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Discussion: (10 comments)

  1. How about your view of the Crédit Mobilier of America scandal in size and scope compared to modern day crony capitalism?

  2. How about the Federal Govt giving eminent domain powers to oil/gas pipeline companies? Is that crony capitalism?

    1. Savior Fair

      Govt routinely grants eminent domain to utilties.

      1. they do indeed. What justifies giving them that right? isn’t that a kind of crony capitalism also?

        1. no, it means you do not understand the term…….

          1. defined: ” Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government ”

            does that mean that business has a “close relationship” to govt when it comes to eminent domain?

            again – what justifies the govt takes sides with one property owner to force another to turn over their property or use of their property ?

  3. Wayne Abernathy

    How about this for a question: If the abundance of regulation increases the opportunity for and likelihood of cronyism, is the solution to add even more regulation to try to control this exercise of regulatory power, or to remove the offending regulation and increase market discipline?

    This is not an academic question. The new Brown-Vitter bill proposes to address the problems of TBTF by adding even more regulation, giving regulators even more authority, and making it federal law that all banks are worse than nonbanks, that all big banks are bad, all small banks not quite so bad, and all mid-size banks a mix of good and bad.

    1. re: the evils of regulation

      I do not see this argument being made about the FDIC which is govt bureaucrats regulating banks – and doing so in a way that IMHO has only benefited the banks and their depositors.

      Anyone remember Resolution Trust? another bureaucratic agency that benefited more than it harmed.

      How about the Pension Benefit Guaranty Corp – PBGC?

      the interesting thing about that entity – so far is:

      The PBGC is not funded by general tax revenues. Its funds come from four sources:
      Insurance premiums paid by sponsors of defined benefit pension plans;
      Assets held by the pension plans it takes over;
      Recoveries of unfunded pension liabilities from plan sponsors’ bankruptcy estates;[4] and
      Investment income.

      so can we really say that in all cases that the govt does a bad job of regulating banks and other financial instruments?

  4. Actually I would beg to differ and suggest that healthcare is an even stronger case as being the “poster child for crony capitalism” since almost all the problems stem from it, and Obamacare merely makes those worse. Usually free market advocates don’t focus on explaining the problem in terms of special interest influence (we speak in free market terms that are preaching to the choir). Instead we need to focus on the crony capitalism aspects because liberals fear corporate influence over government so it may be the hook to get them to pay attention to think through the issues.

    This page spins the issue as crony capitalism in gory detail:

  5. PS, though obviously it is *a* poster child for crony capitalism, I was merely suggesting there is a better candidate for *the* poster child.

    Dodd-Frank shows what happens when the public doesn’t grasp there is a vast difference between *bad* regulation driven by “crony capitalist” regulatory capture, which may appear to be minimal regulation to them, and true deregulation.

    When the government pretends to be solving a problem, e.g. keeping us safe, then the private sector doesn’t step in to address the problem since it fears getting squashed by government intervention, and has trouble explaining to the public why it should pay for private solutions . It is only with *full* deregulation usually that the public will turn to private sector solutions and entrepreneurs will step in to provide them.

    We risk seeing the same thing happen in healthcare as happened with the financial crisis which lead to Dodd-Frank. If there is a repeal only of Obamacare, or only part of it, the core government interventions that drive up prices will remain and prices will rise. Liberals will then claim “see, deregulation didn’t work”, and then push for even more regulation.

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