Supporters of free markets seem to be increasingly vocal in their opposition to corporatism or crony capitalism. Whilst I wholly welcome this, I fear that the demand for a proper free market economy without cronyism or special favours is as unachievably utopian as the wildest leftist fantasy.I say this because of the first premise of free market economics - that incentives matter. Politicians want money, business wants influence and favours. Both sides therefore have powerful incentives to trade - to give us cronyism.
Read it at Stumbling and Mumbling
Crony Capitalism - The Only Capitalism
by Chris Dillow | Investors Chronicle (UK)
Crony Capitalism - The Only Capitalism
by Chris Dillow | Investors Chronicle (UK)
4 comments:
You can't resist the pull of gravity. capitalism gravitates to monopoly and income inequality. All human institutions gravitate to cronyism. You end up with rule by a crony minority. Oligarchy or fascism.
It is only progressive taxation, public education, social welfare and the breaking up of monopolies that keeps capitalism from disappearing up its own butt.
On the other hand a long term socialist regime also degrades into institutional cronyism. Totalitarian communism. A strong private sector does counter the tendency of government institutions towards cronyism, but socialism needs an effective form of democracy more than it needs the counterbalance of the private sector.
At this point in time we are headed to the worst of both worlds, unfettered capitalism and crony government.
Cronyism is part of any economic system. What Chris fails to discuss is that the degree of cronyism is what really matters (http://bit.ly/NjQxeJ)
Dull minded people tend to pejoratively label what they don't support as "Utopian."
Marx's vision of "raw communism", i.e. a dictatorship of the proletariat, was "Utopian" until it became a reality. Of course it failed for being internally contradictory, but that's besides the point.
Chris Dillow fails to appreciate the power of ideas.
Andrew:
capitalism gravitates to monopoly and income inequality.
The former is false, the latter is true.
It is statism that leads to monopoly, not capitalism. In socialism, monopoly is maximized.
As for inequality, if the relatively wealthiest own 20 yachts while the relatively poorest own only 2, is that reason for revolution?
If people are by nature different in terms of their productivity, then inequality us not a function of theft, or exploitation, but of me producing twice as much as some people, and only half of other people.
All human institutions gravitate to cronyism.
False. Cronyism is not inevitable. It is a product of human choice.
You end up with rule by a crony minority. Oligarchy or fascism.
Even if there is a million years worth of history ending up that way, one cannot conclude it will always happen in the future. That's the fallacy of induction.
Because humans act, we are not doomed to repeat our past actions forever. Humans can learn. We're not automatons.
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