Capitalism v Crony Capitalism

November 20, 2011 | By | 1 Reply More

Occupy protesters have been mischaracterized by many people as being opposed to “capitalism.” Based on my conversations and observations, I have not encountered protesters who oppose “capitalism.” Rather, they oppose what has been described as “crony capitalism.” Compare the  follow definitions, from Wikipedia:

Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category. There is general agreement that elements of capitalism include private ownership of the means of production, creation of goods or services for profit, competitive markets, and wage labor. The designation is applied to a variety of historical cases, varying in time, geography,

Supply-Demand curve - creative commons

politics and culture.

In the above definition, you won’t see, as an element of capitalism, that players are allowed to rig the system.  Compare to Crony capitalism:

Crony capitalism is a term describing a capitalist economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth. Crony capitalism is believed to arise when political cronyism spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.

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Category: Economy

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

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  1. Erich Vieth says:

    “On the morning of July 21, before the Eton Park meeting, [Henry] Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

    A Different Message

    At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.”

    http://www.bloomberg.com/news/2011-11-29/how-henry-paulson-gave-hedge-funds-advance-word-of-2008-fannie-mae-rescue.html

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