Michael Munger, in conversation with Fritz Thomas talks about cronyism, an almost inevitable characteristic of capitalism, that he develops on one of his papers, titled The Road to Crony Capitalism.
Munger talks about the common mistake people from the right and left make, by creating idealized conceptions of what is socialism and capitalism; in his opinion we have to look at both things as they actually are and the tendencies they could have. He has specifically got concerned on cronyism, as a possible characteristic of capitalism.
Does a capitalist economy in a democracy have a tendency to encourage business people, to turn away from honest profit, towards lobbying and rent seeking?“
What is crony capitalism? Michael goes further into this concept, explaining he worries that this is almost inevitable, since it is more profitable to hire a lobbyist, because the requirements raise the entry barriers that protect the profits of these industries.
Crony capitalism is when it becomes more profitable for businesses to enlist the aid of government to create these artificial barriers than it does to earn profits honestly by making better and cheaper products”.
Cronyism increases in relation to government power, Munger states. From the perspective of Public Choice, he gives his conclusions on the topic. Also describes the damage that cronyism represents to a democracy, saying it is insidious and means that there is less innovation, prices are higher, there are not new products, and others.
Since cronyism is very possible in capitalism, Michael then conveys on the hopes he has on markets, since they are dynamic, introduce competition and allow new ways of doing things and the need to have better governments with legislative and presidential leaders that are concerned about the welfare of the larger country.
Economist, writer and professor
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Nuestra misión es la enseñanza y difusión de los principios éticos, jurídicos y económicos de una sociedad de personas libres y responsables.
Universidad Francisco Marroquín