Sarah Palin’s speech earlier this month in Indianola, Iowa tore apart Washington’s political fraternity. While it may have left her presidential aspirations in a dicey situation, her speech attacked government officials and politicos who are getting wealthy by helping out their corporate cronies and friends on Wall Street in exchange of votes for the favors rendered. She called it ‘crony capitalism’ – where the government, big businesses and corporations along with big finance come together in collusion. As a result of this, it’s the little guys who are losing out. Palin further said that this crony capitalism is, “not the capitalism of free men and free markets.” It is the same “crony capitalism that destroyed Europe’s economies.” While what she said was generally right, I got stuck with something else she was talking about – ‘crony capitalism’.
Crony capitalism is just jargon coined to mislead people into believing capitalism is unfair and exploitative. In fact, crony capitalism is nothing more than looting what is rightfully yours and mine. It has nothing to do with capitalism, or for that matter free markets and exploitation. So what exactly is crony capitalism all about, if it’s not capitalism? An example of crony capitalism would be Suharto’s regime in Indonesia. During Suharto’s 30 year reign (1968-98) as the President of Indonesia, businessmen made a killing. As long as Suharto’s family got a share of the spoils, businessmen could get any license they wanted. This ensured market monopoly and hence huge profits for Suharto’s cronies.
In normal conditions, where the government does not interfere or meddle with the market competition, only those companies or businesses will prosper that satisfy their consumers – not those who use unscrupulous means to gain market monopoly and deliver substandard products or services.
Let us look at a hypothetical situation to better understand how this affects businesses and consumers i.e. you and me. Suppose, you and I prefer using Samsung’s Galaxy Tab to maybe say Apple’s iPad or any other similar product. In such a scenario, Samsung would be the one making profits. As a result, its share values will go up and provide it with the capital to launch even more such products in the future – a win-win scenario for both the company and the consumer.
However, suppose Apple gets some of its cronies in the government to ban Samsung’s Galaxy Tab, in a bid to gain market monopoly. In this scenario, the profit Apple makes will be at our expense. This is crony capitalism. It cheats us, it cheats businesses (Samsung) and it kills productivity.