Home
/
RELIGION & LIBERTY ONLINE
/
What Christians Should Know About Crony Capitalism
What Christians Should Know About Crony Capitalism
Apr 4, 2025 12:38 PM

Note: This is the latest entry in the Acton blog series, “What Christians Should Know About Economics.” For other entries inthe series seethis post.

The Term:Crony capitalism (sometimes referred to as cronyism or corporatism)

What it means:Crony capitalism is a general term for the range of activities in which particular individuals or businesses in a market economy receive government-granted privileges over their customers petitors.

Why it Matters: For as long as there have been government officials, there have been economic cronies—friends, family, and associates who use their connections for their own financial gain.

In ancient Israel, for example, when the prophet Samuel appointed his own sons as leaders, they began to engage in cronyism: “[Samuel’s] sons did not follow his ways. They turned aside after dishonest gain and accepted bribes and perverted justice.” (1 Samuel 8:3).

Unsatisfied with these corrupt leaders, the elders of Israel asked Samuel to appoint a king over them. God told Samuel to warn the people of the consequences, which included even worse forms of economic cronyism: “[The king] will take the best of your fields and vineyards and olive groves and give them to his attendants. He will take a tenth of your grain and of your vintage and give it to his officials and attendants” (1 Samuel 8:14-15).

We read passages like that and instantly recognize this as unfair and unjust, a corrupting influence on both the people and the government. Yet we tend note to even notice the cronyism that occurs in our own economic system. Because the “dishonest gain” is often more subtle than the examples found in the Bible, we oftendo not recognize cronyism because we don’t know what to look for.

To help in the identification process, here are nine of the mon types of government-granted privileges individuals and businesses receive that give them an unfair advantage (click on this link for detailed explanations of each):

Monopoly privilege — Government uses its power to directly protect certain firms or industries petition by limiting or keeping other firms out of the market. This type of direct cronyism is relatively rare. (Examples: panies, utilities, the USPS)

Regulatory privilege —Large corporations used to lobby government to reduce the regulatory burden on their industries. But many corporation realized they could gain petitive advantage by lobbying for specific regulations that benefit their firm and hamstring petitors. (Examples: Obamacare’s mandate requiring panies to buy contraceptives, a regulation that benefits the panies that make them.)

Subsides – Subsidies, which are sometimes referred to as “corporate welfare”, occur when the government gives taxpayer money directly to a business or industry. According to a report by Philip Mattera and Kasia Tarczynska, “two-thirds of the $68 billion in business grants and special tax credits awarded by the federal government over the past 15 years have gone to large corporations.” The largest recipient is the Spanish pany Iberdrola, which has collected about $2.2 billion in subsidies “by investing heavily in U.S. power generation facilities, including wind farms that have made use of a renewable energy provision of the 2009 Recovery Act.”

The other five mon types of government-granted privileges are: Loan Guarantees, Tax Privileges, Bailouts (and expected bailouts), Tariffs and Quotas on Foreign Competition, petitive Bidding, and Occupational Licensing.

So what’s wrong with some firms getting special privileges? The main reason we should oppose crony capitalism is because it circumvents the moral process involved in a free exchange of goods and services.

In a free exchange, the one who most often benefits is the individual consumer. As Frederick Bastiatargued,

consumption [i.e.,the use of goods and services by households] is the great end and purpose of political economy; that good and evil, morality and immorality, harmony and discord, everything finds its meaning in the consumer, for he represents mankind.

He summarizes his argument for the consumer and against cronyismas follows:

There is a fundamental antagonism between the seller and the buyer.

The former wants the goods on the market to be scarce, in short supply, and expensive.

The latter wants them abundant, in plentiful supply, and cheap.

Our laws, which should at least be neutral, take the side of the seller against the buyer, of the producer against the consumer, of high prices against low prices, of scarcity against abundance.

They operate, if not intentionally, at least logically, on the assumption that anation is rich when it is lacking in everything.

Bastiat uses this as the basis of his argument that the interests of the consumer, rather than the producer, align more closely with the interests of mankind (you should read his essay to fully appreciate the connection). The producer tends to have their own self-interest in mind, and so has a strongincentive to get the government to use its force and power to help them gain aneconomic benefit over the consumer. This causes goods to be either more expensive and/or more scarce than they normally would be without government intervention. The result is that cronies get richer, while everyone else is made poorer.

Other stuff you should know:

• Increasing the power of the government is often posited as a way to keep “Big Business” in check. But as Randall G. be notes, “The substantial and well-established economic literature on ponents of crony capitalism shows that big government is the cause of crony capitalism, not the solution.”

• Cronyism often leads to corruption, though it can be rather subtle. Take, for example, intertemporal corruption. An intertemporal choice occurs when a choice at one time influences the possibilities available at other points in time. For example, you may decide to spend less money today in order to save and be able to spend more at a future point in time, such as during retirement. bined with cronyism, such intertemporal choices can lead to intertemporal corruption. As economist Bryan Caplan explains,

If a major corporation gives a U.S. Senator a ten-million-dollar “gift,” it’s likely to be punished as corruption.It doesn’t matter if the corporation protests, “We’re only expressing our affection for this fine Senator” or if the Senator bellows, “How dare you claim my vote is for sale!”However, if the same Senator retires, and the major corporation gives him a ten-million-dollar sinecure on its Board of Directors, it’s perfectly legal – and few demur.

The painfully obvious flaw with both norms: Intertemporal corruption is a wonderful substitute for ordinary corruption.A professor is unlikely to give an F to his current girlfriend; but he’s also unlikely to give an F to hisfuturegirlfriend.A Senator is unlikely to vote against a corporation that gives him millions of dollars; but he’s also unlikely to vote against a corporation that’sgoingto give him millions of es around, goes around.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
Questions about the Red Cross
The Remedy, the Claremont Institute‘s blog, links to an article in the Los Angeles Times by Richard M. Walden, head of Operation USA, that raises concerns about how the Red Cross spends the money it receives for specific disasters. Walden levels some important and serious charges against the Red Cross, and may or may not be convincing depending on if you approve of the Red Cross’ fund-raising precedents and other activities. But Walden is undeniably right is when he raises...
CAFTA, prudence, and volleyball
After receiving some responses to a previous post (CAFTA/Culture of Life: Enemies?), I thought I would post the the exchange with my most recent dissatisfied critic. Here’s to volleying! (I have edited the emails for confidentiality.) Mr. Phelps, It was with great interest that I recently read your blog entry “CAFTA/Culture of Life: Enemies?” as for some strange reason it recently appeared on the Google Alerts. I found it amusing how you worked John Paul’s teachings in without actually quoting...
Breathing with one lung?
Bishop Hilarion (Alfeyev) of Vienna and Austria, the Russian Orthodox Church’s representative to the European Union, is once again urging a Roman Catholic-Orthodox alliance bat secularism, liberalism and relativism in Europe — and lands outside it. “The social and ethical teachings of the Catholic and Orthodox Churches are extremely close, in many cases practically identical,” Bishop Hilarion said. “Why, then, should we not be able to reveal our unity on all these major issues urbi et orbi?” Since the election...
Submerged subsidiarity
Because too much has already been said about the recent gulf hurricanes, I won’t put in my two cents. I will, however, direct the reader to the most insightful take on this situation that I have yet to stumble across. As you read it, think again about the importance of the definitions of the words we use, such as ‘responsibility’ and ‘authority’ as are discussed in the mentioned article. ...
Journalism professor calls for Helter Skelter
In 1969 Charles Manson and his gang set out to ignite a race war that pitted the wealthy white establishment against underprivileged blacks. The apocalyptic battle would be called “Helter Skelter,” after the Beatles’ song written by Paul McCartney. The white Manson reasoned that America’s angry black population would eventually win this war; at which time he and his group would emerge from their Mojave Desert hideout to assume leadership over what he perceived to be an inferior race. es...
Hurricane relief – Small organizations to the rescue
In the wake of overwhelming need of Hurricanes Katrina and Rita, thankfully a number of us are voicing irritation with the inquiry, “How important do you think that faith-based organizations are to helping people”? Before ANY organization — government agency of any kind or national nonprofit — made a move, faith organizations had already moved. In San Antonio, where several Russian students were among New Orleans evacuees, Victory Fellowship, a faith-based, privately funded substance abuse treatment program, simply did the...
The nose of a camel: The federal government and education
Federal involvement in education has grown steadily throughout the nation’s history, encroaching on what is still viewed by American’s as mostly a state and local responsibility. Kevin Schmiesing looks at a new book that examines U.S. education policy, the red tape and bureaucracy that has resulted, and the opposition to federal control that arose from parochial school administrators. Read the full text here. ...
Fab labbing, Fu-Fu, and the ovine entrepreneur
The BBC reports today a great illustration of human creativity and the intersection of technology and subsidiarity. MIT has set up what they called Fab Labs (Fabrication Labs) in what many might consider the least likely places for technological invention. These Labs consist of basic tools and software than enable people in sometimes remote and rural locations to invent and fabricate the technology they need in their daily work. MIT professor Neil Gershenfeld: In a world of Fab Labs, you...
The right pass at the right time
If you haven’t heard of this story yet, read about what Notre Dame head football coach Charlie Weis did this past weekend. His expression passion for a dying boy, 10-year-old Montana Mazurkiewicz, transcends sports. Weis honored a promise to Montana despite the fact that he is a first-year coach in the big business of college football, in what might be the most scrutinized and storied programs in the country. In a personal visit to the boy last week, in addition...
Spendthrift republicans
A wonderful piece by Deroy Murdock today on NRO. Though most fiscal conservatives understandably vote Republican, the record substantiates the theory that spending is less responsible when Congress is dominated by one party—either party—than when each party has enough votes to frustrate the other. Others have drawn attention to the problem of Republican pork, but Murdock does so in an especially devastating way. ...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved