John Stossel on Crony Capitalism
Often people’s fear of big business is justified. They often do lobby the state for special favours and bailouts. But engaging in this behaviour it is nothing to do with capitalism, although it always seems to take the blame. The fear of companies getting too big and becoming huge monopolies at the expense of consumers is a valid worry, but only in our current system which is not capitalism! We live in a corporatist/fascist society, where the state regulates every aspect of business you can think of, almost always at the expense of the small companies and the consumers and in favour of big, politically connected companies. Whenever the state uses coercion in the market place, it is a net-negative. True capitalism is a self-regulating market place where individuals get both the profits and the losses of any endeavour they undertake, and consumers have free choice to take their business to anybody they choose, regardless of whether some violent gang approves or not.
With that said then: John Stossel just did another fantastic program on Crony Capitalism. This is pretty much the first time I’ve seen this issue broken down so excellently on mainstream television. Everybody needs to see and understand this distinction and I can’t think of a better way to do so than to watch the program:
January 22nd, 2010 at 7:18 pm
Excellent point, this is something I have tried to get across to people so many times when they talk about government favours to big business somehow being the essence of modern capitalism.
Like you say, capitalism by it’s very nature is based upon self-regulation – i,e freedom from the manipulative, coercive interference form the state.
So any government distortion of the free operation of market forces, whether it’s motivated by political self-interest, or on behalf of a private company in the form of croneyism, is not only contrary to the very principal of a free-market, but is about as far from capitalism as it’s possible to get.
January 25th, 2010 at 4:47 pm
Like you say, capitalism by it’s very nature is based upon self-regulation – i,e freedom from the manipulative, coercive interference form the state
How can capitalism function without a strong centralised state? Capitalism requires political stability and the rule of law to function. How do companies borrow and lend and make investments without the assurance of the civil law? How do entrepreneurs protect themselves without patent and copyright law?
January 25th, 2010 at 4:53 pm
Well apparently it can: http://en.wikipedia.org/wiki/Anarchy_in_Somalia
January 30th, 2010 at 4:27 pm
If there is an inherent trend towards big companies & monopoly or near monopoly is a veryprofitable position totally unregulated capitalism would produce it. It is one of the few points on which totally free markets fail & some regulation is desireable.
This does not mean that the regulation may not also fail or be subverted but the issue should be faced.
January 30th, 2010 at 4:41 pm
This isn’t really true. And anyway, in a free market big monopolies aren’t bad, because they are INSTANTLY broken up as soon as they fail to provide what they are supposed to be providing.
It’s in state managed economies that monopolies thrive because government passes regulation that benefits big corporations and creates so many hoops that new start ups have to jump through that it’s almost impossible to compete with the established industry leaders. Over time they do eventually gain monopoly power, but because they got that power through regulation and not being the best at what they do, the consumer loses, unlike in natural monopoly.