into banking and and therefore have to deal with five different banking regulators and a day to day basis and so on this is it's a major it's a major bad influence it's a it's a it's a it's a it's a horrible thing you're gonna deal with them you know and you're gonna you're gonna sit on on committees of bankers that are gonna try and change the legislation so that they don't come and kill you cuz that's what they're trying to do at the end of the day if you leave government alone they will destroy this economy and they will destroy business in this in in in the United States so you're trying to hold that off you're trying to minimize the regulations just trying to shape regulation so they don't penalize you as much so you could and of course then you accused of lobbying and you accused of being a crony that is self-defense now what we need what we need is for businessmen to rise up and say this stuff so you know businesses are gonna lobby Congress they have to they have to survive but if they lobbied Congress and said we want to live in a world where we don't have to lobby Congress if bankers yeah they're gonna receive FDIC insurance they even gonna be bailed out once in a while it's part of the way our economy structured it's awful don't condemn them for that condemning them for that standing up and saying we don't want it we want a different rule game we want freedom we want capitalism we want you know we want to get rid of all this so the day when business must stand up and say we want freedom we want less we want regulation to be done away with phased out lower dramatically went that's we want we'd significant reduce taxes and without trying to manipulate our behavior we want government out of our lives we want as you know we want to produce goods and we want whether we succeed or fail to be based on the products that we make and the services we provide to our customers that's what should determine whether we're profitable or not that voluntary exchange the day when business and rise up and declare that that's when we will start seeing a shift in this country but as long as they play this Cronus game as long as they apologize for their wealth apologize for their profit then it's hard to defend them right because you're defending a very mixed animal you're defending a very mixed this mixture of yeah the incredibly productive and I'm manipulating a system a system that they shouldn't be so it's hard but I think it's a huge mistake and you know so ina and outlet shrugged it's a huge mistake just to go after businessman just because they participates in the in the in the mixed economy they have no choice and you know an Atlas Shrugged Ayn Rand paints a picture that is very sharp right you've got those who won't participate you know and and Reardon is it represents that and remember even he signs a letter is is kind of forced into participating and then you've got Owen Boyle who is a hundred percent crony as he doesn't produce anything he's he's of no value the fact is that in the world we live in most of these most the better businessman who mixtures between the two almost businessman generally a mixture what you do they engage in government activity they engage in cronyism some but they even in America today they're not gonna be successful unless they were also incredibly productive and know how to run a business we are moving more and more towards an alan boyle society as gum and grows as government intervenes more as govern regulates more the on boils are the ones who survive and thrive and they're gonna be successful but let's not forget that we still have remnants of Rearden you know many of our business leaders we have some of them are more some of them or less let's celebrate that part of them let's celebrate productiveness let's celebrate profit let's celebrate innovation let's celebrate the great things that business provides all of us that the businessman shape they shape our world nothing in our world around us does not is not does not come into being spontaneously it's all a product of innovation of creativity of productiveness and all of that happens in businesses small medium and very very large all of those businesses to the extent that they're productive of good businesses to the extent that they serve I based on government favors you know that's not good and we need to criticize that but let's keep context let's stay objective and you know many libertarians out there spend their time Lam blasting business all the time because business is in the is in hand-in-hand with government and they ignore they ignore what businesses are actually producing they ignore the effect the the the the positive effect that business has on all of our lives including big businesses because I know there's this negative view of big business and conservatives have an even libertarians have Objectivist shouldn't get caught up in that Iran celebrated business ironman celebrated productiveness and to the extent where we see productiveness we should support it and hail it and celebrate it and we should condemn the cronyism for what it really is government force government forces the essence of Kony anism and the fault for that is in the politicians and the ideology that drive them the ideology that makes the mixed economy possible that's why the focus of the criticism needs to be it we're now gonna get anyway by condemning Bill Gates and Steve Jobs and and and business leaders what we need to do is condemn the ideas and the manifestation in kind of what in you know the mixed economy and how it manifests in a mixed economy

  1. He lost it at 1:54 when he said "most Americans VOTE for this stuff," implying that Americans vote for issues rather than CANDIDATES.
    He's missing a slight step on the process, since voters have NO VOTE other than for a particular candidate.
    So holding the voters responsible, is short-sighted, since candidates have FINAL AUTHORITY once elected.
    Meanwhile elections are usually won on the amount of financial support they get; and so they become INVESTMENTS for special interests.
    So he doesn't understand that the problem is TOTALITARIAN DEMOCRACY.

  2. the idea that a free market can function where the loser will just accept thier fate is absolutely ludicrous

  3. I don't know ??? if crony is about partiality and keeping it in the club then it seems that crony capitalism is indeed a characteristic system of wealth distribution…. friends ( clubs, insiders, special interest groups ) get together and corrupt a money funded economy whereby they end up buying political offices and whereby they become the lawmakers and whereby they hire or regulate who and how the ideal of capitalism is delivered. …to the masses… sounds to me like crony capitalism is indeed a reality – if capitalism is about the distribution of wealth and the ability to earn wealth from one's ideas and inventions then crony capitalism is just a corruption of the ideal ….. whereby those who manage to take control of ideas end up taking control of capitalism….

  4. Go after crony capitalism; defend real capitalism

    There is a lot of crony capitalism going on in this country. And that has to be distinguished from real capitalism, because this "Occupation" stuff on Wall Street, if you're going after crony capitalism, I'm all for it. Those are the people who benefit from contracts from government, benefits from all of the bailouts. They don't deserve compassion, they deserve taxation, or they deserve to have all their benefits removed. But crony capitalism isn't when somebody makes money and they produce a product. That is very important. We have to distinguish the two. And unfortunately, I think some people mix that. But this, to me, is so vital, that we recognize what capitalism is versus crony capitalism. When you have crony capitalism, and that's why we're facing this crisis today.

  5. Businesses would be ended without a government to defend them.
    When will the fairy tales end?
    "Pure" capitalism ends without anyone to protect the big businesses.

  6. I must disagree with your assessment of any one company, under the present conditions, using government to attack other companies, when the same is being done all over. A novelist-philosopher once said "The aggressor is solely responsible for the consequences of his action" so ALL the evil is to be laid at the feet of the aggressors; First the government, then Netscape, Sun and Oracle for STARTING this crap that CREATED the conditions that are

  7. There is an incident far earlier than Microsoft. In 1964 GM wanted to put one of it's hottest engins in a Chevrolet product but the Gauleiters stepped in and threatened them with anti-trust action because Chevrolet was one of the leading sellers in the leading company. So to evade that, GM put the engine in the Pontiac Tempest and this is where we got the Pontiac GTO, Since, as usual, the government acted on the sneak pepole never understood why this 3-deuces engine was in the Pontiac and not the natural choice of Chevrolet products. This also explains why, during the middle '60's GM had no official presence in racing

  8. Your introduction of foreign competition is taken out of context. What if, and this HAS been the case, where the foreign producers are being subsidized by their governments to drive others out of the market? or what if one country is using slave labor; i. e. is a dictatorship with which a US company has buddied up with? I have never heard any "free traders" address that, while most admit that it is happeneing What if there are linguistic and cultural differences where one People use the same literal words differently (which is why, in addition to "tranlsation" you have "interpretation")? or if one country believes that trade is to make the other country economically dependent with all that entails. As I understand it Canada wants its eco-pathology written into trade agreements. In international trade, until one set of economic principles, which needs, at least, a similar set of values and morals, is writ across the globe, "free traide", which is the only "fair trade", like capitalism, will be an unknown ideal. Now, one may argue the merits of tariffs as a measure, but certainly something has to be done to show that one will not be a milch cow for anothier nation. Hell, Rand said that a freer nation has the right to INVADE a slave pen, so certainly they have the right to take lesser steps

    It seems to me that once you bring in international trade and try to measure it along the same lines, you're mixing pounds with kilograms. So to keep it clear, maybe you'd better keep it within the same system, meaning the same nation

    In the mid 1980's Irving Wolfe penned THE JAPANESE CONSPIRACY (THE PLOT TO DOMINATE INDUSTRY WORLDWIDE) Gene Burns a Libertarian radical free trader out of WRKO Boston AM 680 wkdays 10AM-2PM, vetted it, interviewed Wolfe himself either a more rational libertarian or Objectivist by the sound of things and his writing. Burnes said "it is shameful that the US government did not act" (for Burns to say that, the situation had to be REALLY egregious) and acted as a distributor for the book, which I read and recommend for its international trade historical value. In the 1990's David Brudnoy echoed the same sentiments then just wrung his hands saying "what can we do"? So it DOES happen, i.e. it IS a fact of reality

    So it would be best to not bring in foreign matters and keep the discussion in the same value system

  9. Yaron, you don't get to dictate what others mean by the phrase "crony capitalism". What a person means is what he means, and that's that (I presume you believe in liberty of thought). Reflect on that before claiming "there is no such thing as crony capitalism", because what your answer does is equivocate. It trades out the questioner's actual meaning for your own. It's presumptuous. So you're being very illogical from the start. Study what people actually mean by the phrase — and the best people not the worst — then answer.

    What the most intelligent people mean by "crony capitalism" is, I think, something along these lines: An economic system where there is the superficial appearance of a free market economy, but that is really governed by illegitimate privileges dispensed by the political class to the elite members of the business class (usually the business class will reciprocate the favors somehow, whether now or later, or whether publicly or in secret). And of course, such a thing can exist in degrees — you could have a free market with a little bit of cronyism, or a lot.

  10. If businesses or people want to affect government, they'll have to organize. That's fair. What's not good, is how these things occur behind closed doors, in forms of private deals with the ones with political power. That's just corruption. I think the easiest way to fight this, is to offer legit, open arenas where these things can be discussed freely. People with power should also be required to declare any personal interest they might have, and be subject to investigations when doubts arise.

  11. There is no such thing as "crony capitalism" it is simply capitalism not the Tea party Alex Jones Crack Pot idea of crony capitalism as all these references to "crony capitalism" began with neo-liberal propaganda (1999-2002) and have no real meaning in economics. Any one who uses the term "crony capitalism" is misquoted or does not know what they are saying.

    Helen Hughes (Spring 1999). "Crony Capitalism and the East Asian Currency and Financial 'Crises'". Policy[1]. Retrieved 2012-07-22. Japan’s dismal performance in the 1990s and the East Asian collapses of 1997 indicate that dirigisme can only boost economies in the short run and at high cost. It breaks down in the long run (Lindsey and Lukas 1998). External link in |magazine= (help)
    ^ Jump up to:a b c Kristof, Nicholas (March 27, 2014). "A Nation of Takers?". New York Times. Retrieved March 27, 2014.
    Jump up^ The Discovery that Business Corrupts Politics: A Reappraisal of the Origins of Progressivism, by McCormick, Richard. 1981. The American Historical Review, Vol. 86, No. 2 (Apr., 1981), pp. 247-274.
    Jump up^ Kang, David C. (2002). Crony Capitalism: Corruption and Development in South Korea and the Philippines(PDF). Cambridge: Cambridge University Press. ISBN 978-0-521-00408-4. Focused only on explaining successful outcomes, the conventional model provided no analytic way to explain the 1997 crisis. Countries previously regarded as miracles now were nothing more than havens for crony capitalists (p.3)

  12. Sure there is cronyism in governments.
    But, if there should be a Holy Free Market, the cronyism should stop in enterprises?
    Microsoft? If you go in a shop to buy a computer, the choice for the operation system in your computer is mac or microsoft.
    Why? Cronyism from the government? Perhaps.
    But i don't think that it's forbidden for hardware producers or shops to place open source software in the hardware. So why they place microsoft? Cronyism?

  13. Where cronyism is unacceptable is at a political level where the information that was promoted to secure a vote was not the underlying intent or purpose of the candidate.

    Without consumer rights bought in at a political level it is a case of the most personable liar having the advantage.

    This will not be initiated by the offshore wealth land owned in trust establishment. Voters must make it happen.

  14. 12:15, 9:00 are two examples of why to ignore his first statement that there is no such thing. Crony capitalism is lobbying of businesses and bribing politicians to take away individual or corporate freedom inside the US- that's how I see it. 

  15. At around 9 minutes you contradict your first statement. Stop telling me what to celebrate. I'd rather mourn this system of inequality.

  16. Capitalism always leads to centralized power and fascism and the poor increasing and the rich increasing. I'm no one to listen to but I don't see how there is any way around it.

  17. What happens tho when a bank starts to lend monney to poorly and people cant pay back. Then the bank goes bankrupt, then the people who invested monney in that bank loose the monney. Then other people loose trusts in banks and withdraw monney causing more banks to go bankrupt?

  18. capitalism is based on loaning money (or something else of value) & charging interest. period end of discussion. if you think this is free enterprise you are mistaken. money lending inevitably attempts to curtail free enterprise as a means to gain greater returns by forcing money to be borrowed at advantageous rates. govt is used to accomplish these ends. if got didn't exist bankers would invent it

  19. Libertarians don't have a problem with big business, they should embrace all business. They take issue with government involvement in business. What Yaron is saying is, don't hate the businesses, because they are simply playing by the rules that a manipulative government has laid out for them. It would be nice if they'd all stop playing the game, and say "Get out government!", but that seems a little unrealistic.

  20. Sure. Libertarians generally have a poor view of any interactions between any size business and govt. Though "hate" might not be the right word.

    Size of business is not a moral determination.

  21. It follows from the notion that in the current context the only way to get big is to "crony up" to the govt and get favors. In the current context there is some level of truth to this. Of course it's a different level for each company, and changes over time, as Brook indicates with the Microsoft example. It does blur the reality though. Some small companies crony up. Different big ones do it to different extents.

  22. unrestrained? Unregulated markets?

    Are you insane??? Every aspect of our economy is subject to heavy regulations and controls.

  23. Even the weakest among us are better off in a free society than what we have now. And what we have now is still better that 99% of the rest of the planet.

  24. People often say that Capitalism is a failed system, when it's people who fail to live up to it.
    It's a sad truth that most people DON'T want to compete. They want to be taken care off, they want favors. No wonder we are seeing communist and socialist crap all around the world.
    Capitalism is for the virtuous, the incompetent can't grasp it.

  25. Neither. I'm referring to the new capitalism that is emerging with the new resource based economy. Ck. out the Zeitgeist movement & see how capitalists are reaching their goals of free, unrestrained, unregulated markets in spite of the usual historical constraints. Objectivists tend to miss this viable alternative to the current monetary/market system that has destroyed our freedom & liberty. All patriots should fight for an Amendment convention. Everywhere, this police state is intolerable.

  26. Good pts. Classical capitalism isn't any longer desirable under the monetary "free" market system. Because the mixed corporatist/statist conjunction was rooted prior to the advent of classical economics, it's the system itself that needs incrementally replaced by an emerging resource based economy that will also replace the international banking & corporate cartels that run the tyrannical & totalitarian show. Randians advocate identical capitalistic means to obtain their own utopian sum goals.

  27. The first half of your response to that ignorant jackass was correct; however, the only reason to send someone to look up mutualists or the concept of libertarian socialists is if you want to give them a good laugh.

    I've never seen a bigger oxymoron than Libertarian Socialist, and I used to work with military intelligence.

    (also not sure how "vulgar libertarianism" factors in here other than that seemed to be what he was accusing Yaron of)

  28. Yaron's euphoria seems rooted in the tremendous good of capitalism. The tremendous bad that capitalism has caused, while acknowledged, is largely ignored as he justifies his position of using the ends to justify the means. This is also the moral position of Rand's closed objectivism with Brook as it's chief exponent. The opportunity & ability to compete in his world of global domination & monopoly isn't even possible with the 1% eliminating any perceived threat to their rule both here & abroad.

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