Wednesday, January 20, 2010

Economic Fundamentals: Crony Capitalism

It's a myth that business is opposed to government interference in the economy. It's not. Business leaders love government interference. They love regulations. They love tariffs. They love them as long as they benefit their companies and/or penalize their competitors.

There are business leaders who will always seek to win politically what they are unable to win in the free market. You can often spot them on television, providing cover for the politician who is introducing some new law that reduces liberty, weakens the free market, and provides a drag on the economy at large, but that helps the business leader's company.

The term for this behavior is "crony capitalism." It's hard to fault business leaders who try to game the system. They're simply choosing the easy path to maximize shareholder value. It's cheaper to buy politicians than to buy share in a free market.

It's up to principled politicians to resist the seductive embrace of the crony capitalist. Unfortunately, politicians too often serve their self-interest rather than the public interest. They distort the free market by tilting the playing field in the direction of a favored few.

As government increases in size and scope, its ability to influence business increases. Market competition takes a back seat to political connections.

Recently, John Stossel focused on crony capitalism. Watch the following videos...

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

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