Crony Capitalism
I’ve long said that I don’t want to turn this blog political. My first love, of course, is in the markets, but to avoid what is happening in Washington DC is nothing more than a poor investing strategy. More than ever the government plays an important role in business, generating 25% of the economic output of the nation and making rules and regulations that affect the other three-fourths.
What is Crony Capitalism?
Crony capitalism is a perverted system of capitalism that favors certain entities over others either by legislation, regulation or taxation. Crony capitalism uses the force of government to change the business environment in such a way that it isn’t the best company or the best product that takes over the market place, but rather the company that is the best connected.
Do we really have Crony Capitalism in the US
I hate to suggest that any of our politicians are corrupt, but it seems that many of the laws passed by the federal government are unfair at the very minimum. And it’s no surprise that they are. Politicians want re-election and will do anything to get it. (I don’t like to be fired from a job, do you?) Also, most politicians are so disconnected from the lives of their constituents that they don’t know how legislation affects us “regular folk.” Consider this example, a normal congressman spends several days in DC meeting with political advisers and corporate leaders for input on legislation. Then they may fly to Iraq or Afghanistan and meet with military leaders. Then they may go home to their district for the weekend, which undoubtedly they spend with family they see very rarely. None of this day to day life is anything like that of their constituents, not at all.
Crony Capitalism Examples
Below is a series of a show from John Stossel on Fox Business Network. In this particular show, John Stossel uncovers how the government favors certain businesses including: Serious Materials, Philip Morris, and toy maker giants Mattel and Hasbro. Each of these companies are a benefactor of crony capitalism, as outlined in the following 5 videos. I promise you, each are worth watching.
Not all Stossel said was fact. Some was, but the window company wasn’t. Turns out they never got any tax payer dollars at all. Zero. They used their own money to buy plants and hire workers in the middle of a downturn. We should be thanking them not bashing.
the company printed some rebuttal to this story here:
http://blog.seriousmaterials.com/?p=1007
The investment money is one of the major factors in the economy because the economy is managed on the basis of high and low fluctuations in the stock markets.