The Crushing Weight of Cronyism and Corporate Welfare

Market economies provide egalitarian benefits across societies. The market is a mechanism for stewardship of scarce resources and provides incentives for self-interested individuals to solve social problems and in the process generate higher standards of living and advance human freedom. When markets are constrained by the state, which has the monopoly of force, the egalitarian extension of consumption possibilities narrows. Cronyism, or rent-seeking, unlike unfettered market competition, creates winners and losers. The more the winners can secure benefits and privilege through their relationships with government, the more those winners become institutionalized. They then use their privilege to secure greater rents, subsidies and favors, while those without political protection lose their ability to compete. Cronyism generates the worst kind of income inequality and insulates firms from the disciplinary powers of profit and loss, and erodes market competition thus thwarting innovation.