Competition Cures Crony Capitalism and Drives a Meritocratic Economy

Business challenge isolated on white

A very interesting examination of crony capitalism in Israel. Surprise surprise the political class there gets the pay and privilege too.

The author also points out a very key point. Industries which are protected by regulation tend to get fat and develop an insider, old boys club mentality. Where there is competition companies are lean and productivity and ingenuity are rewarded. This creates opportunities for newcomers who are skilled and work hard even if they aren’t in the “club.”

(From Haaretz)

Uncompetitive markets – such as those that exist in most of the public sector and in concentrated private sectors – concentrate power in the hands of the few. Political power is translated into economic power, and vice versa. Thus, they entrench their power, using “social” slogans to gain social legitimacy.

The interest groups cooperate among themselves, too. The Histadrut never attacks the tycoons and bankers, and they in return don’t attack the Histadrut. Power is drawn to power because together they have more power – instead of protecting the general public, which may be large in number but is disorganized and has no real influence. The majority remains without representation.

What information is the general public given about this state of affairs? Which media groups dispel the smokescreen that hides the interest groups, and which serve them? Journalists often face this quandary: Whether to serve the rich and powerful, in the hope that one day they will help them, or to serve the reader. It is time for the media to decide who it wants to represent.

Click here for the article.