Crony Capitalism vs Free Market Capitalism

And the winner is……….Crony Capitalism!

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Sadly, most people do not know the difference between crony capitalism and free market capitalism. Certainly the Occupy Wall Street crow didn’t know the difference except for the young Ron Paul libertarians that sometimes joined the Occupiers. Not even the great Alan Greenspan understands the difference.

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Alan Greenspan served as Chairman of the Federal Reserve through four presidential administrations from Ronald Reagan until the sixth year of the G. W. Bush administration. As Fed Chairman, Alan Greenspan was considered, for good reason,  the most powerful man on the planet.

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I have a confession to make. During the Reagan years, Alan Greenspan was my hero. I thought at the time how lucky we were to have such a brilliant man in charge of our monetary system to counter balance the mostly useless politicians in Washington. By the time Slick Willy Clinton was in office, Greenspan had become my public enemy No.1. I may be a slow learner, but I am living proof that one is never too old to learn.

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Alan Greenspan at 87 and running his own consulting business has been in the news of late. BBC News reported that during the recent debt ceiling debate, Mr. Greenspan was worried about the potential for default:

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He told the BBC that he had not seen another situation in Washington where “compromise” seemed so far away.

Mr Greenspan confessed to sympathies with the aims of the Tea Party, the Republican faction that fought the government during debt ceiling talks.

But the former central banker said the movement’s tactics were “undemocratic”.

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Hmmm. Maybe I was wrong when I said one is never too old to learn. Maybe someone should tell Mr. Greenspan that America is not a democracy; but rather it is a republic.  Sadly, Mr. Greenspan is not alone in his confusion. Most Americans and most politicians and most talking heads in the media are of the opinion that America is a democracy. Yet no where in any of our founding documents does the word “democracy” appear. Sigh!

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In another article I found at Real Clear Politics it’s reported that Alan Greenspan is worried about crony capitalism in America.

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(From BBC.co.uk)

Mr Greenspan, 87, who now runs his own consultancy business, also criticised a growing “crony capitalism” in the US.

He said: “Crony capitalism is essentially a condition in which… public officials are giving favours to people in the private sector in payment of political favours.”

He said it was prevalent in China and Russia, but had not been common in the US or the UK. But he added: “I am beginning to worry that we are starting in that direction.”

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Excuse me! It wasn’t common in the US or the UK but it is starting in that direction? Folks, crony capitalism has been the norm since before the time of Moses. Back in September, Hunter Lewis wrote a short article on the subject at The Center for Economic Liberty.

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Russia, China, Argentina, and Zimbabwe are all extreme examples of crony capitalism, and therefore useful in defining what we mean by the term. At the same time, they are by no means isolated cases. Most of the world today is crony capitalist to one degree or another.

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 The kind of political and economic system exemplified by these four countries has clear roots in the “national socialism” developed by Mussolini in Italy and copied by Hitler in Germany. But it was by no means a 20th century invention. The earlier monarchies of Europe and Asia worked in a not dissimilar way. Indeed it may be argued that cronyism is as old as recorded human history and has always been the dominant system.
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Does Alan Greenspan believe the railroads that finally connected the east coast with the west coast were built under free market capitalism? Not hardly! It was cronyism at its finest. Although he was not aware of it, the sins of capitalism that Karl Marx wrote about was really crony capitalism. Here are some more excerpts from the Hunter Lewis article:
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This {crony capitalism} is precisely why the human race has made so little progress in overcoming poverty. For most of human history, there has been no economic growth at all. People born poor  died  poor. Whenever economic capital began to be accumulated, it was generally stolen by rulers or their friends or allies.
{…}
By the beginning of the 18th century, the world was just as impoverished as it had always been. But very gradually, in some countries, especially in Britain and the newly formed United States, governments learned to be less greedy, to avoid killing the goose of enterprise that laid the golden eggs. Reforms, especially reforms that freed some prices from government control, were achieved, the so-called industrial revolution began, and poverty began to decline, especially by the 19th century.
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Even then, reform was limited, cronyism remained strong, and millions remained in poverty despite advances. Outside the more reformed and thus more advanced countries, people remained uncertain about their next meal. How could it be otherwise when their economy was run on crony capitalist lines—principally for the benefit of rulers and powerful allied special interests?
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So, the battle between  crony capitalism and free market capitalism hasn’t been much of a battle at all. Free market capitalism has never been tried on a large-scale.  Greed always gets in the way. Too often, those who benefited from the principles of free market capitalism and became wealthy as a result become consumed by greed and look to partnering up with government to keep the competition at bay. Think Bill Gates and Warren Buffet and George Soros just to name a few.
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Through out history, Crony capitalism; the partnership between the wealth producers and the rulers, has ended up killing their golden goose. Look at our own country. For much of its existence, the government’s spending was around 5% of GDP. Today it is 25%. And, when you throw in state and local governments, the number jumps to near 40%. This trend cannot continue indefinitely. The country I live in likes to claim it is an example of 21st century socialism. What a joke! A very bad joke. Socialism in the extreme is really “State Capitalism”. And, like the Soviet Union, this country is well on its way to killing its golden goose. It will happen in America and all of the other so-called developed countries, too. I don’t know, at my age, if I will live to see it; but it is possible…. maybe even probable.
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Well, that’s what I’m thinking. What are your thoughts?
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15 thoughts on “Crony Capitalism vs Free Market Capitalism

  1. The logical extension of crony capitalism; ignorance begets ignorance, poverty begets poverty. Don’t tell the 95% of the black electorate supporting Obama.

  2. I’m painfully reminded we live in a representative republic every time my Congressman fails to represent my viewpoint in any way, shape or form. 😦

    I never understood Greenspan when he talked. His occasional sermons from the mount were full of central banker spek I could not fathom. Today, I think it was on purpose he did that.

    Bernanke changed everything for me. When I listen to him I understand most of what he says. He opened up The Fed and how it makes decisions far more than ever before in the past. I hope Yellin is as good about that when she becomes Chair.

    Crony Capitalism, no matter which side of the isle it comes from, always leads to no good.

      1. There is another huge difference between the two. Bernanke faced a central bankers worst nightmare and slayed the dragon.

        I predict history will record Bernanke as the man who save the U.S. economy during the Great Recession.with money appropriated by Congress and signed off on by Bush 43.

  3. I believe the United States government is being
    systematically taken over by a revolutionary network. They call themselves
    Progressives, but we know they are really leftist radicals,
    dedicated to the demise of the free-market capitalist system. They have
    co-opted and bought off leaders of both the Republican and Democratic
    parties, established a dominant role in all three branches of
    government and thoroughly co-opted the mainstream media.

    Thank you

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