Capitalism Econ Essay

Crony Capitalism- Stockman

Cronyism put in laymen terms is basically using the government to deliver favors to your colleagues in the business world, while the rest of us pay for it. Companies like the drugstores are a primary example because there are politicians rented by the government at pharmaceutical firms to block competition. This also occurs with the loss of jobs, because of trade deals bought and paid for by multinational companies. Also it takes place when tax rates are higher than the billionaires who fund the super PACs. These are just some of the few ways people like us are hurt from this.

Crony capitalism came from the aggressive and proactive use of political resources, lobbying, and similar activities in order to gain something from the governmental process that wouldn’t be achievable in the market any other way. And over the past 30 years it has gotten progressively worse because of the leverage of money in politics which leads to crony capitalism.

Crony capitalism can be fought by a reinstitution of glass steagall and an even more serious limitation on banks. With this being said, having a way for people to not worry about high risks when dealing with their money is key.  There should be narrow banks who take deposits to make short term or long-term loans with the intent to diversify with low risk. The term “too big to fail” plays a role in this as well. When a multi-billion dollar company is in trouble, and they have the ability to call up the secretary and get 50 billion dollars worth of guaranteed back up lines from the government, this is also contributing to the issue. Instead the companies should be required to sell stock at a highly discounted rate, dilute their shareholders to raise the cash to pay off their commercial paper. This makes it a lot less likely of them borrowing short and lending long. The best way to put an end to crony capitalism to ban corporations with politics.