What is Crony Capitalism? | 5 Minute Video
This election season there’s a lot of talk about corruption, about politicians being “bought and sold”, and about “crony capitalism”. What do those terms mean? Why should we care? Is there a way to reduce corruption and restore our trust in government? Author Jay Cost, staff writer at The Weekly Standard, answers these questions and proposes a solution that every society could benefit from.
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Script:
Crony capitalism. What is it? Why is it so bad?
To answer these questions, let’s think about good, old-fashioned capitalism. It is premised on the free exchange of goods or services between independent agents.
Let’s say I want to buy some cereal. Steve’s Grocery is selling my brand for $4. Ted’s Grocery has it for $5. I buy from Steve, which creates the most value for both me and him. Meanwhile, Ted now has an incentive to cut his costs so he can compete better. Replicate this kind of transaction billions of times a day, 365 days a year, and that is how our economy functions and grows. Or at least how it’s supposed to.
Now, what about crony capitalism? Let’s say it’s the government that wants to buy some cereal. More specifically, the House of Representatives’ Committee for Cereal Acquisition is put in charge of the task. Steve still sells it for $4. Ted for $5. I buy from Steve. He’s the low price man. But the Committee for Cereal Acquisition buys from Ted. Why?
Because Ted lobbied the committee. Because his corporate headquarters is in the chairman’s district. Because he gave more campaign contributions. Because he promised a lobbying gig to an undecided committee member who plans to retire next year. That is how crony capitalism works.
And it happens all throughout the government—from defense contracting, to farm subsidies, clean energy programs, infrastructure spending, affordable housing, food stamps, Medicare, Obamacare, tax policy. You pretty much name it. Crony capitalism is there.
Capitalism is moral because it is premised on a voluntary exchange between independent parties – who agree to the deal only because it creates value for everybody. Crony capitalism is immoral because one of the parties—the government—has been bought off.
This creates three problems. First, it is unfair. Politicians are spending the public’s money, but not for the public interest. Instead, they reward friends, supporters, or themselves. Our Constitution grants Congress the power to provide for the general welfare. Crony capitalism violates this sacred principle.
Second, it is incredibly wasteful. In our cereal example, the government overpaid by going with Ted instead of Steve. That’s obviously a waste of taxpayer money. In fact, it is really stealing from the taxpayer. Here’s more waste. Ted had to spend money to lobby the government to get the contract. So, he didn’t get all of that dollar out of the transaction. That’s money that could have been spent making a better product or used in some other constructive way. Economists call this deadweight loss. And it can be substantial.
Moreover, crony capitalism distorts the broader economy. In some industries—like healthcare, student loans, home mortgages, and aerospace—the government is one of the biggest purchasers of goods or services. So its politicized decisions can have wide-ranging and detrimental effects. An entire industry can become, in effect, a client of the government. When that happens its goal is not to build a better mousetrap, but to keep politicians happy. How much does crony capitalism cost society per year? It is hard to say precisely, but the number reaches into the tens of billions of dollars, maybe beyond.
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Team no government
Thank you,we finally agree on something Citizens United should be overturned. Collusion,cooperation and acquisition is not Capitalism.
Whats ironic is that socialists say Unregulated capitalism has caused economic inequalities, when Unregulated capitalism literally gives everyone an equal chance of becoming rich.
What actually has caused economc inequalities is regulated capitalism, where the rich stays rich and poor stays poor, this is basically socialism or corporatism, but socialists dont understand that and think this is the result of Unregulated capitalism
The irony is people thinks Unregulated capitalism leads to economic inequalities, when in reality its regulated capitalism (which is basically socialism or corporatism) leads to the rich staying rich and poor staying poor.
The irony is people thinks Unregulated capitalism leads to economic inequalities, when in reality its regulated capitalism (which is basically socialism or corporatism) leads to the rich staying rich and poor staying poor.
If capitalism was so great homelessness would be low, people would not need 3 jobs and people would not need to work overtime. Capitalism isn’t looking for cure because cures aren’t profitable. Capitalism is based on greed.
If lobbying is so shyt why bother ot exist in the first place? I mean lobbying doesn't exist in anywhere else
Just call it bribery
https://youtu.be/e7CjdJ1QyxI?si=vWncQqh4Ah_DmjHB
I have my reservations of this channel but I gotta give credit to you for discussing this.
hi
Capitalism is not by definition "an exchange of goods" thats just called trade, socialist countrys like the USSR and cuba traded oil and sugar all the time are they capitalist? Nope, bc capitalism is when the means of productions (land, factory's, farms and natural resources) are run privately in the hopes of profits so when businesses lobbys thats not "crony" capitalism its just capitalism, a private enterprise trying to make a profit no matter what.
This is only one part of crony capitalism, it can also happen when the private sector coludes themselves to take competitors out of the market say by ways of corruption of the goverment or by they sheer size of their market share/ economic power that allows them to compete in a disloyal way for example, company A sell a product for 10, then company B ( new company) comes into the market and start selling the same product for 8, imagine the cost of the product is 6 for both, but company A have a bigger bank so they decide to start selling the product at loss for 4, company B can't compete with that price since it's a new company and eventually go bankrupt or sell its company to A.
In a world of super corporations we need to start focus not only in the power of the state but also in the overwhelming power of some companies that can use their economic power to create monopolies or oligopolies. We need to stop thinking about capitalism as the thing to protect, and start aiming to free market and competition as the sacred and most important part of our economic system.
So basically cronyism is capitalism at the state level, and free-market capitalism is capitalism at the private sector level. This is why democrats hate the rich so much.
The uS Government:
Capitalize profits
Social losses.
Just think the "Big Guy's 10%".
Prager U: "The Civil war was over slavery!"
ALSO Prager U: "STOP CRONY CAPITALISM," even though the "civil war" CAUSED it by giving final authority to government officials, over the individual state citizen-voters.
Prager U clearly can't remember its own words, or what they mean.
Crony capitalism explained very well. How come YouTube hasn't censored it yet?
So… Capitalism.
But that's not real capitalism
Corny capitalism, free marketism call it what you like there's very little difference between the two, now ain't i right
Crony Capitalism is just Capitalism.
How is general welfare defined? Some say it’s everything, I say it’s very little.. minimal…
But this is the bread and butter for the democratic party!
There's no difference between crony capitalism and capitalism.
Thats ironic coming from jackson…..
Crony capitalism is socialism and their idea of how capitalism should work.
That's one way crony capitalism works. The other way is captive markets, something Republican/Conservatives never talk about.
The millitary industrial complex the lobbyists the Israeli lobby the oil corporations all part of the scheme
Basically, a slight revision on straight up corruption. Example – Singapore. Or "institutionalised corruption".
Whether left or right, I think this is something everyone should not tolerate. Lobbyists are screwing us in almost every sector.
Yeah, and now we've realised what it does with Trump.
Lobbying is just sanctioned corruption.
That's a real poor explanation to a consumer centric perspective that does not validate the business side of the equation. Makes sense economically but doesn't make sense from a business point of view.
How come a UN interpreter earn less than a real estate agent? Please can you explain the origin of wage discrimination?
This is exactly the type of thing people on the left like AOC are complaining about. AOC was investigating Transdyne a defense contractor. The company makes a part that cost $135 to make they sell it to the government for $1,500. During the covid crisis they were granted millions of dollars in covid relief money to keep from laying off workers, they laid a third of their workforce off anyway after receiving the money. The CEO of the company makes $20 million dollars a year. How many bridges schools or hospitals could be made with that money. Oil companies have made billions in profits in the past few years yet still raise their prices even though they get billions in subsidies. Can we both agree that citizens united should be overturned corporations are not people?
Except for Indians they can go f themselves was forgotten to be added in the quote
I find it ironic that Andrew Jackson spoke of government abusing power, but he supported a radical campaign against the natives
Neat!