The wrongness of crony capitalism

by Samuel Gregg,

We live in an age in which it is fashionable to criticize “capitalism” — blaming it for everything from consumerism to human trafficking. Most of this criticism is misplaced as people blame the economy for problems that are not economic.

There is, however, one form of capitalism that is both morally and economically problematic — “crony capitalism” or “crony corporatism.” Despite the economic problems and injustices resulting from crony capitalism, official Catholic teaching has not examined this issue in any significant depth.

So what is crony capitalism? On one level, it’s similar to what is often called “corporate welfare.” Crony capitalism, however, goes beyond direct handouts from government to business. At its essence, crony capitalist behavior concerns the hollowing-out of market economies and displacing the workings of free exchange within a framework of rule-of-law in favor of what might be called “political markets” where economic success depends upon your ability to harness government power to stack the economic deck in your favor.

Who are crony capitalists? Obviously it includes those who lobby governments and legislators for privileges that might include monopolies, regular subsidies, access to “no-bid” contracts, price controls, regular bailouts, tariff protection, preferential tax treatment, and special access to government-provided credit at below-market interest rates.

[C]rony capitalist behavior and crony capitalist economies are in fact deeply unjust.

If we are to combat crony capitalist behavior, we need changes in the values, beliefs and expectations that people bring to economic life. Underscoring that point in the minds of business leaders and their political counterparts is one of the greatest potential contributions that Catholic social teaching could make to combatting the economic and political cancer of crony capitalism, thereby helping restore integrity to economies desperately in need of it.

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