Crony capitalism is not new. It’s more sophisticated. It’s more pervasive than it has been in the US. But it’s not new. In fact it is as old as government.
(From Inside Sources)
While today we might think of this sort of engineering as exclusive to government, Smith realized that private interests can work with government in a similar manner to arrange the chessboard. Though Smith first articulated the “invisible hand” of the free market, he also had a healthy dose of circumspection about human nature, noting that whenever people in the same trade or industry get together, they always end up finding ways to raise prices. This was particularly true for groups trying to prevent or limit competition.
As Smith states, “The proposal of any new law or regulation of commerce which comes from this order (business or labor group), ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.”
Limiting competition through government privilege is at the heart of corporate welfare. The most extreme example of corporate welfare and cronyism is the historic East India Company. Smith was highly critical of its monopoly protections and the power it achieved through government privilege.