Crony Capitalism Is Coming to America
Business success may increasingly depend on connections, not competence.
I said it before Paul!
How cool is that?
Of course... the coming kleptocracy isn't so cool, but hey!
S E E D E D C O N T E N T
It's late 2025, and Donald Trump has done what he said he would do: impose high tariffs — taxes on imports — on goods coming from abroad, with extremely high tariffs on imports from China. These tariffs have had exactly the effect many economists predicted, although Trump insisted otherwise: higher prices for American buyers.
Let's say you have a business that relies on imported parts — maybe from China, maybe from Mexico, maybe from somewhere else. What do you do?
Well, U.S. trade law gives the executive branch broad discretion in tariff-setting, including the ability to grant exemptions in special cases. So you apply for one of those exemptions. Will your request be granted?
In principle, the answer should depend on whether having to pay those tariffs imposes real hardship and threatens American jobs. In practice, you can safely guess that other criteria will play a role. How much money have you contributed to Republicans? When you hold business retreats, are they at Trump golf courses and resorts?
I'm not engaging in idle speculation here. Trump imposed significant tariffs during his first term, and many businesses applied for exemptions. Who got them? A recently published statistical analysis found that companies with Republican ties, as measured by their 2016 campaign contributions, were significantly more likely (and those with Democratic ties less likely) to have their applications approved.
But that was only a small-scale rehearsal for what could be coming. While we don't have specifics yet, the tariff proposals Trump floated during the campaign were far wider in scope and, in the case of China, far higher than anything we saw the first time around; the potential for political favoritism will be an order of magnitude greater.
As I understand it, the term “crony capitalism” was invented to describe how things worked in the Philippines under the dictatorship of Ferdinand Marcos, who ruled from 1965 to 1986. It describes an economy in which business success depends less on good management than on having the right connections — often purchased by doing political or financial favors for those in power. In Viktor Orban’s Hungary, for example, Transparency International estimates that more than a quarter of the economy is controlled by businesses with close ties to the ruling party.
Now it’s very likely that crony capitalism is coming to America.
There have been many analyses of the probable macroeconomic impact of Trump’s tariffs, which will, if they are anywhere near as big as he has suggested, be seriously inflationary. Arguably, however, their corrupting influence will, in the long run, be an even bigger story.
Why do tariffs create more potential for cronyism than other taxes? Because the way they operate under our laws offers so much room for discretionary enforcement. The Treasury secretary can’t simply exempt his friends from income taxes (although Andrew Mellon handed out highly questionable rebates in the 1920s). The president can, however, exempt allies from tariffs. And does anyone really believe that the Trump administration will be too ethical to do so? Trump himself has bragged about his ability to game the system; he has bragged that not paying his fair share of taxes makes him “smart.”
Will tariffs be the only major potential engine of crony capitalism under the incoming administration? It’s doubtful. If you think about it, Trump’s deportation plans will also offer many opportunities for favoritism.
Some of Trump’s advisers, notably Stephen Miller, seem to imagine that they can quickly purge America of undocumented immigrants, rounding up millions of people and putting them in “vast holding facilities.” Even if you set aside legal issues, however, this is probably logistically impossible. What we’re much more likely to see are years of scattershot enforcement attempts, with raids on various businesses suspected of employing undocumented immigrants.
But what criteria will decide which businesses become priority targets for such raids and which will be left alone, effectively exempted, for years? What do you think?
And there’s more, of course. For example, Trump has suggested a willingness to take away the licenses of TV networks that provide, in his view, unfavorable coverage.
If crony capitalism is coming, what will it do to America? Obviously it will be bad for democracy, both by helping to lock in a large Republican financial advantage and by guaranteeing vocal business support for Trump, no matter how much damage his policies do. It will also enrich Trump and those around him.
Beyond that, a system that rewards businesses based on their political connections will surely exert a drag on economic growth. Many attempts to explain Italy’s dismal economic record over the past generation attribute poor performance in part to pervasive cronyism. One recent study found that populist regimes, whether of the left or the right — regimes that are generally crony capitalist as well — tend to suffer a long-run growth penalty of about one percentage point each year.
Time will tell. The evidence suggests that the rules for how to succeed in American business are about to change, and not in a good way.
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Trump's first term was moderated by the need to maintain a teeny-tiny bit of decency. Appointing a shipping magnate - wife of the Senate Majority Leader - was about as blatant as it got.
Now we have Elon, and it will go downhill from here.
Trump's first administration was the most corrupt in history, and now we have 2.0. They will steal everything that isnt superglued to the wall.
They'll steal the wall.
LOL. As I've posted before, I'm stocking up on microwave popcorn. What a show this will be!!!
Holy fiction Batman!
Sure. Right. Because he's so trustworthy like that. You should always believe everything he says.
uh oh, looks like another "redistribution of wealth" coming from the poor and middle class to maga millionaire and billionaire insiders. the new christo-fascist version ...
Free trade has not lowered poverty in the US. Free trade has not diminished the stress on public resources in the US. Free trade has not safeguarded the US food supply. Free trade has not made housing more affordable or accessible. Free trade has not created equitable prosperity in the US.
Local, state, and Federal governments are spending about 50 pct of GDP. Local, state, and Federal governments have been collecting over 40 pct of GDP through various taxes and fees. Governments at all levels have been engaged in a massive effort to redistribute economic resources in the US economy. Poverty remains high. Demands placed on public resources are increasing. Competition for cheaper goods, food, and housing hasn't decreased. Education has become unaffordable. Healthcare has become unaffordable. Retirement has become unaffordable. Living in the United States is becoming unaffordable -- except for the rich who are getting richer.
So, what has the government's half assed socialism accomplished? What have taxes and government redistribution actually improved in the United States?
Free trade has only allowed the rich to become richer without doing any work. The governments' efforts to redistribute economic resources has only allowed the rich to become richer without doing any work. Rule-based global interdependence has only allowed the rich to become richer without doing any work. Why aren't the socialist ideas working as promised?
OMG!! I agree with Nerm...
So, why do you ignore the global kleptocracy? Free trade allows the global kleptocracy into the United States, doesn't it?
Chinese dominance in free trade really is associated with rapidly increasing inequalities within China. Free trade hasn't created broad prosperity in China. And redistribution by the Chinese government hasn't stopped the rich becoming richer.
I was quite interested in that linked Stanford article. In particular I took note of this major point:
I assume that takes into consideration the successful eradication of abject poverty that took the CPC a decade to accomplish, and it is making certain as well with continual personal assistance that there will be no "slide backs". The old theme derived from the Roman Empire of "bread and circuses" has proven capable of still keeping the populace happy with their government. And starting January 21st, 2025, the Chinese people will be treated to being able to watch the biggest circus of all time.
The average american worker makes 3.5 times more than the average Chinese worker, and doesn't need suicide nets.
40 000 Americans die of gun violence every year..
And food and rents and necessities cost 3.5 times less in China making life just as affordable for a worker in China as a worker in the USA. I have an advantage, because with a meagre Canadian pension income I can live in a very nicely furnished 3-bedroom apartment with 2 balconies in a modern building in an upscale area of a big city surrounded by beautiful university campuses and within a 5-minute walk of the subway, buses, supermarket, department store, variety stores, hardware stores, clothing stores, grocery stores, a medical clinic, a pharmacy, restaurants, a 10 minute walk to a farmer's market with the butcher my wife goes to, fresh vegetables and fruit, and fresh fish, and 10 minutes in another direction to the Bank of China where I have my account and ATMs from which I draw my pension from my bank in Toronto where my pension cheques are automatically deposited each month. But it is a 15 minute walk to the mountains and reservoir which takes us out of the surroundings of the city into a beautiful countryside, like so...
Now, my rent which includes the building management fee, and it is well managed with a doorman and kept immaculately clean throughout, INCLUDING all 3 utilities (electricity, gas, water), cable TV, cellphone and internet, costs me the equivalent of US$500 a month. Chongqing has a population of over 30 million. What would something comparable in Chicago, New York, or Los Angeles cost? And so, do you think that 3.5 times figure makes much of a difference?
By the way, suicide nets? I've never seen suicide nets here, never even heard of a suicide here, but I just looked it up and saw that suicide nets are common on American bridges, like the Golden Gate bridge. LINK -> Suicide Deterrent Net | Golden Gate
America has the highest rate of incarceration in the world, much higher than that of other civilized nations, like being 6 times that of Canada for instance. There has to be one hell of a lot of crime in America to require that much incarceration.
LINK-> Incarceration Rates By Country 2024
I hope lots of members read this. Casper Wyoming isn't typical of the world. Chongqing isn't either... but it's closer.
Coming??! It's been here for many decades! And don't even pretend like it's only Republicans or Trump engaging in it! Follow the money during any election cycle and you can rest assured that it is a game that both parties play to get votes. You want to fix it then you have to get big corporate and union money, super pacs, and influence peddling out of our political process. That process has been driven by our two party system and it has to end if we want any ability to nip crony capitalism in the bud.