Key Takeaways
- Political commentators express concern over crony capitalism, where success ties to political proximity.
- The Economist's 2016 index ranked Russia highest in cronyism; the U.S. was 26th of 43 countries.
- Concerns emerged regarding the Trump administration's potential influence on business decisions.
- A 2023 analysis suggests U.S. cronyism may be rising, citing examples like the TikTok deal.
Deep Dive
- Political commentators, including Walter Isaacson and Fareed Zakaria, voice concern over state capitalism evolving into crony capitalism.
- Crony capitalism describes a system where business success relies on proximity to politicians, contrasting with the U.S. ideal of entrepreneurial merit.
- The term was first used in 1981 to describe Ferdinand Marcos's business practices in the Philippines.
- Marcos's regime utilized state power to benefit associates through grants, loans, and licenses, distorting the free market.
- The Economist developed a crony capitalism index measuring billionaire wealth derived from state-proximate industries like mining and construction.
- These industries often rely on government licenses and land access, a practice identified as rent-seeking.
- The 2016 index ranked Russia highest in crony capitalism, while Germany ranked lowest.
- The U.S. was ranked 26th out of 43 countries in The Economist's 2016 assessment.
- While lobbying and government affairs offices are traditional in the U.S., the Trump administration's approach heightened stakes.
- Decisions, such as those on tariffs, could potentially be made based on personal relationships with the president, rather than market performance.
- An economist noted this dynamic as a "worrying departure" from traditional business competition.
- Concerns arose about tech companies, exemplified by Elon Musk and Jeff Bezos, potentially seeking political favor to avoid tariffs or gain advantages, including a dinner Donald Trump hosted for tech leaders.
- A 2023 economist's analysis suggests the U.S. is potentially rising in cronyism ranks under President Trump, though still less cronyistic than Russia or Malaysia.
- The TikTok deal was cited as an example where investor loyalty to Trump might have influenced policy decisions.
- Executive orders could be tailored to favor specific companies, a dynamic described as "novel and worrying."
- The White House did not respond to requests for comment regarding these accusations; a cautionary tale from the Philippines in the 1970s and 80s highlights crony capitalism's role in economic crashes.