Alejandro Chafuen discusses the impact of crony capitalism:
Unfortunately, much of the debate about cronyism is based on anecdotes and generalizations…..In the United States we have efforts, such as Subsidy Tracker, which give some idea of the problem. Subsidies feed cronyism. Known state subsidies to private business add up to $153 billion.
Subsidies are merely the tip of the iceberg. Artificial exchange rates and offshoring have cost millions of US manufacturing jobs.
The Economist has produced an Index of Cronyism which ranks Hong Kong as #1 and Russia #2 on the list. But it points out that the index is only a rough guide with three major shortcomings:
- Not all cronies, especially politicians, disclose their wealth. So the fortune of Vladimir Putin, for example, is not included.
- The index concentrates on vulnerable sectors and ignores other forms of subsidy outside these areas. And all companies in a sector, good or bad, are tarred with the same brush.
- Only the wealth of billionaires is counted. There are many less-wealthy public servants and corporate officers who also benefit.
….More than a reason for criticism, “The Economist” and its Index of Cronyism should be a call for action and improvement. “If it Matters Measure It,” says the motto of the Fraser Institute. Cronyism matters. Measure it.
I wholeheartedly agree. Cronyism is a bigger threat to capitalism than (largely discredited) socialism. More work needs to be done to measure its economic and social cost.