Allegations have been tossed around for some time now that certain Evansville city government officials and certain businesses are highly involved in what is known as Crony Capitalism, but do the people of Evansville even know what that term means?
According to Wikipedia.com, “Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state interventionism. Crony capitalism is believed to arise when business cronyism and related self-serving behavior by businesses or businesspeople spills over into politics and government, or when self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.
The term “crony capitalism” made a significant impact in the public arena as an explanation of the Asian financial crisis. It is also used to describe governmental decisions favoring “cronies” of governmental officials. In this context, the term is often used interchangeably with corporate welfare; to the extent that there is a difference, it may be the extent to which a government action can be said to benefit individuals rather than entire industries.
Crony capitalism exists along a continuum. In its lightest form, crony capitalism consists of collusion among market players which is officially tolerated or encouraged by the government. While perhaps lightly competing against each other, they will present a unified front (sometimes called a trade association or industry trade group) to the government in requesting subsidies or aid or regulation. Newcomers to a market may find it difficult to find loans, acquire shelf space, or receive official sanction. Some such systems are very formalized, such as sports leagues and the Medallion System of the taxicabs of New York City, but often the process is more subtle, such as expanding training and certification exams to make it more expensive for new entrants to enter a market and thereby limit competition. In technological fields, there may evolve a system whereby new entrants may be accused of infringing on patents that the established competitors never assert against each other. In spite of this, some competitors may succeed when the legal barriers are light.
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The term crony capitalism is generally used when these practices come to dominate the economy as a whole or to dominate the most valuable industries in an economy. Intentionally ambiguous laws and regulations are common in such systems. Taken strictly, such laws would greatly impede practically all business; in practice, they are only erratically enforced. The specter of having such laws suddenly brought down upon a business provides incentive to stay in the good graces of political officials. Troublesome rivals who have overstepped their bounds can have the laws suddenly enforced against them, leading to fines or even jail time. Even in high-income democracies with well-established legal systems and freedom of the press a larger state is associated with more political corruption.
The term crony capitalism was initially applied to states involved in the 1997 Asian Financial Crisis such as Thailand and Indonesia. In these cases, the term was used to point out how family members of the ruling leaders become extremely wealthy with no non-political justification. Southeast Asian nations still score very poorly in rankings measuring this. Hong Kong, and Malaysia are perhaps most noted for this, and the term has also been applied to the system of oligarchs in Russia. Other states to which the term has been applied include India, in particular, the system after the 1990s liberalization whereby land and other resources were given at throwaway prices in the name of public private partnerships, Argentina and Greece. Wu Jinglian, one of China’s leading economists and a longtime advocate of its transition to free markets, says that it faces two starkly contrasting futures: a market economy under the rule of law or crony capitalism.
Critics of crony capitalism including socialists and anti-capitalists often assert that crony capitalism is the inevitable result of any strictly capitalist system. Jane Jacobs described it as a natural consequence of collusion between those managing power and trade, while Noam Chomsky has argued that the word “crony” is superfluous when describing capitalism. Since businesses make money and money leads to political power, business will inevitably use their power to influence governments. Much of the impetus behind campaign finance reform in the United States and in other countries is an attempt to prevent economic power being used to take political power.
Supporters of capitalism generally oppose crony capitalism as well, and consider it an aberration brought on by governmental favors incompatible with free market. In this view, crony capitalism is the result of an excess of socialist-style interference in the market, which inherently will result in a toxic combination of corporations and government officials running the sector of the economy. Some advocates prefer to equate this problem with terms such as “corporatism, a modern form of mercantilism” to emphasize that the only way to run a profitable business in such a system is to have help from corrupt government officials. Even if the initial regulation was well-intentioned (to curb actual abuses), and even if the initial lobbying by corporations was well-intentioned (to reduce illogical regulations), the mixture of business and government stifle competition, a collusive result called regulatory capture.”
Simply put, you can judge a city by its fruit. If pleasing the people is secondary to appeasing the people, you might have crony capitalism at work.
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If a very busy park playground costs $43,000 to renovate, but the new playground is smaller, geared only toward toddlers, and used by fewer people, the park was never for the people, but for the appeasement of the people, holding only the appearance of representation while bearing fruit that is tainted and used for self-promotion.
If a realty company grows city officials like weeds, and those city officials are highly involved with the transfer of properties through a “non-profit corporation” housed in a government building to the tune of millions of dollars, but there are not enough beds in the city for the homeless, there’s something rotten in the fruit basket.
If the construction of a 10-story, $20 million building with an indoor pool, high-end apartments, and rooftop bar is approved by the city, but the city builds a 5-story building with an outdoor pool and fewer amenities and it somehow costs greater than $20 million, there’s something fishy in the water.
If $12.5 million is taken out of an account that is off-limits and placed into the deficient General Fund to cause the appearance of balanced books, and the state auditors recognize the activity as being immoral and possibly illegal, but the person who admits to carrying out such a transaction does not pay back the $12.5 million and barely gets a slap on the wrist, the fruit is rotten.
Photo by Ary
If the rich keep getting richer and the poor keep getting poorer, it is safe to say that the elected officials have more interest in padding their own future and the future of their cronies than resolving the evident problems within the city experienced by the citizens.
If the homeless population is growing rapidly and the buildings keep getting bigger, the well-being of the citizens is merely an afterthought in the agenda of their “representatives.” If crony capitalism is at work in your city, injustice is taking place. How will you right the injustices in your city?
If you are a witness to or the victim of the injustice of Crony Capitalism in Evansville, please send your story to the vipnewsroom@zoho.com or mail to The Vanderburgh Independent Press at P.O. Box 2067 Evansville, IN 47728.
