In a Facebook group run by my friend, Dov Baron, he posed the following question:
Capitalism…Do you see a difference between Capitalism and Corporate Capitalism? Should we keep either, both, and if so how do you see us repairing the system?
Many responded. One I found to be particularly interesting was from someone we’ll call Steve who replied:
“The ‘elephant in the room’ difference is that Capitalism can use guns to enforce their will.”
Since that, by definition, is actually the very opposite of Capitalism, and I feel that understanding this concept is so vital to our future as a country, I responded to Dov’s question and “Steve’s” comment with the following:
“Corporate Capitalism” (a/k/a “Corporatism” or “Crony Capitalism”) is a misnomer and is actually not Capitalism at all. As I often say, “Crony Capitalism is to Capitalism what Chinese Checkers is to Checkers…nothing!”
That’s why I don’t even use that term “Crony Capitalism” and simply call it “Cronyism.”
The entire premise of Capitalism — aside from private ownership — is that it is the exchange of products/services between two or more willing parties with both sides coming away from the exchange better off than they were before the exchange. Otherwise, neither party would willingly participate.
Cronyism, on the other hand, is where corporations or other special interests purchase special favors, rules and regulations from politicians (usually via lobbyists and through campaign contributions and other goodies) in order to provide themselves with an unfair advantage over the competition.
This ultimately hurts the consumer in many ways as well as the country as a whole.
Freedom vs. Force
Responding to Steve, I must respectfully disagree and say that the difference is not that Capitalists can use guns to enforce their will; it’s Cronyism that employs “the guns of government” through the buying of politic favors from politicians.
Key Point: With true Capitalism, companies can only get people to buy from them by providing value in such a way that a consumer chooses to do so. In a truly free-market environment the consumer is the ultimate boss and votes with their dollars.
In other words, Capitalism is based on freedom of choice. Cronyism is based on manipulation, politics, and ultimately, force.
Capitalism — while not utopian or perfect — has been the driving force in an increase in the standard of living for everyone living under that system. The more economically free a country is, the higher standard of living for the masses (including the poor). The less free, the lower the standard of living.
In answer to Dov’s question about how to repair this situation, the citizenry must insist its elected representatives do not participate in Cronyism or they will be voted out of office.
Of course, for this to happen, the citizenry must first understand the difference between Cronyism and Capitalism. I’m afraid that at this point most people think they are the same. And, that is a huge problem.
We cannot repair what we don’t understand.
Want to weigh in? Feel…free! 🙂
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Bob, what a excellent description of both capitalism, and cronyism.
I think about something you said months ago about our beliefs. While you and I believe what you said to be the truth, perhaps “Steve’s” belief is what he stated. My question is how do we change Steve’s….and so many other’s belief to understand the true difference between Capitalism and Cronyism?
Jean: Thank you. I’m so glad you enjoyed the post. And, yes, your concern is very valid as people see the world in different ways and through their own personal (and unconscious) lens. And, they’ll often hold that “position” in spite of the presented facts. Interesting about “Steve” in that he later wrote me back in agreement. That doesn’t usually happen and I give him a lot of credit. One thing I believe helps, Jean, when discussing touchy topics such as economics and politics with those not pre-disposed to our beliefs is to make the conversation very civil and to communicate with tact, kindness and respect. While that certainly doesn’t guarantee another’s open-mindedness, not communicating that way will practically guarantee it won’t happen. One other point: I find that once people of either major political party come to understand the difference between Capitalism and Cronyism they are likely to accept it. My belief is that most people (not necessarily the politicians or the cronyists themselves but the actual citizens) want what is right, ethical and fair to all. And they understand that Cronyism is neither of those three. Thanks again, Jean!
Well written piece.
This reminds me about the “occupy” movement. Realistically, hey were protesting cronyism or what is wrong in our present corporate world. However, he message was somewhat lost when the world capitalism crept in. In other words, I think their protest had valid points to make but the message got lost when they often couldn’t articulate what they were protesting. Is there an income gap? Most certainly. Is it invalid that it exists? In some cases, where cronyism is involved, yes. However in many cases, those who have a high income have created it via a valid method of bringing value to the marketplace.
Perhaps the question needs not to be about what corporate executives are paid, but about how the “common folk” can change their lives to improve their own situation. If they are unwilling to improve themselves then their complaints will fall on deaf ears.
Derek: Thank you for writing and for your very kind feedback. And, I agree with you completely! Speaking of the “Occupy” movement, one of my most-read posts was on that very topic. Here is the link. I hope you enjoy it. https://www.burg.com/2011/10/what-the-occupy-wall-st-protesters-are-actually-protesting/
You did it again Bob, excellently put and stated… Love it Thanks for another amazing blog post about an important heated topic.
Carly: Thank you very much. So glad you enjoyed the post. And always appreciate your kindness and encouragement!!
Great article/response Bob (wouldn’t expect anything else), and as I’m sure you are aware I too see a vast difference between the two.
As I see it, the challenge is how to separate corporate and special interest monies from the political environment.
With regard to your answer that “the citizenry must insist its elected representatives do not participate in Cronyism or they will be voted out of office.”
That becomes a rather impotent threat when A) Most people voting, vote for a party (R or L) and not what the representative stands for.
In recent research people were stopped on the street and asked a series of question as to whether they were voting in the upcoming election regarding certain policies.
The questions were all asked based on a single candidates policies.
Overwhelmingly, people said they were NOT in favour of said policies and very often said they were strongly against these policies. Yet when asked who they were voting for it was the candidate whose policies they were against.
B) Even if a candidate is a great candidate, who really has the very best interests of his/her community as their focus and s/he is Not heavily bankrolled no one would even know about them, because a bad candidate with a big bankroll will get elected every time purely based on exposure.
So again, I agree with what you are saying,. However, the supreme court has decided that unlimited funds can flow to a candidate (that has the best interests of the lobby group or corporation). So even our laws (and ultimately the constitution) are being rewritten in favour of who have the biggest bank account.
Dov: Thank you for your comments and, of course, for inspiring the post in the first place through your Facebook group question. You are very correct in that the general electorate really doesn’t understand the basic principles of economics and liberty. And, I’m afraid that until we are willing to insist that our politicians respects and adhere to the basic Constitution they swear to uphold and defend it will be very difficult for any significant changes to take place. Instead, it will remain a game of whose favorite party is in power and then forcing their ideology on everyone else, spurred on by the cronyism in which they all partake. A friend of mine, Michael Cloud, when speaking of government once said, “the problem is not the abuse of power; it’s the power to abuse.” In other words, if our legislators were forced to operate according to the “chains of the Constitution” then it wouldn’t matter how many lobbyists operated out of K. Street, they would not be able to influence/buy off even one politician. That is how you separate corporate and special interest monies from the political environment. Of course, much easier said than done, right? First the general population must understand the issue. And, your “Point A)”was both very valid and very chilling. Regarding the money involved (your “Point B”), again, I think it goes back to government not having the power to abuse. Once that happens, everything else will work itself out. On a personal note, as much as I don’t like the fact that the ones with the biggest bankrolls are able to win the elections, the people who typically want to limit the amount of money a candidate can raise are the incumbents, who enter their races with a huge inherent advantage. What they fear most of all is a well-funded challenger. I understand what you’re saying though. Again, my major feeling is that all reforms other than taking power away from the politicians to abuse that power…are simply band aids on the cut rather than getting to the root of the disease itself. (Please pardon that horribly mixed metaphor – it’s getting past my bedtime. 🙂 Thanks again, Dov. Always appreciating you!
Thank you for once again, reinforcing the difference between these two. I remember how clarifying this was for our listeners when you spoke about this as a guest on our Billions Rising Radio show. It is unfortunate that cronyism has caused the popular demonizing of capitalism. Keep speaking the truth, Bob! 🙂
Anita: Thank YOU. I remember the interview and that we were able to discuss that. I’m so glad your listeners enjoyed the clarification. I believe that helping as many people to understand the huge difference between the two concepts is vital to the citizenry insisting that our elected officials stop playing that very horrible game. Thank you so much for your kind and encouraging words!
Bob, cronyism is a big problem but I do think there’s good news on the horizon. Because of the transparency of social media and related digital platforms, more and more people are becoming aware of what is really going on in cronyism oriented political and business decisions. As we first saw in the 2008 Presidential election, social media can level the playing field and dictate change.
The general public is becoming less tolerant to the old ‘business as usual’ approach with respect to inaccurate and misinformation being spoon-fed to the masses. Political/business decisions actually premised upon profit and self-serving interest are now, more than ever, more easily exposed. People and politicians are now more accountable than ever and the bar will continue to be raised.
Hopefully, and keep in mind that I’m a true optimist, things will continue to progress in the right direction reducing and eventually eliminating cronyism once and for all. Let’s touch base in 10 years and see what changes have occurred. I think we’ll both be amazed.
Mitch: Thank you for your always very thoughtful and insightful feedback and comments. While I agree that Social Media has helped in terms of the quantity/amount of messaging, the challenge I see is that the actual issues really aren’t understood. Instead, the same tired old “talking points” and slogans are shared more often and with more people. As a result, it’s simply gotten louder as opposed to more educational. It goes back to the saying, “even the greatest logic, if based on a false premise, can never result in a correct conclusion.” On the other hand, I’m also an optimist and hoping that if enough people continue to educate, and are able to do it respectfully, in a way that considers the other person’s humanity and good-intent, eventually we can move to a more liberty-based and prosperous – and less politically-based – society. Looking forward to our 10-year base-touch and seeing. I’m hoping you are right. I’ll certainly do all I can from my small corner of the soapbox to help get it there. 🙂
No argument here. All valid points. However, flipping things around, the same dynamics can be used to better educate, increase awareness, and share accurate facts and information to the masses like never before. I call this the anti-Cronyism formula 🙂
Mitch: Exactly! Great point! And, that’s what we’re rooting for (and, hopefully all doing our part) to happen! 🙂