What is meant by ‘Crony Capitalism’?

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Thankfully crony capitalism is increasingly in focus in this country. However, many of our readers may not know that it is a growing area of focus around the world also, particularly in India and in South Africa.

(From The Rational Standard)

In South Africa people overwhelmingly see service delivery as poor, all government functions marred by corruption, and that the system put in place with the aim to help people failing, because of mediocrity. Yet despite this many wish to create the perception that these woes should be blamed on capitalism.

Sadly, crony capitalism is all too often confused for capitalism. The biggest difference between these two systems is that capitalism in its true form is based on better morals than crony capitalism. Capitalism is moral, as it is premised on the voluntary exchange between independent parties who both agree to the transaction, as the transaction creates value for both of the involved parties.

Crony capitalism, in contrast, is immoral in three respects. Firstly, it is unfair – as the government is using public money, but not in the public’s interest. This money is rather spent on friends, supporters or themselves. One does not have to look far in South African politics to find examples where this has happened.

Secondly, crony capitalism is an extreme waste of taxpayers’ money, as these taxed Rands are not spent as efficiently as South Africans would do themselves. It is ironic that we trust our own people to elect a government, but we do not trust our own people to spend their money. Then after the money is ineffectively spent by our government, critics blame the capitalist system which would have avoided the government having the discretion to spend the money in the first place. In no universe is the government capable of being the best decision maker for all people.

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