“Capitalism vs. Crony Capitalism”

Thoughts on a Free Market Economy…
“Capitalism vs. Crony Capitalism”
By Phyllis Hunsinger
September 1, 2016

Since the 2007-2008 economic downturn, the United States has struggled to regain a healthy economy. The lack of jobs, rising prices, corruption in Congress and other maladies facing the U.S. is often blamed on capitalism. The average citizen does not seem to understand the difference between capitalism and crony capitalism. These two types of economic systems are fundamentally opposed.

Capitalism defines a system of economics where capital is invested by individuals to further ideas and enterprises that the investor thinks will create a return on the money invested. The risk taken is borne by the investor and business owner, but if the enterprise is a good one, both investor and business owner win.

Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. Crony capitalism may be demonstrated in the distribution of legal permits, government grants, special tax breaks or other forms of state interventionism. Crony capitalism is the marriage of the state and private special interests.

The playing field for business is not level when the government inserts itself into the mix. Crony capitalism can actually use government power through regulated interests to squelch competition. The government can acquire money in only two ways: print it or confiscate it from their citizens through taxes. When the government is intertwined in business, the money for such activities comes directly from the taxpayers. The government faces no risk nor is under any urgency to make the business succeed. Any private business in a partnership with some government entity is not playing by the same economic rules as the private business alone. The private business risks losing everything if the business is not successful. The private business is held accountable for the decisions made for the business; whereas, there is no such accountability when the government is involved.

A notorious boondoggle of government/private partnership was Solyndra. In October’s “Thoughts on a Free Market Economy…,” the idea of corporate welfare will be discussed. All citizens need to know the differences between capitalism and crony capitalism. One is a straight-forward approach to business and the other is a classic “good ole’ boy system.”

https://www.free-dom.co.us, Phyllis Hunsinger © 2013 All Rights Reserved

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