The 7 Degrees of Crony Capitalism

“I favor capitalism, not crony capitalism” is a common refrain I hear among conservatives or the type of mainstream libertarians whose idea of a free society is simply the current system minus the welfare state, when pushed. This is the response I get when bringing up such interventions as the TARP bailouts or agricultural subsidies. These are too often seen as anomalies in an otherwise mostly free market system rather than the modus oporandi of the existing system.  Furthermore such interventions as licensing requirements, right to work laws, zoning restrictions, patents, copyrights and government funded infrastructure are rarely acknowledged in conversations about “crony capitalism”.

When taking these interventions into account, not to mention the massive military expenditures and other forms of government contracting that the US engages in, then one is forced to conclude that crony capitalism is much more widespread than those who see it as an anomaly in otherwise pure system would like to think. As such I find it helpful to view cronyism in the existing economy in terms of degree rather than as something more black and white. Obviously the CEO of a company that gets most its revenue from government contracts is obviously more guilty of benefiting at the expense of the tax-payers and consumers than the janitor who sweeps the company’s floor.

This perspective has led me to view the issue in terms of multiple degrees of cronyism. I have developed a tentative seven degree scale that ranks what I see as the most extreme crony capitalists (the first degree) to those who receive only minimal benefits from the modern cronyism (the seventh degree). The scale goes as follows:

1. In the first degree with have people who have made it to the upper levels of government and have used to massive levels of state violence to enrich themselves and their friends. Here I am thinking of the Dick Cheney’s of the world. For those who don’t know Dick Cheney’s former company was awarded billions of dollars in government contracts as part of a war that was started by an administration he was part of.

2. At the second degree I would place those decision makers for firms that do contracting work for the most violent and invasive parts of the state. Here I am thinking of the decision makers at firms like the Previously mentioned Halliburton, Blackwater (now Academi), General Dynamics, or any other firm that gets most of its revenue through supplying the warfare and surveilence states as well as the private prison industry. These entities should be viewed as part of the state rather than mere private companies.

3. In the third degree we have those in business who actively use their wealth and personal connections to influence the government to intervene in the economy on their behalf. Here I am thinking of People like Charles Koch who, as I previously discussed is using his wealth and influence to get the oil government to construct a large oil pipeline, using taxpayer money and land taken through eminent domain. Other examples include the Disney Corporation which has a history of lobbying for the extension of their copy right monopolies, or Walmart’s tendency to pressure local governments into building business parks and overpasses at its behest. In this group I would also include the decision makers in those financial institutions who were bailed out by the federal government and whose fraudulent activity was exempted from legal repercussions.

4. In the fourth degree I place those decision makers in those firms who are receive government contracts, grants for things other than military, police or surveilence state related services. The include those firms that are on the recieving end of government funded R&D, agricultural subsidies ect. Where a given firm or individual falls in this category like all the others depends on how much their business model centers around government contracting, and subsidies.

5. In the fifth degree I would place the decision makers at those firms whose business models center around or are made possible some form of government intervention that they do routinely actively push for. This would include the numerous big box retailers whose business models rely entirely on the domestic and international shipping infrastructure, as well as the various members of licensing, patent, and copyright monopolies and oligopolies, not to mention firms whose business models involve extracting resources on government land ect. The line between this and the third degree can be quite blurry depending on how active these decision makers are in pursuing advantages from the state. The decision makers at most major retailers and food chains likely fall into this or the third category and I suspect most doctors and lawyers do as well.

6. At the sixth degree would be the middle managers and people who choose to work at the above mentioned firms, despite having a wide range of other options available.

7. Is those lower ranking individuals who work for firms that are benefiting from government intervention, do first and foremost to a lack of other options. In practice the cronyist economy pushes out non-cronyist business models and forces many of into conventional employment for the above mention businesses. I would also include in this category farmers who receive agricultural subsidies, only because they are unable to opt out of them.

As readers may note, nearly all of the dominant firms in the global economy fall somewhere onto this scale. Cronyism is all around us, and cronyist government intervention spills over into most aspects of economic life. Most of us work for firms that benefit from the interventions at some point or another and whatever benefits anyone at any of these levels is receiving is coming at a cost to the tax-payer and consumer. Let us not forget when we speak of crony-capitalism we are really talking about the whole of the existing system and not some aberration from it.

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