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I focused only on defining the elements of the Free Market System and Socialism in my most recent post on this topic, and I neglected to mention “Crony Capitalism.”
Yesterday, I read an article in the Winter Issue of The Independent Review, Volume 23, Number 3, published by The Independent Institute and written by Professor Michael C. Munger (Duke University) and Mario Villareal-Diaz, Associate Professor (University of Arizona), entitled, “The Road to Crony Capitalism.” The article raises a most serious question and issue, to wit: “Suppose it’s true that capitalism has a tendency—it’s not inevitable or irreversible, but a tendency nonetheless—to devolve into crony capitalism. Is laissez-faire simply the first step on a kind of road to serfdom, where giant corporate syndicates achieve a parallel kind of economic planning every bit as pernicious as that feared by Hayek?” The authors go further by stating, “[I]t is at least possible that cronyism is intrinsic to and not separable from capitalism.”
I am not an academic and so I do not approach the Free Market versus Socialism debate from an intellectual framework, but rather from a more-matter-of-fact perspective. I would then submit the following comments as part-rebuttal and part-clarification of the points raised by Professors Munger and Villareal-Diaz, to wit:
1. The free market system (capitalism) is a complex, supra-system that comprises millions of people making billions, if not trillions of decisions every day, maybe every hour.
2. The free market system, as a system, is morally neutral, only capitalists (human beings) can be greedy, corrupt, or dishonest.
3. Crony capitalism is not true capitalism, because the crony capitalists do not want to do business in a competitive environment or on a level playing field. They seek special privileges or protection from the political class, either at the state level or the federal level. In my mind, crony capitalism equates in some cases to “too big to fail,” which violates Joseph Schumpeter’s concept of creative destruction.
4. Cronyism is not intrinsic to capitalism, but it is intrinsic to human nature.
5. There is nothing immoral or corrupt about the Free Market System. However, there is everything wrong with many capitalists who really do not want a free market or believe in free-market principles.
6. Many large-scale corporate entities have moved away from command-and-control structures and towards enlightened leadership and participatory decision-making models.
I will continue this discussion in a future post after I have read the other six related articles on crony capitalism.
