For what its worth I argue that what people call ‘Crony Capitalism” is the normal form of capitalism. It is not, in any way, aberrant, even if it supposedly ‘corrupts’ the market; that is what happens in capitalism. Neoliberalism is a particular form of crony capitalism which aims at total control over all forms of human life, and the sacrifice of human life to capitalism.
Crony Capitalism
Wealthy people (or people who succeed in the market, if you prefer) naturally team-up with each other to:
- protect themselves
- defeat their enemies,
- defraud the public,
- suppress rising competition whenever possible,
- secure their wealth and property,
- attain maximum profit at minimum risk (which is the origin of the modern corporation),
- disperse the costs of business, or business expansion, onto the public,
- get maximal labour for minimal costs,
- plan for a favourable future for themselves,
- propose what they consider to be sensible government,
- reinforce, or set up, a State to govern on their behalf,
- buy legislation and regulation that supports them,
- support people in the State who give them good results,
- support people who can intellectually and rhetorically justify their actions and dominance,
- deceive the public to distract from what is really going on, and so on.
Some of these normal aims obviously overlap.
Friendly people who work in the State, and elsewhere, benefit from this association. They get:
- supplemented incomes,
- extra entertainment,
- prestige,
- power and back up,
- association with people who might support them in times of need
- high paying jobs, after they leave the State, with little real work.
It is a mutual association that works well. State workers tend to work with the powerful as it makes life easier, capitalists tend to want the State to defend them, or be useful to them, and business people want to work with other business people for mutual profit. This is just normal business in action.
Historical issue?
I am not aware of any historical form of capitalism or mercantilism that does not work this way. If crony capitalism is not dominant in any period of history, then it’s probably because the existence of at least one other organised (or ‘crony’) force that is equally, or more, powerful: an Aristocracy, Church, Military, Organised Labour etc. That does not mean that crony capitalism does not exist in those societies, merely that it has to struggle and does not win all the time.
Cronyism is normal
The simple point is that people who identify with each other as being similar, will often collaborate against others they identify against, even if they are often competitive with each other as well. Any formal group working for its own interests will always have people competing for positions, dominance and so on, within that group. This does not mean the group’s people are not also collaborative, and do not team up to:
- protect each other,
- gain power as a group, or
- fight against those in groups they do not like.
The people who are considered similar might change depending on who the opposition is. In war, business people might see themselves as more similar to workers than they are to the enemy, and thus work with workers while the war is on, even if they still try and maintain ultimate dominance, or try to reassert the established hierarchy when the war is over.
This can be considered a common human dynamics (‘human nature’ if you like), and if it is left out of an economic theory then that theory is deficient. Almost always pro-corporate economics ignores the collaborative nature of the corporate system, or makes collaboration something that is acceptable within the firm, but condemns collaborations of workers (an outgroup) in general. These kind of economic statements could be seen as political statements, acting for the benefit of business, not statements aimed at discovering anything about real economic behaviour.
If humans were not prone to ‘cronyism’ then society would not work very well. If we did not compete and co-operate for personal and group advantage, we would not have firms, corporations, gangs, rock bands, political parties, discussion groups, organised religions, families and kin groups, and almost any other feature of social life you might care to mention.
That capitalists and business people engage in cronyism is to be expected. The more society is structured by wealth, then the more effective that cronyism will be, and that leads us to neoliberalism.
Neoliberalism
Neoliberalism seems to be an intensification of crony capitalism, or a tool of crony capitalism, that effectively acts as if to argue:
- the State only exists to support the big-business (corporate) sector,
- the State should not encourage or support any other sector at all,
- the State should leave ‘planning’ to business,
- the State must support the ecological destruction caused by business and allow pollution and poisoning by business, unless it threatens the activities of other big business,
- everything must be organised for business,
- every activity must be organised like a business as there must be no other organisational form with any public validity. Every organisation from Church to mother’s group to the army is really a business.
- public monopoly is bad, private monopoly is good (one of the big differences between neoliberalism and classical economics),
- ‘the people,’ or the State, must be stopped from interfering with business profits as that will lead to disaster and tyranny,
- democracy is only good, if it protects business, and is disciplined by corporate (‘market’) needs,
- free markets solve every problem as satisfactorily as that problem can be solved.
By promoting these positions, neoliberalism not only threatens human ways of life, but human life itself.
These positions seem marked in early neoliberal theorists such Hayek, Mises and the like, as well as in neoliberal politics.
Neoliberal politics came in to prominence when the possibility seemed strong that ‘the people’ might start working to stop business and State from causing ecological catastrophe, in the late sixties to early seventies. Neoliberals saw this as an unforgivable democratic attempt to interfere in business operations, liberties and profits, and neoliberalism seemed the way for crony capitalists and friends to go – especially after the only major challenge of Communism collapsed.
Corporately controlled markets were said to be the only way to bring liberty and prosperity. In Thatcher’s famous words: “There is no alternative.” Her words can also be seen as an attempt to stop the search for alternatives, which is one of the strategic aims of neoliberalism; it tries to present itself as inevitable when it is merely a hierarchical political and utopian movement.
A term central to neoliberal practice, is ‘free market.’ In practice, this term simply refers to whatever big business does. Interfering with nearly anything established business does is immediately said to be bad. Boosting free markets also means that the State should not help ordinary people, because that can free those people from the markets, and that might lead to a challenge to those markets. Business is the model for everything.
In practice neoliberal political parties are not ‘hands off’, and always seem eager to throw money at businesses they like; bail out failures (currently oil, gas and fracking companies) and to choose winners when they like them, or need to suppress some up and coming challenger. This is one reason why it is important to observe what neoliberals do, rather than what they say they do. The dogma of ‘free markets’ is an attempt to make this power grab seem aspirational; it easily passes from a position of putting the interests of established business first to claiming this gives everyone else liberty rather than servitude. In neoliberalism, the term ‘free market’ usually functions as a misdirection.
Preventing interference with whatever established corporations want to do can also involve:
- Lowering taxes on business, as that interferes in profits.
- Removing protective regulation such as minimum wages, good or safe working conditions, prevention of ecological destruction, lowering pollution etc., as they all interfere with business liberty and profit maximisation, and thus the ‘free market’.
- Increasing regulation and penalties which inhibit protest against business, as this stops interference with business.
- Arguing that taxpayers should not support ‘free education’ or ‘free’ healthcare for those who need it, as that impinges on ‘liberty’ (it probably is an added cost to business), presents a non-business form of organisation, and businesses could profit themselves from running these services.
- Reducing any social security which allows people not to be forced to take very low wages or working conditions to avoid starving to death, as this interferes with the threats business people can use to discipline workers and increase profits. The more neoliberal the powers that be, the more they are happy to sacrifice people to disease to keep the economy, and profits, going.
In neoliberalism, the ‘free market’ never means a market that is not structured to support big business, and it always allows giving big business subsidies from taxpayers if needed – whatever neoliberals say to the contrary.
Neoliberalism is not about ideal, or really, free markets and never has been – partly because to get real free markets you would have to scrap some forms of accumulation (particularly destructive accumulation) and stop companies getting so large they influence the market or the State (or become “too big to fail”), so that people could compete relatively equally in the market. This would be interfering with business as it is, and hence interfering with what neoliberals call free markets.
You would have to break up existing crony capitalism to get free markets, but eventually the process of control would restart unless you had inhibitors, such as limited lifespan for corporations, wealth taxes, customs such as dispersion of assets on death, or you had other powerful groups which were organised to resist capitalist control.
Conclusion
Crony capitalism may be unavoidable, just as crony communism, crony conceptualisation, or crony Christianity, are unavoidable. Neoliberalism is avoidable and challengeable, provided we recognise what it is and what is aims for (deliberately or not): that is, total dominance by the corporate classes or plutocracy.
However, fighting neoliberalism calls for ‘cronyism’ amongst all those in the population who are victimised by it – which is another reason the term is condemned by neoliberals. If we are all neoliberal ‘individuals’, then how can we team up to defeat it? Co-operation by the people is necessary to struggle against co-operation amongst the wealth elites.
Tags: economics, neoliberalism
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