‘Crony capitalism’ is just capitalism

An unlevel playing field is a natural consequence of unregulated markets.

Eric Murphy

“Crony capitalism” will be a buzzword in the 2012 election. Sarah Palin has cited General Electric paying no taxes as an example of crony capitalism, Mitt Romney has called President Barack Obama a crony capitalist and New York Times columnist Nicholas Kristof devoted an entire column to “sav[ing] capitalism from crony capitalists.”

Basically, the argument goes that big businesses are corrupting the free-market system by getting special breaks from government like bailouts — according to conventional wisdom, that’s “crony capitalism.”

It’s actually just capitalism.

Normal, everyday free-market capitalism incentivizes collusion, monopolies, fraud and corruption because these practices undeniably lead to higher profits for those who practice them. They are not distortions of the system; they are logical outcomes of the system. Laws preventing these behaviors are the distortions of the free-market system.

Banks and mortgage lenders practiced widespread fraud in the lead-up to the financial crisis. When the law allows media and telecommunications companies to merge and concentrate, they do, and doing so makes them very wealthy. This is because capitalism doesn’t reward companies that do the best job of competing on a level playing field. It rewards companies that avoid having to compete at all by tilting the playing field in their favor.

These problems are exacerbated when money is considered political speech. Huge, rich corporations can outbid others for favorable treatment from government — skewing the law in their favor becomes a legitimate, legally protected investment strategy. A ridiculously profitable one, too: A study done last year found that the “return on investment” for lobbying by multinational corporations was 22,000 percent.

This is not some deformation of capitalism; it’s the free market at work. And it’s the system Romney and others like him are defending.

 

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