crony capitalism

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Adam Smith: Father of Economics by Jesse Norman

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But, if he had, it is not hard to imagine that he might have backed the use of scarce capital in that developing country for new manufacturing industries in nascent markets over existing agriculture, on the grounds of its greater added value—despite his clear dislike of interference in established markets. CRONY CAPITALISM: THE NEXT FRONTIER From a Smithian viewpoint, then, the case for freely trading markets is overwhelming, but the idea that the modern world has enjoyed a glorious history of free trade over the past two centuries, in Britain, continental Europe or the USA, is largely a myth. The West enjoyed the benefits of commercial society, but it also continued to deploy the weapons of mercantilism or crony capitalism to extract value from other countries. This is quite at odds with the radical critique of Smith as the supposed originator of the ills of global capitalism. Yet a Smithian viewpoint also enables us to look forward: at new forms of crony capitalism, and how they can be addressed. For there is every reason to fear the continued growth of crony capitalism. First, the economics of lobbying continue to be enormously enriching, especially to the global corporations which dominate it.

On this view, a general reduction in pay and bonuses across the sector to levels closer to those of other similarly skilled industries, if it could be achieved, would transform the profitability of the banks, and the returns to shareholders. CRONY CAPITALISM AND ‘THE MERCANTILE INTEREST’ Lobbying, rent-extraction, very high pay, growing inequality… the pattern seems clear. Yet, although it is especially evident in the banking sector, one should not ignore the wider picture. For this is just one extreme example of a much more general phenomenon: crony capitalism. What is crony capitalism? It has no single settled definition. But for present purposes we can usefully think of it as having two key features. The first is that business activity loses any relation to, and often clashes with, the wider public interest; the second is that business merit is separated from business reward.

But, as he also shows, those interests can come apart when markets cease to function well: through a tendency to monopoly, through poor regulation, through loss of animal spirits and more widely through crony capitalism enabled by rent-seeking, asymmetries of information and power, and conflicts of interest between owners and managers. Crony capitalism is a general blight, because it damages the economy, corrupts politics, tends to increase inequality and invalidates and delegitimizes markets and commercial society itself. It flourishes where companies and markets lose their connection to the public good, and where business rewards float free of underlying business merit. These things undercut the core rationale for market exchange: that it should be what Smith sees in his system of natural liberty, a source of ‘universal opulence’, that is of general prosperity, not the enrichment of a few. However, a fifth lesson is that crony capitalism is far from the only challenge facing modern commercial society.


pages: 442 words: 130,526

The Billionaire Raj: A Journey Through India's New Gilded Age by James Crabtree

accounting loophole / creative accounting, Asian financial crisis, Big bang: deregulation of the City of London, Branko Milanovic, business climate, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial rule, Commodity Super-Cycle, corporate raider, creative destruction, crony capitalism, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, facts on the ground, failed state, Francis Fukuyama: the end of history, global supply chain, Gunnar Myrdal, income inequality, informal economy, Joseph Schumpeter, liberal capitalism, Mahatma Gandhi, McMansion, megacity, New Urbanism, offshore financial centre, open economy, Parag Khanna, Pearl River Delta, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, rent-seeking, Rubik’s Cube, Silicon Valley, Simon Kuznets, smart cities, special economic zone, spectrum auction, The Great Moderation, Thomas L Friedman, transaction costs, trickle-down economics, Washington Consensus, WikiLeaks, yellow journalism, young professional

Global Wealth Report 2016, Credit Suisse, November 2016. Gomez, E. T. Political Business in East Asia. London, Routledge, 2002. Gowda, M. V. R. and Sharalaya, N. “Crony Capitalism and India’s Political System.” In N. Khatri and A. K. Ojha, eds., Crony Capitalism in India: Establishing Robust Counteractive Institutional Frameworks. Basingstoke, Palgrave Macmillan, 2016. Guha, R. A Corner of a Foreign Field: The Indian History of a British Sport. London, Picador, 2003. ———. India after Gandhi: The History of the World’s Largest Democracy, rev. ed. London, Pan Macmillan, 2011. Guha Thakurta, P., Ghosh, S., and Chaudhuri, J. Gas Wars: Crony Capitalism and the Ambanis. New Delhi, Paranjoy Guha Thakurta, 2014. Gupta, A. and Kumar, P. “India Financial Sector: House of Debt.” Credit Suisse, August 2, 2012.

Center for Global Development Working Paper 276, December 2011. Khan, M. H. and Jomo, K. S. Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia. Cambridge, UK, Cambridge University Press, 2000. Khanna, J. and Johnston, M. “India’s Middlemen: Connecting by Corrupting?” Crime, Law and Social Change, 48(3–5), 2007. Khatri, N. and Ohja, A. K. “Indian Economic Philosophy and Crony Capitalism.” In N. Khatri and A. K. Ojha, eds., Crony Capitalism in India: Establishing Robust Counteractive Institutional Frameworks. Basingstoke, Palgrave Macmillan, 2016. Khilnani, S. The Idea of India. New Delhi, Penguin, 1999. Klitgaard, R. Controlling Corruption. Berkeley, University of California Press, 1988. Kumar, A. The Black Economy in India, rev. ed. New Delhi, Penguin, 2002. ———. “Estimation of the Size of the Black Economy in India, 1996–2012.”

Countries riven by internal divisions are also less likely to build the kind of broad social consensus that makes it easier to introduce tough structural reforms, of the type that India itself now badly needs if it is to continue to develop economically. There is also every reason to believe that, without intervention, the gap between India’s rich and the rest will keep widening. The rise of the super-rich then ties into a second issue: crony capitalism, meaning collusion between political and business elites to capture valuable public resources for themselves. India’s old system of central planning and state controls created fertile ground for graft, forcing citizens and businesses alike to pay myriad bribes for basic state services. Yet these problems of retail corruption were trivial compared to those that emerged during the go-go years of the 2000s.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

As in developing countries under structural adjustment, inequality and oligarchy did not come about as a result of free markets but as the predicted consequence of institutional interventions deploying an ideological agenda. They created a venal form of crony capitalism. The Economist has constructed an index of crony capitalism based on the wealth of billionaires in sectors such as casinos, oil and construction where, in its view, there is ample scope for rent seeking through cosy relations with government.2 It claims that rent seeking is worse in emerging-market economies, which account for two-thirds of ‘crony wealth’, with Russia heading the 2016 rankings of twenty-two countries. Britain, at fourteenth, comes top among industrialised economies, followed by the USA at sixteenth. However, the index does not include technology industries or much of finance as rent-seeking sectors, despite their lobbying power. In 2014 The Economist suggested that crony capitalism had peaked, but in 2016 it acknowledged that there was still reason to worry.

As The Economist admitted, ‘If technology were to be classified as a crony industry, rent-seeking wealth would be higher and rising steadily in the Western world.’ Moreover, The Economist’s narrow definition substantially understates crony capitalism. Its examples of rent seeking were ‘forming cartels’ and ‘lobbying for rules that benefit a firm at the expense of competitors and customers’. It thus omitted the most insidious way in which crony capitalism is extending its grip: political manipulation by the plutocracy and elite, who are funding politicians and political parties to favour the interest of rentiers (see Chapter 7). Another aspect of crony capitalism is the spread of corporate rentier devices. Individuals or groups buy firms, saddle them with debt, pay themselves huge bonuses and then declare bankruptcy, thereby privatising profit and socialising losses.

The term ‘crony capitalism’ describes the blending of commercial interests with political power. The transition of party donors into senior government posts is a classic example. The many dubious cases in Britain include John Nash, a venture capitalist with commercial interests in education and healthcare (and a board member of the right-wing think tank Centre for Policy Studies). Having donated generously to the Conservatives, he was given a peerage and appointed Schools Minister in 2013. It would be hard to pretend there is no conflict of interest. Similarly, Lord Sainsbury, former chair of the eponymous supermarket chain, who has donated millions of pounds to the Labour Party, was appointed Science Minister in the New Labour government. These are just two examples of crony capitalism. PRIVATISATION AND POLITICAL REVOLVING DOORS Privatisation of public services is rife with potential for corruption and rent seeking.


pages: 372 words: 92,477

The Fourth Revolution: The Global Race to Reinvent the State by John Micklethwait, Adrian Wooldridge

Admiral Zheng, affirmative action, Affordable Care Act / Obamacare, Asian financial crisis, assortative mating, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bernie Madoff, Boris Johnson, Bretton Woods, British Empire, cashless society, central bank independence, Chelsea Manning, circulation of elites, Clayton Christensen, Corn Laws, corporate governance, credit crunch, crony capitalism, Deng Xiaoping, Detroit bankruptcy, disintermediation, Edward Snowden, Etonian, failed state, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, income inequality, Khan Academy, Kickstarter, knowledge economy, Kodak vs Instagram, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, Martin Wolf, means of production, minimum wage unemployment, mittelstand, mobile money, Mont Pelerin Society, Nelson Mandela, night-watchman state, Norman Macrae, obamacare, oil shale / tar sands, old age dependency ratio, open economy, Parag Khanna, Peace of Westphalia, pension reform, pensions crisis, personalized medicine, Peter Thiel, plutocrats, Plutocrats, popular capitalism, profit maximization, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, Silicon Valley, Skype, special economic zone, too big to fail, total factor productivity, War on Poverty, Washington Consensus, Winter of Discontent, working-age population, zero-sum game

It would be unfair to compare American public land with Greece, where a twenty-year-long effort to create a proper account of the land has gotten nowhere largely because so much has been built on with politicians’ connivance; but the nexus between Republican congressmen, ranchers, and the Department of the Interior is not a healthy one. The heirs of Reagan could do with a little of his vim. CRONY CAPITALISM BY THE POTOMAC If privatization is the American Right’s great blind spot, subsidies for the wealthy is the Left’s. Dismantling the web of handouts for the rich and powerful should be at the very top of progressive America’s agenda—in the same way that royal patronage was the great enemy for John Stuart Mill. So far the Left has concentrated on trying to raise taxes in the name of redistribution. It would be much better to focus on dismantling the welfare state for America’s plutocrats. There are two rich targets. The first is crony capitalism: all those subsidies for well-connected industries. The second is the personal tax system, which, as we have seen, is massively distorted by aid to the rich.

The second is the personal tax system, which, as we have seen, is massively distorted by aid to the rich. Fixing these things would simultaneously slim Leviathan and help it focus its energies on people who actually need its help. Crony capitalism represents the most egregious example of Olson’s law. If market capitalism provides a way of turning private benefits to the public good, as Adam Smith argued, crony capitalism provides a way of turning public goods to private gain, lining the pockets of the powerful, undermining economic competitiveness, and misdirecting resources on a huge scale. The industry with the longest history of sucking at the udder of the state is agriculture. The U.S. Department of Agriculture distributes between $10 billion and $30 billion in cash subsidies to farmers each year (the particular amount fluctuates with the market price of crops and the frequency of disasters).6 The payments are heavily tilted toward the big producers: The largest 10 percent of farmers received 68 percent of all commodity subsidies in 2010.7 The beneficiaries include some of America’s biggest companies, such as Archer Daniels Midland, and some of its richest individuals, such as Ted Turner, as well as some people who don’t farm at all but who own land that was once deemed agricultural.

Over the past decade eighteen former senior ministers and civil servants have taken jobs with Britain’s biggest three accountancy firms, whose work includes helping businesses minimize their tax bills and lobby the government. For progressives of all sorts this is a huge missed opportunity. The battle against crony capitalism is older than America itself: The Boston Tea Party was a protest against the East India Company, which was using its political connections in London to subsidize its tea. The Democratic Party would not only save the state a lot of money if it were to campaign against crony capitalism. It would also become a champion of the future in much the same way that British radicals did in the nineteenth century by taking on the systems of “outdoor relief for the upper classes” in the form of Corn Laws and patronage. Fully 77 percent of Americans believe that too much power is in the hands of the rich and large corporations.12 An even bigger target for “True Progressives”13 is all the state spending that is sprayed at well-off individuals.


pages: 348 words: 99,383

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope by John A. Allison

Affordable Care Act / Obamacare, American ideology, bank run, banking crisis, Bernie Madoff, business cycle, clean water, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, fiat currency, financial innovation, Fractional reserve banking, full employment, high net worth, housing crisis, invisible hand, life extension, low skilled workers, market bubble, market clearing, minimum wage unemployment, money market fund, moral hazard, negative equity, obamacare, Paul Samuelson, price mechanism, price stability, profit maximization, quantitative easing, race to the bottom, reserve currency, risk/return, Robert Shiller, Robert Shiller, The Bell Curve by Richard Herrnstein and Charles Murray, too big to fail, transaction costs, yield curve, zero-sum game

Instead of dealing with market forces, it is easier to influence the political allocation of resources, that is, money. However, the problem is not Goldman. The problem is that the politicians and bureaucrats have this power. If the U.S. Constitution were enforced, crony capitalism would not work because the politicians and bureaucrats would not have the authority to hand out favors to their friends. If there were a separation of economics and state as there is of church and state, crony capitalism would not be possible. Crony capitalism is really crony socialism and is caused by politicians, that is, government. There can be no moral justification for saving Goldman and letting Lehman fail. Many insiders will tell you that Paulson hated Lehman. Did his personal feeling about Lehman cause him to allow Lehman to fail?

., 183 government debt in, 200 manufacturing in, 10, 25–26, 161 market-based pricing in, 34 military spending in, 198 stimulus fund use, 181–182 trade with, 204–205 U.S. investment by, 29, 159 Chrysler, 130, 179–180 Citigroup: bailout of, 50, 104, 130, 177 CDOs of, 125–126 credit decisions, 238 crony capitalism, 6 funding of shadow banking system, 120 long-term debt of, 71 and panic during financial crisis, 163 pragmatism at, 217–218 reason at, 245 “too-big-to-fail” firms, 173 Clearing, 104 Clinton, Bill: lending reforms, 42–44, 56 subprime lending requirements, 58–60 Collateralized debt obligations (CDOs), 124–126 Colonial Bank, 47–48 Commercial real estate, 11, 97 Common good, 215–216 Community Reinvestment Act (CRA), 42, 55–57, 59 Compensation, 50, 83–84, 197–198 Confidence, 84–87, 184–185 Conservatives, 108 Consumer compliance, 193 Consumer Price Index (CPI), 26–27 Consumption: borrowing for, 57–58 housing as, 9–12, 54–55, 73–74 Contagion risk, 123 Corporate debt, 107 Counterparty risk, 123, 124 Countrywide: crony capitalism at, 6 and fair-value accounting change, 114, 118 and FDIC insurance, 39, 41, 46 necessary failure of, 159 pick-a-payment mortgages of, 91–93 subprime business at, 99 thrift history of, 98 CPI (see Consumer Price Index) CRA (see Community Reinvestment Act) Creativity, 7, 247 Credit default swaps (CDSs), 126–128 Credit rating agencies (see Rating agencies) Crony capitalism, 6, 102, 129, 179 Cross-guarantor insurance fund, 48–52 Cuba, 34, 247, 252 Cuomo, Andrew, 58 Currency, debasing, 22 Debt, 21–22, 107 Declaration of Independence, 220, 252 Defaults, 90–91, 126–128 Defense spending, 198–199, 227 Deflation, 22 Demand, supply and, 104, 185, 209, 210 Department of Housing and Urban Development (HUD), 15, 58 Deposits, disintermediation of, 120–121 Derivatives, 3, 120, 122–124 Disclosure requirements, 150–152 Dodd, Christopher, 7, 46, 61, 63, 64 Dodd-Frank Wall Street Reform and Consumer Protection Act: deficiencies of, 193 introduction of, 63–64, 183 as misregulation, 147 results of, 130 and TARP, 173, 174 Dollar, U.S., 77, 188, 229 Durbin amendment, 193 Earnings, operating, 103–106 East Germany, 34, 247 Eastern Europe, 34, 252 Economic cycles, 108, 189–193 Economic health, 159–161 Economic recovery, 1, 207–208 Economy, banking industry in, 67–69 Edison, Thomas, 19, 158–159 Education, 230–235, 247 Egypt, ancient, 230 Elitism, 7 Ely, Bert, 48 Employee Retirement Income Security Act (ERISA), 82, 149 Enron, 60, 109, 133, 149 Entitlement programs, reforms for, 199–204 Equal Credit Opportunity Act, 42, 55 ERISA (Employee Retirement Income Security Act), 82, 149 Ethical incentives, lending, 57–58 Euro, 189 European banking crisis, 51–52, 137 Expensing (stock options), 114–117 Experiential learners, 244–245 Fair Housing Act, 55 Fair-value accounting, 103–118 asset valuation in, 106–108 and expensing of stock options, 114–117 and losses on CDSs, 126–127 private accounting systems vs., 177–178 SEC involvement in, 151–152 for selling vs. servicing mortgages, 113–114 Fannie Mae: accounting scandal, 112–113, 149 in current environment, 251 and disintermediation of deposits, 121 failure of, 61–65, 164 and fair-value accounting, 118 in housing policy, 58–61 misallocation of resources by, 14 misleading of rating agencies by, 83 mortgage lending by, 97–101 reforms for, 190–192 selling mortgages to, 113–114 subprime lending by, 58, 99–101 FASB (see Financial Accounting Standards Board) FDIC (see Federal Deposit Insurance Corporation) FDIC insurance, 37–52 and bank liquidity, 171 and failing banks, 140 and fractional reserve banking, 68–69 and pick-a-payment mortgages, 91 reform of, 190 and S&L failures, 97 Federal Deposit Insurance Corporation (FDIC), 37–38 as external auditors, 134 and failing banks, 47–48 misallocation of resources by, 14 and pick-a-payment mortgages, 91 as regulator, 41–48, 143 take over of Washington Mutual, 75–77 Federal Housing Administration (FHA), 15, 190–192, 252 Federal Reserve, 22–23, 102, 189 antitrust policy, 174 bailouts by, 120–121, 190, 192 and banking industry reforms, 187–188 as external auditors, 134 and federal debt, 21–22 and leverage, 72 mathematical modeling by, 136 misallocation of resources by, 14, 208 misleading information from, 46, 83, 101, 125 monetary policy of, 17–20, 31–35, 96 overreaction by, 154 stimulus from, 152, 153, 208 and TARP, 165, 167–168, 171 and unemployment, 213 and Washington Mutual, 75 Federal Reserve Board, 18 Federal Reserve Open Market Committee, 31 Federal Savings and Loan Insurance Corporation (FSLIC), 37–38, 50, 96 FHA (see Federal Housing Administration) Financial Accounting Standards Board (FASB), 105, 106, 114–117 Financial crisis (2007-2009), 1–3, 251–254 banking industry in, 70–72 derivatives in, 122–124 Freddie Mac and Fannie Mae in, 65 free-market response to, 177–186 and Great Depression, 25 lessons from, 251–252 SEC role in, 154–155 Financial reporting requirements, SEC, 150–152 Financial Services Roundtable (FSR), 32, 61–62 First Horizon, 237 Fitch, John Knowles, 150 Fitch Ratings: investor confidence in, 84–87 misratings by, 82–84, 101, 125, 126 and SEC, 81–82, 149–150 Flat tax, 197 Forbes, Steve, 197 Ford, 179 Foreclosure laws, 77–80 Fractional reserve banking, 69–70 Frank, Barney, 7, 61, 63, 64 Fraud, 109–113 Freddie Mac: accounting scandal, 112–113, 149 current environment, 251 and disintermediation of deposits, 121 failure of, 61–65, 164 in housing policy, 58–61 misallocation of resources by, 14 misleading information from, 83 mortgage lending by, 97–101 reforms for, 190–192 selling mortgages to, 113–114 subprime lending by, 58, 99–101 Free markets: experimentation in, 19 justice in, 92, 177 market corrections in, 157–159 and monetary policy, 31–35 risk taking by banks in, 40–41 wage rates in, 210–211 Free trade, 204–205 Friedman, Milton, 20, 189 FSLIC (see Federal Savings and Loan Insurance Corporation) FSR (Financial Services Roundtable), 32, 61–62 GAAP accounting, 116, 117 Gates, Bill, 216 GDP, 183, 197–199 General Electric, 168, 169 General Motors (GM), 169, 178–180 General Theory of Employment, Interest and Money, The (Keynes), 181 Germany, 52 GM (General Motors), 169, 178–180 GMAC, 168, 169, 178–180 Gold standard: and deflation, 25–26 and economic future of U.S., 188–189 Greenspan’s view of, 32 Golden West, 39, 91, 92, 98, 159 Goldman Sachs, 71, 173 as AIG counterparty, 128–129 bailout of, 104, 164, 179 CDSs of, 126 counterparty risk at, 124 crony capitalism at, 6 financial “innovations” of, 101 Government policy: as cause of financial crisis, 1, 5–6, 251 and residential real estate bubble, 6 (See also Housing policy; Policy reforms) Government regulation, 5–8, 41–48, 204 Government spending, 180–183, 197–199 Government-sponsored enterprises (GSEs), 59, 64–65, 98, 137 (See also Fannie Mae; Freddie Mac) Great Depression: and avoidance of stock market, 74 banking industry in, 70–72 economic policies after, 161 and Federal Reserve, 19–20, 24, 188 and gold standard, 188 and government interference, 170 and Smoot-Hawley Tariff Act, 205 Great Recession, 1, 251–254 and Federal Reserve, 188 Freddie Mac and Fannie Mae in, 65 and interest-rate variation, 33 market corrections and depth of, 160 and monetary policy, 17 and residential real estate, 9–15 Great Society, 6, 55, 96 Greece, 51, 52, 137, 228 Greenspan, Alan, 23–30, 32, 33, 160 Gross domestic product, 183, 197–199 Hamilton, Alexander, 19 Harvard University, 43, 131 Hayek, Friedrich, 31 Health insurance, 201–202 High-net-worth shareholders, 93 Home Builders Association, 60 Home foreclosure laws, 77–80 Homeownership, 53–55 Hoover, Herbert, 24, 161, 205 Housing: as consumption, 9–12, 54–55, 73–74 government support of, 12 Housing policy, 53–65 HUD (Department of Housing and Urban Development), 15, 58 Human Action (von Mises), 238 Immigration, 19, 205–206 India, 10, 25, 205 IndyMac, 39, 75, 98 Inflation: CPI as indicator of, 26–27 and fair-value accounting, 103 and Federal Reserve, 21–22 and prices, 24–25 (See also Monetary policy) Initial public offerings, 150 Insurance: bond, 86–87 cross-guarantor, 48–52 FDIC (see FDIC insurance) health, 201–202 private deposit, 48–52 self-insurance at banks, 48–52 unemployment, 212–213 Interest rates, 26–27, 31–35 Inverted yield curves, 27–29 Investment banks: disclosure requirements for, 151 government bailout of, 162 “innovations” of, 101–102 leverage ratios of, 71–72 IPOs, 150 Iran, 198, 199, 227 Iraq, 198 Ireland, 77 Isaac, Bill, 107–108, 161–162 Italy, 51, 52 Japan, 159, 200, 205 Jefferson, Thomas, 19, 220 Johnson, Lyndon Baines, 6, 55, 96, 161, 188 JPMorgan Chase, 75 and Bear Stearns, 162 and shadow banking system, 120 as “too-big-to-fail” firm, 173 and Washington Mutual, 163 Keynes, John Maynard, 181 Labor: allocation of, 10–11, 14 minimum-wage laws, 209–212 Lehman Brothers, 71, 76, 101, 104, 129, 164 and Bear Stearns bailout, 162–163 corporate debt at, 107 counterparty risk at, 124 derivatives from, 123 Limited government, 182–183, 195, 231, 253 Liquidity: of banks, 68–69 and FDIC insurance, 171 and financial crises, 70–72 and housing prices, 74–75 and TARP, 171–172 Loan loss reserves accounting, 152–154 Loans: capital standards for, 51–52 qualified, 98 substandard, 140–141 Madoff, Bernie, 149, 225 March of Dimes, 241 Market corrections, 157–165 Federal Reserve’s prevention of, 23, 32 prevention of, 13 residential real estate, 78 and response to financial crisis, 177–180 Market discipline, 21, 38 Market-based monetary policy, 31–35 Market-clearing price, 209 Mathematical modeling: for loan loss reserves, 152–153 by ratings agencies, 82–83 for risk management, 136–138 MBIA, 86 Medicaid, 6, 55, 201 Medicare, 6, 8, 55, 201, 203 Meltdown (Michaels), 35 Merrill Lynch, 101, 124–125 Michaels, Patrick J., 35 Microsoft, 217 Military spending, 198–199, 227 Minimum-wage laws, 209–212 Mises, Ludwig von, 34, 238 Monetary policy, 17–35 of Bernanke, 27–31, 33, 35, 40, 125, 213 and federal debt, 21–22 and Federal Reserve, 17–23 of Greenspan, 23–27 market-based, 31–35 and unemployment, 208–209 Money market mutual funds, bailout of, 120–121, 192 Money supply, 21–22, 24, 189 Moody, John, 83, 150 Moody’s, 81–87 investor confidence in, 84–87 misratings by, 82–84, 101, 125, 126 and SEC, 81–82, 149–150 Morgan Stanley, 71, 101, 124, 173 Mortgage lending, 95–102 by Fannie Mae and Freddie Mac, 97–101 and investment bank innovations, 101–102 prime, 59, 97–99 by private banks, 97–99 savings and loan industry in, 95–97 subprime, 43, 56–57, 99–101 Mortgages: by BB&T Corporation, 97–98 jumbo, 62 pick-a-payment (see Pick-a-payment mortgages) selling vs. servicing, 113–114 Mozilo, Angelo, 46 Multiplier effect, 181 Naked shorting, 127–128, 151 Nationally recognized statistical rating organizations, 82 Negative real interest rates, 26–27 Neo-Keynesian response to financial crisis, 185–186 Neutral taxes, 197 New Deal, 53, 170, 232 Nixon, Richard, 96, 161, 188 North Korea, 34, 198, 227, 247, 252 NRSROs, 82 Obama administration, 142–144: and Dodd-Frank Act, 64 economic policies of, 15, 161 healthcare bill, 183, 201 and Patriot Act, 45 stimulus plan, 181–182 Office of the Comptroller of the Currency (OCC), 40, 154 Office of Thrift Supervision, 40, 41, 45–46 Operating earnings, 103–106 OTS, 40, 41, 45–46 Panics, 137–138, 161–165 Patriot Act, 45, 46, 48, 133–136, 147 Paulson, Henry: in 2008 panic, 164, 167 and AIG bailout, 128, 129 credibility of, 164 development of TARP, 76, 168–170, 172 Pick-a-payment mortgages, 89–93 borrowers using, 90–91 and FDIC, 91 and rise of Fannie Mae/Freddie Mac, 98 Policy reforms, 195–206 for entitlement programs, 199–204 and free trade, 204–205 and government regulations, 204 for government spending, 197–199 for immigration, 205–206 for political system, 206–207 and tax rate, 196–197 Politics: in banking regulation, 42–46 and crony capitalism, 129 and failure of Fannie Mae/Freddie Mac, 59–62 and Federal Reserve appointments, 18 policy reforms for, 206–207 Poor, Henry Varnum, 150 Portugal, 51 Price fixing, 31, 193 Price setting, 31–32 Prime lending, 59, 97–99 Prince, Charlie, 217 Principles-based accounting, 109 Privacy Act, 133, 135 Private accounting systems, 177–178 Private banks, 97–99, 187–188 Private deposit insurance, 48–52 Public schools, 228, 233–235 Racial discrimination (in lending), 42–45 Raines, Frank, 59 Rand, Ayn, 225, 231 Rating agencies, 81–87 investor confidence in, 84–87 mathematical modeling by, 136 and subprime mortgage bonds, 82–84 and “too-big-to-fail” firms, 173 and SEC, 81–82, 149–150 Real estate: commercial, 11, 97 residential (see Residential real estate market) Recessions, 28, 29, 160 Recovery (see Economic recovery) Reforms: banking industry (see Banking industry reforms) government policy (see Policy reforms) Regions Bank, 237 Regulation: of banking industry (see Banking regulation) by government (see Government regulation) Reporting, financial, 150–152 Reserve currency, U.S. dollar as, 77, 188, 229 Residential real estate market: economics of, 73–74 misinvestment in, 9–15 Residential real estate market bubble, 73–80 and government policy, 6 international impact of, 77 and job creation, 80 and state home foreclosure laws, 77–80 Risk: contagion, 123 counterparty, 123, 124 with derivatives, 122–124 diversification of, 67–69 and economic cycles, 189–193 and FDIC insurance, 38–41 and government regulation, 50–51 liquidity, 68–70 mathematical modeling for, 136–138 and “originate and sell” model, 100 systemic, 50–51 RMBS (residential mortgage-backed securities), 81 Roman empire, fall of, 230 Roosevelt, Franklin D., 24, 37, 103, 161 Rules-based accounting, 109 Russia, 198 Samuelson, Paul, 238 Sarbanes-Oxley Act, 133–134 and fair-value accounting, 106 and Fannie Mae/Freddie Mac, 99 misregulation by, 48, 147 and SEC, 150 violations of, 136 SARs (Suspicious Activity Reports), 136 Satchwell, Jack, 57 Savings and loan (S&L) industry, 95–97, 110, 191 Securities and Exchange Commission (SEC), 149–155 capital ratio guidelines, 71–72 and complexity of accounting rules, 116–117 and expensing of stock options, 114, 115 loan loss reserves accounting for, 152–154 misallocation of resources by, 14 and rating agencies, 81–82, 149–150 requirements for shorting stock, 127–128, 151 and rules-based accounting, 109, 110 and Sarbanes-Oxley Act, 150 Self-insurance, 48–52 Selgin, George, 189 Senate Banking Committee, 46 Shadow banking system, 119–131 and AIG bailout, 128–130 credit default swaps in, 126–128 and derivatives, 122–124 Federal Reserve’s role in, 30 losses from, 131 S&L industry, 95–97, 110, 191 Small businesses, 144–147, 183–184 Smoot-Hawley Tariff Act, 205 Social Security, 8, 199–204 South Financial, 237 South Korea, 247 Soviet Union, 34, 195–196, 252, 254 S&P (see Standard & Poor’s) Spain, 51, 52, 77 Spitzer, Eliot, 71, 134–135, 151 Stagflation, 181, 208 Standard & Poor’s (S&P), 81–87 investor confidence, 84–87 misratings by, 82–84, 101, 125, 126 and SEC, 81–82, 149–150 Standard of living, 6–7, 10, 161, 177 Start-up banks, 38–39 State home foreclosure laws, 77–80 Stimulus plan, 181–182 Stock options, expensing of, 114–117 Stocks, shorting, 127–128, 151 Stress tests, banks, 171 Subprime lending: and CRA, 56–57 by Fannie Mae and Freddie Mac, 99–101 and racial discrimination in lending study, 43 Subprime mortgage bonds, 82–87 Substandard loans, 140–141 SunTrust, 152, 237 Suspicious Activity Reports (SARs), 136 Tails (mathematical models), 137 TARP (see Troubled Asset Relief Program) Tax rate, 196–197 Tea Party Movement, 218, 231 Technology industry, 5 “Too-big-to-fail” firms, 130, 173, 193 Trader principle, 92, 223–224 Troubled Asset Relief Program (TARP), 167–175 and 2008 panic, 165 and FDIC, 37 Underwriters Laboratories, 117, 150 Unemployment, 207–213 in economic recovery, 207–208 and minimum-wage laws, 209–212 and misinvestment in residential real estate, 10–11 and monetary policy, 208–209 Unemployment insurance, 212–213 Unions, 179, 180, 212 United Auto Workers, 179, 180 United States: demographic problem in, 228 economic future of, 8, 227–230, 252–253 educational system of, 230–235 founding concepts of, 219–220 as free trade zone, 204–205 GDP of China vs., 183 mixed economy of, 5–6 public schools of, 233–235 university system of, 230–233 United Way, 224, 241 University system, 230–233 U.S.

However, any errors by these institutions, individually and collectively, are far less important than government policy mistakes, and almost all the errors were the direct result of government policy incentives.2 It is important to note that many of the financial institutions that should have been allowed to fail had a history of being crony capitalists; that is, these companies did not advocate limited government but instead sought special favors for themselves. Goldman Sachs, Citigroup, and Countrywide are examples of crony capitalists. Crony socialist is probably a better name for these individuals and firms. If the United States had separation of “business and state” as it does separation of “church and state,” crony capitalism (or crony socialism) could not exist. 4. Almost every governmental action taken since the crisis started, even those that may help in the short term, will reduce our standard of living in the long term. If you misidentify the fundamental cause of a problem, you will almost certainly recommend the wrong solution. If your doctor treats you for cancer when you have heart disease, the outcome will not be good.


pages: 335 words: 104,850

Conscious Capitalism, With a New Preface by the Authors: Liberating the Heroic Spirit of Business by John Mackey, Rajendra Sisodia, Bill George

Berlin Wall, Buckminster Fuller, business process, carbon footprint, collective bargaining, corporate governance, corporate social responsibility, creative destruction, crony capitalism, cross-subsidies, en.wikipedia.org, Everything should be made as simple as possible, Fall of the Berlin Wall, fear of failure, Flynn Effect, income per capita, invisible hand, Jeff Bezos, job satisfaction, lone genius, Mahatma Gandhi, microcredit, Nelson Mandela, Occupy movement, profit maximization, Ralph Waldo Emerson, shareholder value, six sigma, social intelligence, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Pinker, The Fortune at the Bottom of the Pyramid, The Wealth of Nations by Adam Smith, too big to fail, union organizing, wealth creators, women in the workforce, zero-sum game

In recent years, the myth that business is and must be about maximization of profits has taken root in academia as well as among business leaders. This has robbed most businesses of the ability to engage and connect with people at their deepest levels. Regulations and the size and scope of government have greatly expanded, creating the conditions for the spread of crony capitalism, restricting competition in favor of politically well-connected businesses. Crony capitalism is not capitalism at all, but is seen as such by many because it involves businesspeople. These are significant challenges, but they must be overcome if we are to continue to spread freedom and bring dignity and the fruits of modernity to the billions on the planet who are still in dire need. The Intellectual Hijacking of Capitalism The early intellectual case for capitalism was built almost exclusively on the theory that people create businesses to pursue only their personal self-interest.

We are not suggesting this is easy. Large corporations have to overcome a lot of inertia and decades of legacy thinking. But the barriers that prevent them from changing are not legal ones; they are the outmoded mental models with which companies have operated in the past. Investing in the Future Much of the animosity toward capitalism today comes from the distortions that crony capitalism has created. In no place is crony capitalism more evident than in the financial sector of the economy. No sector of capitalism more urgently needs to become more conscious and discover its higher purposes and the importance of stakeholder value creation than the financial sector. The sector’s philosophy of maximizing short-term profits and personal compensation while ignoring all other stakeholders is a proven failure with extremely harmful consequences for all of us.

In such situations, regulations are often crafted to benefit the industry (or certain companies in the industry) rather than to serve the public interest.9 Society has countless examples of special favors being granted to well-connected people. When people see this kind of corruption, they usually blame business for doing the corrupting. But the government is equally to blame. This kind of crony capitalism represents the worst danger to free-enterprise capitalism. The danger is especially great in emerging economies, but is a problem everywhere and is becoming a serious problem in the United States. Many people who condemn capitalism do so for this reason. But crony capitalism is not free-enterprise capitalism; it is a perversion of it. The bottom line is that good government is absolutely essential. If government becomes too corrupt, it is impossible to have a free-enterprise system and healthy capitalism. We need the rule of law, but our regulations and taxes must be applied fairly to all.


pages: 297 words: 84,009

Big Business: A Love Letter to an American Anti-Hero by Tyler Cowen

23andMe, Affordable Care Act / Obamacare, augmented reality, barriers to entry, Bernie Sanders, bitcoin, blockchain, Bretton Woods, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, correlation coefficient, creative destruction, crony capitalism, cryptocurrency, dark matter, David Brooks, David Graeber, don't be evil, Donald Trump, Elon Musk, employer provided health coverage, experimental economics, Filter Bubble, financial innovation, financial intermediation, global reserve currency, global supply chain, Google Glasses, income inequality, Internet of things, invisible hand, Jeff Bezos, late fees, Mark Zuckerberg, mobile money, money market fund, mortgage debt, Network effects, new economy, Nicholas Carr, obamacare, offshore financial centre, passive investing, payday loans, peer-to-peer lending, Peter Thiel, pre–internet, price discrimination, profit maximization, profit motive, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Ronald Coase, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Nature of the Firm, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, ultimatum game, WikiLeaks, women in the workforce, World Values Survey, Y Combinator

A world of itty-bitty banks is no remedy for the ability of systemic risk to bring a financial system to its knees, as was illustrated during the Great Depression of the 1930s. So if you’re looking for a villain, big banks aren’t the right candidate. 8. CRONY CAPITALISM: HOW MUCH DOES BIG BUSINESS CONTROL THE AMERICAN GOVERNMENT? OK, so what about business and the government? Doesn’t big business control what goes on in Washington? There are indeed numerous government privileges for business; most of those are bad policy, and yet they persist for many years, perhaps indefinitely, as has been pointed out eloquently by Luigi Zingales in his 2012 book A Capitalism for the People. I am against virtually all manifestations of crony capitalism, but I’m also not sure people are getting the basic story right. Business does have some real political pull, but the basic view that big business is pulling the strings in Washington is one of the big myths of our time.

For a disaggregated look at this source of financial sector growth, see Antill, Hou, and Sarkar 2014, who show it occurred disproportionately through non-bank credit intermediation. 29.   On the decline in Chinese debt holdings, see, for instance, Mullen 2016. 30.   For those numbers, see Comoreanu 2017, drawing upon FDIC data. Chapter 8: Crony Capitalism   1.   These quotations are all from Pearlstein 2016.   2.   Luigi Zingales has been one of the most articulate critics of crony capitalism. See, for instance, Zingales 2017.   3.   For the estimate on total advertising expenditures, see Statista 2017. For the General Motors comparison, see Austin 2012; see also Drutman 2015, 223. For Coca-Cola, see Zmuda 2014. For the China quotation, see Pearlstein 2016.   4.   See Drutman 2015, 83, 86–87, 91. For the study on lobbying, see Cao et al. 2017.   5.   

But that constant churn of events is antithetical to the general and largely justifiable business desire for predictability and political stability. Trump in some key regards likes to favor crony businesses, but it is hard to avoid the suspicion that he does not really know how business works, in spite of having spent his whole life in this vocation. THE BROADER HISTORY OF BUSINESS INFLUENCE IN GOVERNMENT There is indeed plenty of crony capitalism in America today. For instance, the Export-Import Bank subsidizes American exports with guaranteed loans or low-interest loans. The biggest American beneficiary is Boeing, by far, and the biggest foreign beneficiaries are large and sometimes state-owned companies, such as Pemex, the national fossil fuel company of the Mexican government. The Small Business Administration subsidizes small business start-ups, the procurement cycle for defense caters to corporate interests, and the sugar and dairy lobbies still pull in outrageous subsidies and price protection programs, mostly at the expense of ordinary American consumers, including low-income consumers.


pages: 183 words: 17,571

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

Scene Twelve The aftermath of financial crisis rarely leads to the state simply recapitalizing the banks and exiting the business, though something very like this happened in Sweden in the 1990s. Most often, crises are followed by the systematic imposition of “financial repression”—a regime in which the state systematically suppresses market forces in finance—especially interest rates—in order to direct credit for political ends and hold down its own funding costs. This regime leaves itself open to democratic crony capitalism at best. At worst, it leads to socialism or “corporatism”—the organization of society into collective interest groups such as big business and labor, all subordinate to the state (as with Italy and Germany and even some aspects of the New Deal). Financial repression is how banking works in China today, and once in place, it is very hard to change. The Banking Act of 1933 ushered in an age of financial repression (and so-called utility banking) in the United States that lasted almost 40 years, until the rise of the euromarkets in London during the 1960s and 1970s allowed US banks and their corporate customers to create a parallel unregulated dollar market outside of US jurisdiction.

A competing narrative is far less frequently told outside the pages of the Wall Street Journal, although Gretchen Morgenson of The New York Times has, with mortgage expert Joshua Rosner, told it well in the book Reckless Endangerment (Times Books, 2011). It does not let greedy bankers off the hook, but maintains that to a large degree, the crisis was created through a mixture of bad if well-intended public policy and crony capitalism in the housing finance market. This narrative focuses on the GSEs we met in the last chapter, with a central role being played by Fannie Mae CEO Jim Johnson and a host of enablers in Congress and the Washington power structure, including Messrs. Dodd and Frank. In this tale, Fannie Mae and Freddie Mac became money-making machines for their managers by using their ambiguous status as “governmentsponsored” public companies to borrow cheap (essentially at US government debt rates) at very high leverage to build enormous portfolios of mortgage securities.

A key lesson of the crisis—a point that Bagehot made clear a century and a half ago—is that there must be a lender of last resort with complete discretion to act to stop a panic. Dodd-Frank’s morass of inconsistent rule-making may even inhibit the Federal Reserve from executing bailouts. No panic in history has ever been foreseen, and inhibiting the discretion of central banks to pour water on the fire is storing up a future disaster for the world economy. A second key lesson is that banks must be free to fail—something that the crony capitalism of the Great Moderation inhibited until the institutions really became too big and interconnected to fail, turning finance into a one-way bet for the bankers. Dodd-Frank punts on too-big-to-fail, choosing instead to do the impossible: make finance safe. Its approach to doing this is to proscribe activities that had nothing to do with the crisis, such as proprietary trading, and to bring previously unregulated financial entities into the net even if they pose no systemic risk.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, Bretton Woods, business climate, capital controls, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, transaction costs, universal basic income, urban sprawl, working-age population

These involve substantive matters in which ‘reform by stealth’, which has been the Indian way of doing things, will be unlikely to suffice. There is also increasingly manifest a contrast between the country’s dynamic private sector (though the shine has been fading recently) and its weak and ineffective government sector. This disjunction has now reached such a level as to seriously endanger India’s ambitions. At the same time, a combination of crony capitalism and excessive ambition has caused leading private companies to trip up on their own greed and zeal. More liberalization is certainly necessary. But it will not be sufficient because the state no longer performs its core functions effectively. Each country has to work out for itself the right balance between the state and the market to suit its particular circumstances. India has failed to do that.

On macroeconomic stability, India has avoided rampant turmoil but periodic inflation spikes remain a major problem, while the fiscal position remains weak, and vulnerable to growing demands on the state. I n di a at t h e C u s p [7] 8 There is also plenty of evidence that the culture of public service has deteriorated, and that government incompetence and venality have become pervasive. The popular perception that sleaze and crony capitalism are rife at all levels of government is not far off the mark. (At the same time, the fear of being blamed for honest mistakes has also paralyzed government administration in recent years.) It follows from this sorry tale that both the state and the state-​market relationship need urgent reform, which is no easy task in the context of India’s political economy, with its democratic turbulence and powerful vested interests.

But history all over the world shows that entrepreneurship can be directed to productive or unproductive uses depending on the context.20 If the rewards are greater in unproductive rent-​ seeking than in productive activities, then that is where business energy will go.21 There is no doubt that liberalization in India has very been successful in channelling the energy of firms into innovative and productive uses.22 However, there is also evidence, especially in the recent past, that India’s corporate sector is vulnerable to rent-​seeking and unproductive entrepreneurship, a disease that could arrest the growth of productivity in the long run. The lesson is that while the state must redouble its efforts to liberalize, it must at the same time safeguard competition and restrain corruption and crony capitalism (see Chapter 11). Another source of disquiet about dominant firms in India’s private sector is that so many of them are ‘business houses’, i.e. conglomerates that are controlled by ‘promoter’ families and family trusts. It has been claimed, quite rightly, that the prevalence of conglomerates is not surprising, given the weakness of the state: it makes sense to do things in-​house and in vertically integrated operations since the infrastructure is poor, the legal system is slow at contract-​enforcement etc.23 But is promoter/​family control a healthy phenomenon?


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

These relationships have been leading to, or contributing to, what some observers now call “crony capitalism.” In this kind of “capitalism” personal connections, especially connections with strategically placed individuals in both the private and the public sector, can acquire great economic values for some individuals, while the grey, and growing, areas between the two sectors become larger and more important. Outsourcing some activities, including the increasing use of private contractors in many public-sector operations, the execution of public investments by private enterprises, the growth of public-private partnerships, the assumption by the government of implicit or explicit responsibility for some private-sector failures, and so on have increased these “crony capitalism” possibilities. Today, to some extent, even military operations and security operations have been partly privatized and are thus exposed to these problems.

In those years, authoritarian and fascist governments in European countries and elsewhere, such as Argentina, Brazil, Mexico, Japan, and some other countries, would adopt some version of economic planning, which allowed them to increase their political power and their control over the economy and over the populations, as Hayek pointed out. These controls would, at times, take on aspects of what some today call “crony capitalism.” They tended to benefit individuals or industrial groups that were favored by the authoritarian regimes, over less favored ones. For Italian examples, see Carlo Celli (2013); discussions of “corporatism,” especially chapters 8 and 9, in Bosworth (2006); and Steiner (1938). For information on Argentina, and the influence of planning on Peronism, see Falcoff and Dolkart (1975). Peron had been a military attaché for Argentina in Fascist Italy in the late 1930s and had assimilated some of the aspects and policies of that regime.

For businesspeople, Roosevelt’s Bill of Rights included the guarantee “to trade in an atmosphere of freedom from unfair competition and domination by monopolies.” Thus, it contained a promise of a welfare state operating within a well-working private market that would give the government the objective to intervene to eliminate “market failures.” President Roosevelt was promoting ambitious and potentially very expensive welfare policies for American citizens while, at the same time, promising a well-working free market for economic operators. No “crony capitalism” or other threats, including nonjustified interventions by the government in a well-working market economy, would be allowed, and no abuse of power by any group over the market would be permitted. He was implicitly assuming that there would be no conflict between these two objectives and that a well-working private market would tolerate and finance, without creating excessive economic disincentives and difficulties, the high spending that his Bill of Rights was promising for the American citizens.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, Plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Silicon Valley, Silicon Valley ideology, smart cities, software patent, too big to fail, total factor productivity, trade liberalization, transaction costs, tulip mania, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

If plutocrats are indeed that powerful, does it really make sense that they would only use their power to produce neutral rules that in practice happen to favor the rich? Would it really not occur to them to push for rules that actively redistribute upward? It is this bipartisan blind spot that helps explain the market for a huckster like Donald Trump. Unless we take steps to unrig our liberal democracy, we run a serious risk that the tide of authoritarian populism will extend itself, all the while entrenching the very crony capitalism that it purports to assault. Market rigging by the already powerful is the primary mechanism by which high status is entrenched. While markets naturally produce unequal returns, they also have powerful mechanisms of creative destruction as well. When there are extraordinary returns by a particular firm, a market with low barriers to entry will encourage challengers to undercut incumbents, thereby driving down their rate of return.

On the left, Nobel Prize–winning economist Joseph Stiglitz has sounded the alarm in a pair of recent books.19 Jason Furman (writing while chairman of the Obama administration’s Council of Economic Advisers) and Peter Orszag (former director of the Office of Management and Budget during the Obama administration) have called attention to the buildup of rents in a widely discussed paper.20 Dean Baker of the Center for Economic and Policy Research has long been outspoken on the issue.21 On the right, Luigi Zingales of the University of Chicago has been a prominent critic of “crony capitalism.”22 Under his leadership, the George F. Stigler Center for the Study of the Economy and the State pursues an active research program on the phenomenon of regulatory capture and its associated ills.23 What the analysis of upward redistribution has so far lacked is a plausible account of why high-end rent-seeking has increased so dramatically, and an agenda of plausible mechanisms for restraining it.

In the ideal market economy, the rules of the game are set so that the desire for private gain is channeled into bettering the lives of others. In the ideal democracy, the mechanisms of government are devised so that the clash of contending opinions and interests is converted into policies that serve the common good. To the extent that rent-seeking holds sway, the invisible hand of capitalism degenerates into the grasping hand of crony capitalism, and the lofty pursuit of the public interest devolves into a feeding frenzy of special interests. Free markets depend, paradoxically for some, on the existence of a state strong enough to enforce the rules of the game in an impartial, public-spirited fashion. Economic power must, somehow, be kept from being translated into the political power to game those rules for the benefit of market incumbents.


pages: 128 words: 38,187

The New Prophets of Capital by Nicole Aschoff

3D printing, affirmative action, Affordable Care Act / Obamacare, Airbnb, American Legislative Exchange Council, basic income, Bretton Woods, clean water, collective bargaining, commoditize, crony capitalism, feminist movement, follow your passion, Food sovereignty, glass ceiling, global supply chain, global value chain, helicopter parent, hiring and firing, income inequality, Khan Academy, late capitalism, Lyft, Mark Zuckerberg, mass incarceration, means of production, performance metric, post-work, profit motive, rent-seeking, Ronald Reagan, Rosa Parks, school vouchers, shareholder value, sharing economy, Silicon Valley, Slavoj Žižek, structural adjustment programs, Tim Cook: Apple, urban renewal, women in the workforce, working poor, zero-sum game

Departing from the dominant idea that states have retreated from the market over the past three decades, Mackey argues states have become more interventionist than ever, and that in the process they have “fostered a mutant form of capitalism called crony capitalism” that is to blame for many of the problems societies face today. Mackey does not see crony capitalism as “real” capitalism. Instead it is a product of big government in which politicians trying to preserve their cushy jobs develop symbiotic, parasitic relationships with businesspeople too lazy or unimaginative to compete successfully in the marketplace. 10 In Mackey’s story, crony capitalism has been exacerbated by the rising power of the financial sector and shareholder-value ideology—the idea that firms are nothing more than a stream of assets designed to maximize profits for shareholders.

The loudest critics of capitalism these days are people like Bill Gates, who decries poverty and inequality, and Sheryl Sandberg, who laments persistent gender divides, but they are not calling for an end to capitalism. Instead, they are part of a chorus of new elite voices calling for a different kind of capitalism. The long list of “new” capitalisms being touted or disdained—conscious capitalism, creative capitalism, sustainable capitalism, equitable capitalism, philanthrocapitalism, eco-capitalism, inclusive capitalism, crony capitalism—illustrates the widespread feeling that capitalism needs to change. The New Prophets of Capitalism examines the stories told by four of these new storytellers: Sheryl Sandberg (COO of Facebook), John Mackey (CEO of Whole Foods), Oprah Winfrey (media mogul), and Bill and Melinda Gates (creators of the Gates Foundation).7 I argue that each of these storytellers acts as a prophet of capitalism.

The reader should note, however, that general views about conscious capitalism are shared and developed by Sisodia. 2See www.wholefoodsmarket.com/. 3Mackey and Sisodia, Conscious Capitalism, p. 236. 4For example, see Michael Strong, Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problem’s, New York: Wiley, 2009. 5Mackey and Sisodia, Conscious Capitalism, pp. 264–5, 230. 6People and the Planet Report, Report 01/12, London: Royal Society Science Policy Centre, 2012. 7“Use It and Lose It: The Outsize Effect of US Consumption on the Environment,” Scientific American, September 14, 2012. 8Mackey and Sisodia, Conscious Capitalism, p. 3. 9Ibid., pp. 14, 27. 10Ibid., pp. 16, 21; Mackey is not alone in his emphasis on crony capitalism. See also www.againstcronycapitalism.org/. 11Ibid., pp. 16, 18. 12Charles. Fishman, “Whole Foods Is All Teams,” Fast Company, April/May1996. 13‘Trader Joe’s Top Survey of Best Grocery Chains, Walmart Lands at Bottom of List,” Huffington Post, July 23, 2013. 14Gert Spaargaren and Arthur P.J. Mol, “Greening Global Consumption: Redefining Politics and Authority,” Global Environmental Change 18, 2008, 350–9. 15John Boli and George Thomas, “World Culture in the World Polity: A Century of International Non-Governmental Organization,” American Sociological Review 62: 2, April 1997, 171–90. 16Josée Johnston, “The Citizen-Consumer Hybrid: Ideological Tensions and the Case of Whole Foods Market,” Theory and Society 37, 2007, 229–70; see also Josée Johnston, Andrew Biro, and Norah MacKendrick.


pages: 88 words: 22,980

One Way Forward: The Outsider's Guide to Fixing the Republic by Lawrence Lessig

collapse of Lehman Brothers, crony capitalism, crowdsourcing, en.wikipedia.org, Filter Bubble, jimmy wales, Occupy movement, Ronald Reagan

At a teach-in at Occupy K Street, I implored the Occupiers to invite Tea Partiers to sit down with them. “You may or may not like capitalism,” I told them, “but nobody likes ‘crony capitalism,’ and it is crony capitalism that has corrupted this system of government and given us the misregulation that led to the collapse on Wall Street.” Just after I said that, in a scene that could have been scripted in Hollywood, a man sitting in the front row raised his hand and said, “I was one of the original Tea Partiers, and today I run a site called AgainstCronyCapitalism.org. I can guarantee you that if you started talking about the corruption from crony capitalism, you’d have thousands of Tea Partiers down here joining with you in this fight.” I thought the argument was obvious, and that the next steps would happen almost automatically.

The Right will have no fair shot at getting a smaller government or simpler taxes so long as the opposite is a surer path to funding congressional campaigns. There should be no conflict between the Left and the Right on this: Both sides should favor reform that ends this corrupting influence. We don’t need to destroy wealth. We need to destroy the ability of wealth to corrupt our politics. We don’t need to kill capitalism. We need to kill that form of capitalism—crony capitalism—that uses its power to corrupt our politics. We don’t need to hate success. We have to organize against those who think that their success entitles them to special benefits and privilege from those addicts to fundraising we call congressmen. We don’t need to foment another fundamental revolution. We need only to end the corruption within the system that Jefferson’s revolution helped create.


pages: 411 words: 114,717

Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma

3D printing, affirmative action, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, business climate, business cycle, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, Gini coefficient, global supply chain, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, Kenneth Rogoff, knowledge economy, labor-force participation, land reform, M-Pesa, Mahatma Gandhi, Marc Andreessen, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, Nelson Mandela, new economy, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, quantitative easing, reserve currency, Robert Gordon, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Watson beat the top human players on Jeopardy!, working-age population, zero-sum game

Yet today analysts are still looking for this miracle of mass convergence to happen all over the globe. Meanwhile, scores of “emerging” nations have been emerging for many decades now. They have failed to gain any momentum for sustained growth or their progress has begun to stall since they became middle-income countries. Malaysia and Thailand appeared to be on course to emerge as rich nations until the crony capitalism at the heart of those systems caused a financial meltdown in the crisis of 1998. Their growth has disappointed ever since. In the 1960s, the Philippines, Sri Lanka, and Burma were billed as the next East Asian tigers, only to see their growth falter badly, well before they could reach the “middle-class” average income of about $4,000. Failure to sustain growth is the general rule, and that rule is likely to reassert itself in the coming decade.

Not a single billionaire in China has a net worth of more than $10 billion; compare that to eleven billionaires with a net worth of more than $10 billion in Russia and six in India, which have far smaller economies. Only one tycoon who made China’s list of top-ten billionaires five years ago was still on the roster in 2011. The government appears to be both creating competitive churn among the very wealthy and restricting their maximum wealth. To be sure, there is crony capitalism in China, or wealth built on friendly ties to the government. Some reports even suggest that a majority of the Chinese worth more than $10 million are children of high-level Communist Party officials. Still, it’s clear that Chinese leaders are acutely aware of the growing wealth gap. The ruling party won’t countenance growth at any cost, if one of the costs is stoking popular revolt. The Illusion of China’s $2.5 Trillion Surplus The extent of China’s indebtedness is also poorly understood.

All of that is real, but India is already showing some of the warning signs of failed growth stories, including early-onset overconfidence. Many outsiders were just as confident before the recent signs of trouble. I put the probability of India’s continuing its journey as a breakout nation this decade at closer to 50 percent, owing to a whole series of risks that the Indian and foreign elites leave out of the picture, including bloated government, crony capitalism, falling turnover among the rich and powerful, and a disturbing tendency of farmers to stay on the farm. The early signs of an unraveling have begun to emerge under the administration of Prime Minister Manmohan Singh, but not really because of it. Singh helped open India to global trade in the early 1990s, when he was finance minister. India was in crisis, and Singh oversaw sweeping changes that broke down the regime known as the “License Raj,” a red tape–laden bureaucracy in which licenses spelled out not only who could manufacture which goods but also how much and at what price.


pages: 436 words: 98,538

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, assortative mating, bank run, Berlin Wall, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Climatic Research Unit, cloud computing, corporate governance, creative destruction, Credit Default Swap, crony capitalism, disruptive innovation, diversified portfolio, Donald Trump, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, full employment, future of work, Gini coefficient, illegal immigration, immigration reform, income inequality, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, Kodak vs Instagram, labor-force participation, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meta analysis, meta-analysis, new economy, offshore financial centre, paradox of thrift, Paul Samuelson, pushing on a string, quantitative easing, randomized controlled trial, risk-adjusted returns, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, selection bias, Silicon Valley, Simon Kuznets, Snapchat, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, total factor productivity, twin studies, Tyler Cowen: Great Stagnation, University of East Anglia, upwardly mobile, War on Poverty, winner-take-all economy, women in the workforce, working poor, working-age population, zero-sum game

At first glance, these accusations seem reasonable. The growth of middle-class and working-class incomes has slowed. Crony capitalism does exist. Automation and offshoring seem to have reduced the number of high-paying factory jobs. Companies like Apple, Google, and Facebook scarcely seem to employ any Americans, especially not middle- and working-class Americans. Academic test scores are not improving. And it seems impossible to break the generational cycle of poverty. Yet despite these facts, the growth of the U.S. economy has accelerated relative to other high-wage economies with more equally distributed incomes—the opposite of what one would expect if crony capitalism or other unfair means of income distribution had increased in the United States on a scale necessary to account for rising income inequality.

Because my business partner, Mitt Romney, was running for president when Unintended Consequences was published, the media held up my book as a defense of the 1 percent. At the time, a leading proponent of income redistribution wrote, “the biggest surprise, on opening Unintended Consequences, lies in discovering that this book isn’t about income inequality at all.”1 The critics’ demand for a comprehensive defense of income inequality planted the seeds for this book. Since 2012, accusations that crony capitalism and the success of the 1 percent slow middle- and working-class income growth have only grown louder. While the incomes of the 0.1 percent have soared, the growth of middle-class and working-class incomes has continued to remain slow. Many insist that this gap has grown because the wealthy are rigging a zero-sum game to take what rightly belongs to others. The Upside of Inequality addresses these accusations head-on and explains why income redistribution hurts the middle and working class.

It’s time to stop blaming the success of the 1 percent and embrace the upside of inequality: faster growth and greater prosperity for everyone. Part I THE WORLD AS WE FIND IT Chapter 1 THE CAUSES OF GROWING INEQUALITY It seems as though you can’t pick up a newspaper today without reading an article blaming the 1 percent for the stagnant wages of the middle class.1 If people aren’t accusing the 1 percent of using crony capitalism to steal what they haven’t earned, then they are accusing them of inventing technology that hollows out the middle class or stifles the advancement of the underprivileged by underfunding education.2 In 2003 renowned economists Thomas Piketty and Emmanuel Saez burst into the public’s consciousness with convincing evidence that income inequality had increased dramatically, especially in the United States, and that middle- and working-class incomes had stagnated.


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The System: Who Rigged It, How We Fix It by Robert B. Reich

affirmative action, Affordable Care Act / Obamacare, Bernie Madoff, Bernie Sanders, business cycle, clean water, collective bargaining, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, crony capitalism, cryptocurrency, Donald Trump, ending welfare as we know it, financial deregulation, Gordon Gekko, immigration reform, income inequality, Jeff Bezos, job automation, London Whale, Long Term Capital Management, market fundamentalism, mass incarceration, mortgage debt, Occupy movement, Ponzi scheme, race to the bottom, Robert Bork, Ronald Reagan, shareholder value, too big to fail, trickle-down economics, union organizing, women in the workforce, working poor, zero-sum game

By contrast, labor unions contributed $213 million. Corporate lobbying has soared. The voices of average people have been drowned out. Meanwhile, and largely because of this vast power shift, taxes on the wealthy and on corporations have been slashed. Safety nets for the poor and middle class have begun to unravel. Public investments in education and infrastructure have waned. The “free market” has been taken over by crony capitalism, corporate bailouts, and corporate welfare. The American oligarchy is back, with a vengeance. * * * — Not all wealthy people are culpable, of course. I am not advocating class warfare. The abuse has occurred at the nexus of wealth and power, where those with great wealth use it to gain power and then utilize that power to accumulate more wealth. This is how oligarchy destroys democracy.

This strategy gives the oligarchy freer rein: It distracts Americans from how the oligarchy is looting the nation, buying off politicians, and silencing critics. The way to overcome oligarchy is for the rest of us to join together and win America back. This will require a multiracial, multiethnic coalition of working-class, poor, and middle-class Americans fighting for democracy and against concentrated power and privilege, determined to rid politics of big money, end corporate welfare and crony capitalism, bust up monopolies, stop voter suppression, and strengthen the countervailing power of labor unions, employee-owned corporations, worker cooperatives, state and local banks, and grassroots politics. This agenda is neither right nor left. It is the bedrock for everything else America must do. * * * — Jamie Dimon is one of the highest-paid banking and finance CEOs in the world.

Several of them had lost jobs, savings, or homes in the Great Recession following the financial crisis. By the time I spoke with them, most were back in jobs, but the jobs paid no more than they had two decades before in terms of purchasing power. I heard the term “rigged system” so often that I began asking people what they meant by it. They spoke about the bailout of Wall Street, political payoffs, insider deals, CEO pay, and “crony capitalism.” These complaints came from people who identified themselves as Republicans, Democrats, and Independents. A few had joined the Tea Party. A few others had briefly been involved in the Occupy movement. Most of them didn’t consider themselves political. They were white, black, and Latino, from union households and non-union. The only characteristic they had in common apart from the states and regions where I found them was their position on the income ladder.


When the Money Runs Out: The End of Western Affluence by Stephen D. King

Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, business cycle, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, mass immigration, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

As it turned out, the presumption of official support was at least to some extent misplaced, because the government did not clearly have the resources to provide that support.10 194 4099.indd 194 29/03/13 2:23 PM From Economic Disappointment to Political Instability Many Western observers preferred to be just a little more direct. Asian countries were suffering from crony capitalism, an unhealthy relationship between government and commerce associated with endemic bribery and corruption, and they’d fooled innocent foreign creditors into lending to them. The fact that South Korea, in particular, had delivered an extraordinary increase in living standards in previous decades was conveniently ignored. Between 1950 and the onset of the Asian crisis, Korean living standards had risen 15-­fold, suggesting that crony capitalism – if that’s what it was – had hardly been an impediment to rising prosperity. In any case, the problems outlined by Ferguson were, as we now know, not uniquely Asian: the Western world discovered to its cost ten years later that American – or, indeed, Western – exceptionalism was not quite so exceptional after all.

THE ASIAN CRISIS The story of the late 1990s Asian crisis can be simply summarized: having been forced to recognize they had lived beyond their means, the nations involved took the pain up front but were then able to recover strongly. The near-­term losses in Asia were, in many cases, far bigger than those seen in the West following its later financial crisis but, having been written off as hotbeds of crony capitalism and, thus, doomed to fail, Asian economies were able to bounce back in style. There was no Western-­style economic stagnation but, instead, a return to economic dynamism within just a handful of years. Yet the political response varied from nation to nation. In the early 1990s, Asian nations had increasingly adopted the so-­called ‘Washington Consensus’, broadly speaking a commitment to low inflation, conservative fiscal policies and open cross-­border capital markets.

We must use our brains also.15 On a charitable interpretation, it might just be possible to argue that Mahathir was demonstrating secret admiration for the Jewish people, suggesting that, to fight them, Muslims would also have to use their brains. That, however, seems a bit of a stretch. At the very least, he was surely invoking age-­old anti-­Jewish prejudice to explain why Malaysia, alongside other Islamic nations, had been so vulnerable economically. And his 2003 comments were hardly the first time he had claimed some kind of Jewish conspiracy against his country. Dismissing claims of crony capitalism, Mahathir survived – and thrived – by blaming others, however unreasonably, for Malaysia’s predicament. Unlike Suharto – whose decision to accept an IMF programme may have contributed to his downfall – Mahathir was able to argue that he was defending Malaysia against evil foreign forces. His use of capital controls – which led to a typically fraught debate among academic economists – was not so much an attempt to fix Malaysia’s financial problems but, instead, a deliberate decision to portray Malaysia as an innocent victim of an international conspiracy.


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The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, lateral thinking, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, plutocrats, Plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

Moreover, nine of India’s top ten were holdovers from 2006 compared to zero in China, and this stagnation was relatively new; on India’s 2006 list, only five billionaires had been holdovers from 2001. A cover story I wrote for Newsweek International in September 2010 argued that the rise of crony capitalism was “India’s fatal flaw,” and it was greeted with great skepticism in Delhi’s political circles. Top officials told me that corruption is normal when a young economy is taking off, citing the robber barons who ruled America in the nineteenth century. But as economic growth fell by almost half in the years that followed, many of the same officials came to acknowledge that an abnormally high level of corruption and inequality † was one of the main factors in the slowdown. Rising crony capitalism steers money and deals to undeserving hands, but it also sets off a chain reaction in the political system. India’s courts after 2010 started to sense the popular outrage, and in a policy akin to killing a few chickens to scare the monkeys, they took strict action against some high-profile targets.

The judges began denying bail to accused businessmen, holding them in jail for months before formal charges were filed; they began pressuring agents of the Central Bureau of Investigation (CBI) to push forward with corruption charges and questioned their probity if they dropped a case. By 2012, the crackdown was widening, and at parties in the lavish “farmhouses” that wealthy Indians keep as second homes on the outskirts of Delhi, it sometimes seemed that every other guest was either out on bail or about to go to jail. At this point it was not clear which was worse: crony capitalism or the backlash. Bureaucrats grew fearful of attaching their name to any policy or even approving any permit that might look pro-business, lest they be tarred as corrupt themselves. Businessmen started avoiding deals that might require government approval, which in India is an expansive list. Investment ground to a halt, and the atmosphere of suspicion lingered for years. India’s finance minister Arun Jaitley, a lawyer himself, lamented in 2015 that government investigators were operating by “the golden rule that I must somehow make the case, and it is good luck of the accused to get a fair trial.”

India’s finance minister Arun Jaitley, a lawyer himself, lamented in 2015 that government investigators were operating by “the golden rule that I must somehow make the case, and it is good luck of the accused to get a fair trial.” This culture of investigative “overkill,” he warned, has “hindered the whole process of economic decision-making.” India needed to grow rapidly to address poverty and inequality, but the rise of crony capitalism and the subsequent attempt to restrain it had instead impeded growth. It’s difficult to clearly define when the scale of billionaire wealth threatens to throw an economy out of balance, but comparing each country to its peers throws the outliers into stark relief. Total billionaire wealth in the past few years has averaged about 10 percent of GDP both in emerging countries and in developed countries.


Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, creative destruction, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus, zero-sum game

, Political Institutions and Economic Growth in Latin America (Stanford, CA: Hoover Institution Press, 2000). 7. According to Haber, crony capitalism “is usually thought of as a system in which those close to the political authorities who make and enforce policies receive favors that have large economic value.” He could have in mind the restrictions on sugar imports, or the Halliburton Iraq contracts, or the $14 billion subsidy to 126 The Politics of Underdevelopment in Latin America 8. 9. 10. 11. 12. 13. 14. 15. the oil industry. But none of these are possible, because in the United States the government is “limited.” Stephen Haber, Crony Capitalism and Economic Growth in Latin America: Theory and Evidence (Stanford, CA: Hoover Institution Press, 2002), pp. 12, 13. See, for example, Leandro Prados de La Escosura and Samuel Amaral, eds., La independencia americana: Consecuencias económicas (Madrid: Alianza, 1993); John H.

The institutions that matter likely include not only those that protect property rights, but also those that mobilize savings and coordinated investments and those that subject those in government to the approval of the governed.5 Yet institutionalist answers to why Latin America fell behind are often drowned in ritualistic invocations of the institutionalist approach.6 In Stephen Haber’s most recent collection, for example, the culprit is Latin American “crony capitalism,” as if capitalism in the United States could be categorized differently.7 While recent works resulting from a revived interest in Latin America’s lagging development provide several insightful case studies,8 this chapter’s analysis is conducted at the cross-national level. Moreover, to the extent to which data limitations allow, this study closely adheres to the facts. The caveats should be obvious: reconstructing historical data is a hazardous undertaking, and the data are replete with errors and omissions.

See, for example, Leandro Prados de La Escosura and Samuel Amaral, eds., La independencia americana: Consecuencias económicas (Madrid: Alianza, 1993); John H. Coatsworth and Alan M. Taylor, Latin America and the World Economy since 1800 (Cambridge, MA: Harvard University Press, 1998); and Haber, How Latin America Fell Behind, Political Institutions and Economic Growth, and Crony Capitalism. See Roberto Gargarella, Los fundamentos legales de la desigualidad: El constitucionalismo en América (1776–1860) (Madrid: Siglo XXI, 2005). José Luis Machinea and Cecilia Vera, “Comercio, inversión directa y políticas productivas,” paper presented at the seminar “Una nueva agenda de desarrollo para América Latina,” Salamanca, October 7–8, 2005. This is contrary to what some scholars have argued. See, for example, Stanley L.


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The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan

activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airline deregulation, Albert Einstein, Andrei Shleifer, banking crisis, barriers to entry, basic income, battle of ideas, Bernie Sanders, blockchain, borderless world, Bretton Woods, British Empire, Build a better mousetrap, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, computer vision, conceptual framework, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, data acquisition, David Brooks, Deng Xiaoping, desegregation, deskilling, disruptive innovation, Donald Trump, Edward Glaeser, facts on the ground, financial innovation, financial repression, full employment, future of work, global supply chain, high net worth, housing crisis, illegal immigration, income inequality, industrial cluster, intangible asset, invention of the steam engine, invisible hand, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, labor-force participation, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, means of production, moral hazard, Network effects, new economy, Nicholas Carr, obamacare, Productivity paradox, profit maximization, race to the bottom, Richard Thaler, Robert Bork, Robert Gordon, Ronald Reagan, Sam Peltzman, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South China Sea, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, superstar cities, The Future of Employment, The Wealth of Nations by Adam Smith, trade liberalization, trade route, transaction costs, transfer pricing, Travis Kalanick, Tyler Cowen: Great Stagnation, universal basic income, Upton Sinclair, Walter Mischel, War on Poverty, women in the workforce, working-age population, World Values Survey, Yom Kippur War, zero-sum game

Minxin Pei, China’s Crony Capitalism: The Dynamics of Regime Decay (Cambridge, MA: Harvard University Press, 2016). 8. Chang-Tai Hsieh and Zheng (Michael) Song, “Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China,” Brookings Papers on Economic Activity, March 2015, https://www.brookings.edu/wp-content/uploads/2016/07/2015a_hsieh.pdf. 9. Hsieh and Song, “Grasp the Large.” 10. See Yuen Yuen Ang, “Autocracy with Chinese Characteristics: Beijing’s Behind-the-Scenes Reforms,” Foreign Affairs 97, no. 3 (May/June 2018), https://www.foreignaffairs.com/articles/asia/2018-04-16/autocracy-chinese-characteristics. 11. Huang, Capitalism, 234–35. 12. McGregor, The Party, chapter 1. 13. McGregor, The Party; Pei, China’s Crony Capitalism. 14. McGregor, The Party. 15.

Finally, the people in industrial democracies, engaged in their communities and thereby organized socially and politically, maintain the necessary separation between markets and the state. By doing this they enable sufficient political and economic competition that the economy does not descend into cronyism or authoritarianism. Society suffers when any of the pillars weakens or strengthens overly relative to the others. Too weak the markets and society becomes unproductive, too weak a community and society tends toward crony capitalism, too weak the state and society turns fearful and apathetic. Conversely, too much market and society becomes inequitable, too much community and society becomes static, and too much state and society becomes authoritarian. A balance is essential! THE EFFECTS OF TRADE AND THE ICT REVOLUTION ON THE COMMUNITY The pillars are seriously unbalanced today. The direct effects of the ICT revolution through automation, and the indirect but more localized effects through trade competition, have led to large job losses in some communities in developed countries.

Given the difficulty of getting anyone to approve higher taxes on themselves, monarchs tried to find ways to not put the question to the representative bodies if they could find other ways of gathering revenues. The obvious alternative was to do cozy deals with the businessmen in the towns, which the emerging absolute monarchs of sixteenth- and seventeenth-century Europe proceeded to do. Europe’s first stab at a regime more tolerant of business resulted in a pro-business but not pro-enterprise economy. Government and business formed a closed community—or what would be called crony capitalism today. The towns were certainly not free markets. TAXING TOWNS As agriculture became more commercialized and prosperous, it could provide more taxable income. There were limits, though, on how much the powerful landed could be taxed—in France they were not, and in England, landowners colluded to pass laws in Parliament to avoid taxes.16 Moreover, the king needed every last bit of revenue for the new forms of mass warfare because, as Louis XIV declared, “after all it is the last Louis d’or which must win.”17 So the king looked to the towns and ports, where excise duties could be levied on goods like beer and bricks and customs duties could be charged on imports.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, starchitect, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

THE RISE OF THE ALPHA GEEKS The rise of the alpha geeks is most obvious in Silicon Valley, a culture and an economic engine they created. But you can find them everywhere you find the plutocracy. The alpha geeks are the dominant tribe in Bangalore, the Indian city that invented technology outsourcing. In their incarnation as engineers, they overwhelmingly populate the Communist Party leadership in China, where political nous is a surer path to wealth than filing patents. The Russian oligarchs are a textbook example of crony capitalism, yet six of the original seven earned degrees in math, physics, or finance before becoming natural resource tycoons. Carlos Slim, who studied engineering in college and taught algebra and linear programming as an undergraduate, attributes his fortune to his facility with numbers. So does Steve Schwarzman, who told me he owed his success to his “ability to see patterns that other people don’t see” in large collections of numbers.

Most reports depicted the Orange Revolutionaries, with their determined, subzero encampment in the capital city’s central square, either as western Ukrainians rebelling against the government’s pro-Russian stance or as idealistic students who were unwilling to stomach political repression. Both characterizations were true, but Aslund saw a third dynamic at play. The Orange Revolution, he told me, was the rebellion of the millionaires against the billionaires. Ukraine’s crony capitalism worked extremely well for the small, well-connected group of oligarchs at the very top, but it was stifling the emerging middle class. This rising petite bourgeoisie was finally fed up and it was fighting for more equitable rules of the game. That battle of the millionaires versus the billionaires has been playing out across the world. It was a decisive factor in the Tahrir Square protests, whose most visible organizer was Wael Ghonim, an MBA-trained Google executive based in Dubai, which quickly won the support of the country’s well-heeled military elite.

Graham told me, was when “the gains around them are much bigger than their own, and bigger than they can ever achieve in their lifetime.” Dr. Graham attributes this feeling of inadequacy vis-à-vis the 0.1 percent partly to greed. She points to work by economist Angus Deaton that shows the richer you are, the more covetous you become—the social science version of the biblical proverb about the eye of the needle. But she says crony capitalism is to blame, too. The middle-class achievers are the most frustrated in societies where getting to the top is seen as a function of connections rather than merit. A more sympathetic rationale, advanced most prolifically by Cornell economist Robert Frank, is the problem of positional goods. These are products and services whose value is derived in part from their scarcity and how much everyone else wants them.


pages: 330 words: 99,044

Reimagining Capitalism in a World on Fire by Rebecca Henderson

Airbnb, asset allocation, Berlin Wall, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, collaborative economy, collective bargaining, commoditize, corporate governance, corporate social responsibility, crony capitalism, dark matter, decarbonisation, disruptive innovation, double entry bookkeeping, Elon Musk, Erik Brynjolfsson, Exxon Valdez, Fall of the Berlin Wall, family office, fixed income, George Akerlof, Gini coefficient, global supply chain, greed is good, Hans Rosling, Howard Zinn, Hyman Minsky, income inequality, index fund, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, Kickstarter, Lyft, Mark Zuckerberg, means of production, meta analysis, meta-analysis, microcredit, mittelstand, Mont Pelerin Society, Nelson Mandela, passive investing, Paul Samuelson, Philip Mirowski, profit maximization, race to the bottom, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, sovereign wealth fund, Steven Pinker, stocks for the long run, Tim Cook: Apple, total factor productivity, Toyota Production System, uber lyft, urban planning, Washington Consensus, working-age population, Zipcar

Under these conditions firms have a moral duty to help build a system that supports genuinely competitive, appropriately priced markets and strong institutions. They also have a compelling economic case to do so. A world on fire threatens the viability of every business. The Danger Ahead For years, the proponents of the unchecked free market have been attacking government. But the alternative to strong, democratically controlled government is not the free market triumphant. The alternative is crony capitalism, or what the development economists call “extraction,” a political system in which the rich and the powerful get together to run the state—and the market—for their own benefit. Extractive elites monopolize economic activity and systematically underinvest (when they invest at all) in public goods such as roads, hospitals, and schools. There’s always a trade-off. Too much focus on the public good stifles the entrepreneurial dynamic that is the lifeblood of well-functioning markets.

For a golden moment it seemed as though Russia would become a developed market economy. But no one stopped to price externalities, build the institutions that would enforce the rule of law, provide decent education and health care, or ensure that firms couldn’t set their own rules. Behind the smiles, the men with guns were still in charge. The Russian state sold its holdings—the vast majority of the economy—to a small group of cronies, creating a particularly nasty form of crony capitalism. The United States has a population of 327 million and a GDP of $21 trillion.57 Russia has roughly half the population and a GDP of only $1.6 trillion.58 Free markets need free politics: functioning institutions are great for business. When we told the leaders of firms that their sole duty was to focus on shareholder value, we gave them permission to turn their backs on the health of the institutions that have historically balanced concentrated economic power.

The Consensus led influential bodies such as the World Bank and the International Monetary Fund (IMF) to push developing countries to enact far-reaching deregulation and privatization, to open domestic markets to global trade, and to permit free capital flows as roots of development—all without explicit attention to the health of local political or social institutions. It’s now clear that this was a mistake. Empirically, many of the states that implemented the Washington Consensus failed to do as well as expected. In post-Soviet Russia in particular, the rapid liberalization of markets was followed by a descent into an extreme form of crony capitalism, while the so-called Asian tigers—especially Taiwan, Singapore, and the Republic of Korea—found economic success by pairing the development of their own markets with heavy government intervention. A 2000 study that found that differences in political and social institutions explained about three-quarters of per capita differences in income across formerly colonized nations provoked a flood of further research.18 This work eventually confirmed what historians and political scientists had never stopped saying—namely that while economic growth and social well-being are often enormously advanced by the presence of free markets, they are also critically dependent on a host of complementary institutions.


The Limits of the Market: The Pendulum Between Government and Market by Paul de Grauwe, Anna Asbury

"Robert Solow", banking crisis, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, conceptual framework, crony capitalism, Erik Brynjolfsson, eurozone crisis, Honoré de Balzac, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kitchen Debate, means of production, moral hazard, Paul Samuelson, price discrimination, price mechanism, profit motive, Robert Gordon, Ronald Coase, Simon Kuznets, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, trickle-down economics, ultimatum game, very high income

The discrepancy between collective and individual interests does not grow to excessive proportions. In his impressive book Martin Gilens20 analyses how the American political system promotes the interests of those with the highest incomes. This is closely related to the fact that in the US money is the determining factor in winning elections. To a certain extent it could be said that the US is also a victim of crony capitalism. That makes it very difficult for the government to take care of the public domain, such as the environment. Better known examples of crony capitalism appear in countries in Asia, Africa, and Latin America. Many countries are also unstable. In time there will be revolution and violence, which will damage the mechanism of the free market system. As I concluded previously when I talked about inequality, the true enemies of capitalism are the capitalists themselves. External Limits of Governments I argued above that political action to reduce the discrepancy between individual and collective interests is difficult to get off the ground, but let us now assume that the government is working to promote the  E X T E R N A L L I M I T S O F G O V E R N ME N T S collective interest, even when that is at the expense of private interests.

It is not clear beforehand which direction the government will take. Much will depend on the democratic quality of the institutions. In many countries the minority wins. In these countries the government systematically chooses in favour of the large polluting businesses. This is possible because there is no functioning democracy in place. Politicians are bribed by polluting companies, without any mechanism to put a stop to it. This is referred to as ‘crony capitalism’, where the government systematically defends capitalist interests. Companies exploit their labourers unpunished, destroy the environment, and conspire to push up prices. Politicians, who are bribed or even control large parts of the industry themselves, openly defend the capitalists. A symbiosis arises between government and capital. In other countries the quality of the democratic authorities ensures that the voice of the majority dominates.


pages: 278 words: 74,880

A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment, and Zero Carbon Emissions by Muhammad Yunus

active measures, Bernie Sanders, Capital in the Twenty-First Century by Thomas Piketty, clean water, conceptual framework, crony capitalism, distributed generation, Donald Trump, financial independence, fixed income, full employment, high net worth, income inequality, Indoor air pollution, Internet of things, invisible hand, Jeff Bezos, job automation, Lean Startup, Mark Zuckerberg, megacity, microcredit, new economy, Occupy movement, profit maximization, Silicon Valley, the market place, The Wealth of Nations by Adam Smith, too big to fail, unbanked and underbanked, underbanked, urban sprawl, young professional

., 189 Bon et Bien, 139, 140, 141 Bosnia, 133 Boston Consulting Group (BCG), 56 Branson, Richard, 105, 106 Bruysten, Saskia, 56, 184 businesses organization of, 26 solving problems with, 26 two types of, 28 Campo Vivo, 136, 138, 141 Capital In the Twenty-First Century (Piketty), 8 capitalism alternatives for, 147 crises of, 41–48, 263–264 damage of, 15 economic growth with, 8 economy and, 7 framework of, 259 human freedom and, 230 inequality and, 6–10 millennial and, 145 new economic system and, 37, 264 problem of, 39 system of, 229–230 theory of, 260 zero-sum assumption of, 15 See also free market Capitalist Man GDP and, 14 Real Man versus, 11–15, 260 carbon emissions, 125 Chapiro, Cecilia, 157 charity economic system and, 71 efforts for, 262 governments and, 213 wealthy people and, 10 child mortality, 123 China, 20 civic projects, 212–213 civil institutions governments and, 220 human freedoms and, 219 threats against, 220–221 Climate Action, 128 climate change, 18 activist for, 20 agriculture and, 46 Bangladesh and, 95 China and, 20 dangers of, 19 focus on, 19 human society and, 21 poor people and, 130 sea level rise and, 97 sustainability and, 125 Trump and Paris Accord, 20 turning point of, 120 Clinton, Hillary, 85 Clinton Foundation, 108 Coel, 196, 197 collateral, 23–24, 88 communism, 147 consumption, 128 conventional banks, 23, 29 COP21. See Paris Climate Conference corporate control, 45, 224 corruption crony capitalism and, 205 financial institutions and, 214 good governance and, 204–208 new civilization and, 206 rule of law through, 205 widespread problem of, 204 See also political corruption countereconomics of entrepreneurship, 30–32 mainstream economics and, 30–31 social business and, 17 Crédit Agricole, 248–249 credit markets, 47 creditworthiness agriculture and, 191–192 conventional banks and, 23 Grameen Bank and, 12 crime, 127 crony capitalism, 205, 206 crowdfunding, 183 Dalio, Matt, 178, 179, 181 Dalio, Ray, 178 Danone, 51, 58, 251 Danone Communities, 251–252 data usage in emerging markets, 179 Kiva and, 184 MakeSense and, 186 Deaton, Angus, 4 developing nations, 45, 98 Doctor in a Box, 197, 198 donors impact payment and, 256 social business funds and, 254 Social Success Note and, 255 economic crisis banks during, 232 financial systems and, 231 globalization and, 47 other crises and, 48 reasons for, 47 economic development education part of, 215–216 health care part of, 215–216 projects for, 77 economic distress, 84, 85 economic engine, 15–16 economic freedom, 221–225 economic growth Bangladesh and, 100–101 capitalism for, 8 economic freedom and, 222 entrepreneurship for, 105 environmental protection and, 98–99 GDP and, 13 governments and, 209 human rights and, 199 infrastructure and, 214 economic inequality.

When the head of the government becomes corrupt, the disease becomes an unstoppable epidemic eating away the fundamentals of the society. Every basic institution, from the judiciary and the police to the military services and the financial system, becomes dysfunctional. Often they are converted into tools of repression to ensure that those in power continue to reap their ill-gotten rewards. Minimizing government corruption and crony capitalism is not an easy challenge. History shows that, where money and power are combined, human behavior tends to become corrupted. National and international laws and treaties that forbid corruption in business deals have not accomplished their goals. Too many companies continue to violate the legal and ethical standards set by their national legislatures; practices like money laundering and offshore harboring of cash gained through illegal activities continue to flourish.

See Global Entrepreneurship Monitor gender equality, 123, 128 Giving Pledge, 244, 245 Global Alliance for Improved Nutrition (GAIN), 51 Global Entrepreneurship Monitor (GEM), 35 global pollution, 98 Global South, 92, 209 globalization economic crisis and, 47 food markets and, 43 new era of, 14 technology and, 176 Golden Bees operations of, 38 poor people and, 39 social business of, 37 Uganda and, 37 YSB and, 57 Good Bee, 162 good governance, 225 corruption and, 204–208 elections and, 201 elements for, 210–221 human rights and, 200, 221 infrastructure and, 210 technology and, 212 governments budgets for, 243 charity and, 213 civil institutions and, 220 corporate control and, 224 corruption in, 205 crony capitalism and, 206 economic growth and, 209 entrepreneurs and, 209 finance and, 242–243 financial collapse avoided by, 232 financial institutions and, 214 infrastructure and, 247 people’s vision with, 208 poor people and, 246 problems for, 208–210 public opinion mobilized by, 20 social business and, 247 social business funds and, 254 tyranny in, 224 Grameen America economic distress and, 85 microcredit bank of, 12–13 poor people and, 50 Grameen America, Inc.


pages: 511 words: 132,682

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants by Maurice E. Stucke, Ariel Ezrachi

affirmative action, Airbnb, Albert Einstein, Andrei Shleifer, Bernie Sanders, Boeing 737 MAX, Cass Sunstein, choice architecture, cloud computing, commoditize, corporate governance, Corrections Corporation of America, Credit Default Swap, crony capitalism, delayed gratification, Donald Trump, en.wikipedia.org, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Google Chrome, greed is good, hedonic treadmill, income inequality, income per capita, information asymmetry, invisible hand, job satisfaction, labor-force participation, late fees, loss aversion, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, market fundamentalism, mass incarceration, Menlo Park, meta analysis, meta-analysis, Milgram experiment, mortgage debt, Network effects, out of africa, payday loans, Ponzi scheme, precariat, price anchoring, price discrimination, profit maximization, profit motive, race to the bottom, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Stanford prison experiment, Stephen Hawking, The Chicago School, The Market for Lemons, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Davenport, Thorstein Veblen, Tim Cook: Apple, too big to fail, transaction costs, Uber and Lyft, uber lyft, ultimatum game, Vanguard fund, winner-take-all economy

Congressman Adam Schiff remarked, “Nothing says drain the swamp like telling a room full of bankers to give more money to politicians who put the interests of banks ahead of people.”40 Lobbying and money can suffocate democratic values. Add the competition ideology and it becomes invasive. After all, that is the effect of kudzu. And there you have it. Lobbyists utilize the competition ideology to support crony capitalism, militate against important regulation and safeguards, and ensure that power and money are allowed to subvert democracy. And most of our legislators go along with it, either out of genuine belief in unbridled competition or for more craven political purposes. The result, in our case, is a distorted ideology that is often used as a smoke screen to benefit the few. To put it simply—the people and companies with the most money and power want to keep themselves at the top.

They do so, even though they know, or should know, that outsourcing government services to private companies in these particular cases will mean that citizens and consumers end up paying higher costs, in the form of taxes and budget deficits, for inferior services, and that we end up worse off as a result. At times, policy makers kudzu to shrug fiscal responsibility—better to blame private firms for poor quality and high prices than the government. Other times, the support for privatization is driven by crony capitalism, where big government is in bed with big business. To be clear, the support for privatization isn’t always suspect. Many of its supporters, among them libertarians who want to reduce government’s footprint and competition ideologues who believe competition always works, are genuine in their conviction that privatization is for the benefit of society. Often they are right. But we want to show that these supposed benefits do not always materialize and explain why not.

The United States has one of the highest poverty and inequality levels among the OECD countries,” and also ranks near the bottom among wealthy countries in terms of labor markets, safety nets, and economic mobility.5 The middle class, in the United States and in much of Europe, is shrinking—down to just over 50 percent in the United States and 60 percent in the European Union.6 Once-thriving manufacturing centers where workers could earn a decent living have been reduced to a state of rusting decay brought about by declines in labor’s share of profits, low-skilled workers’ wages, labor force participation, and the start-up rate of new firms (due to barriers erected by powerful incumbents).7 Yet, our elected officials continue to defend the competition ideology, to insist that it will pay off, even as our pocketbooks, health care, and social rights tell us otherwise. What has happened is that the idealized perfect competition portrayed in the economic textbooks has been squeezed out by the bad forms of competition—monopolistic or toxic or both. Crony capitalism, in which big business and big government cozy up to each other to stifle the good forms of competition, is the order of the day. Economists who have studied the data reveal that under this system many markets have actually become more concentrated and less competitive. And while the profit margins of the most powerful companies increased, innovation may have actually declined.8 Yet the consolidation in the marketplace continues to be defended as necessary.


pages: 358 words: 106,729

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bernie Madoff, Bretton Woods, business climate, business cycle, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, longitudinal study, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, price stability, profit motive, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, school vouchers, short selling, sovereign wealth fund, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

But the best state-run firms typically distance themselves from government norms, procedures, and interference and are often private in all but ownership. Favoring the Few Instead of relying on state-owned firms to propel growth, a number of governments have tried to remedy private-sector organizational deficiencies and build domestic champions, even while relying on some market signals to allocate resources. The process of playing midwife, often derided as crony capitalism but better termed relationship or managed capitalism, involved a judicious mix of the government’s giving firms some protection from foreign competition and special privileges so that they could generate the profits around which they could build their organizational capital, while maintaining some incentives for firms to be efficient. One example is Taiwan’s efforts in the early 1950s to promote its textile industry.15 The first textile manufacturers in Taiwan were mainland Chinese, who put their machines on board ships when the Communists took over in 1949 and relocated on the other side of the straits.

The immediate need was to restore financial stability, perhaps infuse some government stimulus to compensate for the sharp decline in economic activity, and then, with confidence restored, sort out the mess over time. This was indeed what Western governments did in their own economies in 2008–2010, and what the IMF eventually turned to doing. But proud East Asian government officials were initially treated as derelicts who did not understand how to run clean governments. Overnight, managed capitalism was labeled crony capitalism, and there were certainly enough examples of cronyism to allow the Western financial press to go to town. Some of the initial policy advice from the Fund, the World Bank, and Western governments seemed to be focused on punishing the cronies, instead of recognizing that the system was so interconnected that many innocent people would suffer in the process. Empathy was missing, perhaps because managed capitalism seemed so alien to the outsiders who were now calling the shots.

Resources are trapped in corporate structures that have repeatedly proved their incompetence, and further resources are sucked from the taxpayer as these institutions destroy value. Confident in the knowledge that the government will come to their rescue, these institutions can play a game of chicken with the authorities by refusing to take adequate precautions against failure, such as raising equity. Perhaps just as important are the political consequences of such rescues. It is hard for the authorities to refute allegations of crony capitalism. Aside from the stated intent of saving the economy, there is no discernible difference between a bailout motivated by the sense that institutions are systemically important and one motivated by the desire of those in authority to rescue their friends or their once and future employers. Even as conspiracy theorists have a field day, painting everyone remotely associated with the financial system into a web of corruption, the damage to the public’s faith in the system of private enterprise is enormous: it senses two sets of rules, one for the systemically important and another for the rest of us.


pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, break the buck, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

Aided by the president and his family, who opened doors for their friends (and shut them for their competitors), these entrepreneurs built factories, developed cities, and learned how to export raw materials, agricultural products, and simple manufactured items to the rest of the world. As in many other low-income countries in the past half-century, economic development was dominated by a small economic elite defined by their personal ties to the ruling family, which traded favors for both political support and cold, hard cash—a pattern known as “crony capitalism.”26 For example, Indofood became one of the largest conglomerates in the country, largely because of a longtime personal friendship between its founder, Liem Sioe Liong, and Suharto.27 Suharto’s wife, Siti Hartinah Suharto, known as Madame Tien, was involved in so many business deals that she was referred to by critics as “Madame Tien Percent” for her alleged fees.28 Suharto’s children also cut themselves into many major deals; his daughter was involved in the largest taxi company, one son tried to build cars, and another son was a financial entrepreneur.29 For a long time, the system worked reasonably well.

Of course, the “dispossessed” oligarchs fight back, calling in political favors or even trying subversion—including calling up their contacts in the American foreign policy establishment, as the Ukrainians did with some success in the late 1990s.41 But the aftermath of an emerging market crisis typically leads to a shakeout of the oligarchy, with political power concentrated in a smaller number of hands. However, another common feature of emerging market crises is that they don’t last forever. Even while outside observers are still despairing over corporate governance, macroeconomic management, and crony capitalism, growth picks up again. In 1999, the Korean economy grew by 11.1 percent; the Russian recovery took slightly longer, with growth of 4.5 percent in 1999 and 11 percent in 2000; and while growth took longest to resume in Indonesia, by 2000 its economy was expanding at close to 4 percent per year.42 A lower exchange rate boosts exports, widespread unemployment reduces the cost of labor, and companies with rescheduled debts or new companies with clean books can take advantage of both higher sales and lower costs.

The oligarchs who run them can become even wealthier; Carlos Slim bought up companies on the cheap after the 1982 crisis in Mexico and used the boom-bust cycle of the early 1990s (and his strong political connections) to consolidate his dominant position in telecommunications—becoming one of the world’s richest men in the process.43 Growth can come back without any real fundamental reforms. Foreign lenders learn exactly the wrong lessons from a crisis: they learn that when push comes to shove, the IMF will protect them against the consequences of their bad investments; and they learn that it’s always best to invest in the firms with the most political power (and hence the most assurance of being bailed out in a crisis), perpetuating the pattern of crony capitalism. As a result, foreign capital flows back, and emerging markets can repeat the boom-bust-bailout cycle for a long time, perhaps indefinitely. But long-term economic growth is unlikely to result. Although oligarchies may be consistent with episodes of growth, they are not good at supporting the development of new entrepreneurs and the commercialization of new technologies.44 In fact, entrenched economic elites may have an interest in limiting competition from new ideas and new people.


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable:, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, disruptive innovation, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, follow your passion, game design, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kickstarter, lone genius, longitudinal study, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reshoring, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, Tim Cook: Apple, too big to fail, tulip mania, We are the 99%, Y Combinator, young professional, Zipcar

As Americans began to feel the effects of the Great Recession, it became clear that the economic benefits of the New Economy disproportionately went to a tiny elite, while the vast middle class saw immiseration and downward mobility. We witnessed an inequality gap that hadn’t been as wide since the 1920s and the Great Depression. The Occupy Wall Street movement, with its rallying cry “We are the 99 percent,” crystallized the sense that something needed to change. You knew something fundamental was about to change when both the Tea Party and Occupy Wall Street found a common enemy, publicly blaming “Crony Capitalism” for destroying the American Dream. Even while the New Economy was at its peak, alternative ways of thinking and doing had begun springing up around the nation. Alice Waters’s groundbreaking organic restaurant Chez Panisse served as inspiration for a local food movement, which, four decades later, has gone truly global. The restaurant’s model, one in which all the ingredients are grown within a few miles of its Berkeley location, is now being replicated by thousands of restaurants in Chicago, Boston, both Portlands, Cincinnati, Los Angeles, and across the country.

Indie Capitalism emphasizes the economic value generated by the creation of new products and services. It is an economic system that would encourage the formation of vastly larger numbers of start-ups and promote policies that helped them scale successfully. It would reward large corporations with entrepreneurial cultures—companies like Corning and 3M—that generate substantial revenue each year from new products invented over the previous five years. And it would curtail the “crony capitalism” tactics of big corporations and banks that deploy political contributions to turn the tax and regulatory systems to their benefit. BUILDING A NEW ECONOMICS OF CREATIVITY Using the competencies of Creative Intelligence as a starting foundation, we can begin to build a new economic model for the twenty-first century. I developed the central ideas for such a model in the course of teaching Creativity, Capitalism and Social Movement at Parsons with Ben Lee, former provost and Professor of Philosophy and Anthropology at the New School.

We see Schumpeter’s creative destruction thriving in Silicon Valley and among start-ups in general. Apple is pushing aside RIM and Nokia, Facebook is pressuring Google to move into social, online shopping is mauling the malls. But the brutality of the free market isn’t in operation in many industries where large corporations hold sway by virtue of their powerful connections, not their innovations. Creative destruction is the enemy of crony capitalism, as well as a force that’s essential for innovation. An economic model based on creativity would require a transparent economic playing field, a vigorous antitrust policy that breaks up unfair monopolies, and curbs lobbyists who manipulate tax and regulatory policies for special interests. The capital gains tax, for example, should be structured to promote start-ups and young companies. And a trade policy must reflect the needs of new companies and the “local” values of a growing number of people.


pages: 283 words: 87,166

Reaching for Utopia: Making Sense of an Age of Upheaval by Jason Cowley

anti-communist, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, centre right, Charles Lindbergh, coherent worldview, Corn Laws, corporate governance, crony capitalism, David Brooks, deindustrialization, deskilling, Donald Trump, Etonian, eurozone crisis, Fall of the Berlin Wall, illegal immigration, liberal world order, Neil Kinnock, Occupy movement, offshore financial centre, old-boy network, open borders, plutocrats, Plutocrats, Right to Buy, Robert Mercer, Ronald Reagan, University of East Anglia

For the political philosopher and New Statesman writer John Gray, ‘politics is the pursuit of a succession of temporary remedies to recurring human evils’. That may be too dark but the subtext is this: liberal societies cannot depend on history for their survival. The assumption that markets and democracy are mutually reinforcing was always an illusion. China and Russia have not evolved to become liberal democracies. Economic liberalisation has not led to political liberalisation. In fact, ours is increasingly becoming an age of crony capitalism, buttressed by authoritarianism and nationalism – think Putin’s Russia, Trump’s America, Erdoğan’s Turkey, Xi Jingping’s China, Modi’s India. Or the illiberal democracies of eastern Europe. Or the Gulf autocracies. Macron is a liberal optimist; there aren’t many like him. Moderation, scepticism, caution, decency, empathy, humility, order, security, moral wisdom, social responsibility, the common good, the protective state: these should be some of the watch words and phrases of any new political dispensation or settlement that emerges out of this age of upheaval.

When you get CEOs paying themselves a thousand, two thousand times what their lowest-paid employee [gets], that’s not a country that’s together. And what is so interesting is that the right is saying that as well.’ You mean the more thoughtful, cerebral right . . . ‘Yes, the more thoughtful right. Now, Cameron is cut off from that political project. It might have been Cameron in 2006, 2007, but it’s just not Cameron now.’ But Cameron speaks of the iniquities of ‘crony capitalism’. He has his own reformist position on the financial crisis and its aftermath. ‘I know, but he doesn’t believe it, does he?’ Ferdinand Mount thinks he believes it. Tom Baldwin interjects: ‘They are cousins [Mount and Cameron].’ Miliband: ‘Well, anyway, look, if Cameron really believes it, you don’t cut taxes for millionaires and then raise taxes for everybody else and say a country is coming together.

As for my book being taken up by the left, most of my fan mail, such as it is, comes from former directors of FTSE-100 companies, saying that, alas, yes, that’s pretty much how it is these days. The truth is, or ought to be, that a campaign to restore transparency and accountability to business ought to be an all-party thing. After all, it was D. Cameron, I think, who coined the best phrase for it, “crony capitalism”. More importantly perhaps, much of the reform is going to have to be self-generating (e.g., the shareholder spring), rather than led by government of whatever party, although govt must play an energetic supporting role.’ Miliband’s forthcoming conference speech will develop the defining theme of his leadership – which is, how does a party of the centre left achieve social justice when the old statist tax-and-transfer model of redistribution is no longer affordable?


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How Asia Works by Joe Studwell

affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

If governments allow entrepreneurs access to what economists call ‘rents’ – sources of income at government discretion – without contributing to developmental objectives, this is a political dereliction of duty. What south-east Asians were the first to call ‘crony capitalism’, whereby businessmen are granted concessions without developmental strings attached, is a political failure rather than an entrepreneurial one. The term originates in the Philippines, where the political class has been the most selfish and culpable among all the major states in east Asia. Neo-liberal economists argue that developing countries should avoid the risk of crony capitalism by getting rid of economic rents. But while this might make sense in rich countries, in aspiring states it simply begs the question: How, in that case, will you get entrepreneurs to do what you need them to do in order to develop your economy?

What created the Canons, the Samsungs, the Acers and so on in Japan, Korea and Taiwan was the marriage of infant industry protection and market forces, involving (initially) subsidised exports and competition between manufacturers that vied for state support. The north-east Asian states found ways to overcome the problems that afflicted the ISI policies that were promoted in the 1950s (including by the World Bank in its early, ‘left-wing’ incarnation). Contrary to the claims of many economists, rent-seeking and crony capitalism did not inevitably undermine industrial policy so long as sufficient discipline could be wrapped around infant industry promotion. The mix of plan and market recalls the British development economist Ronald Dore’s contemporary observation about foreign perceptions of Japan at the height of its industrialisation: ‘Left-wing … observers come back from Japan convinced they have seen a shining example of state planning,’ he wrote.

Habibie, a German-trained aircraft engineer he appointed Minister for Research and Technology in 1978, with increased budgets. But then came a downturn at the end of the 1980s, when the Berkeley Mafia were allowed to apply their most radical reforms to the financial system. Finally, in the boom immediately before the 1997 crisis, Suharto was leaning towards Habibie again.94 The Berkeley Mafia were not hardened ideologues, but they believed that only the market could overcome Indonesia’s tendency to crony capitalism. A peripheral member of the group offers an anecdote which helps explain why the economists felt more and more compelled to seek solutions in financial deregulation. Soedradjad Djiwandono, who was governor of the central bank from 1993 until 1998, recalls receiving a letter in late 1996 from Tommy Suharto.95 The president’s youngest son wrote that he had two state banks willing to lend him more than USD1 billion for a car plant.


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The Politics of Bitcoin: Software as Right-Wing Extremism by David Golumbia

3D printing, A Declaration of the Independence of Cyberspace, Affordable Care Act / Obamacare, bitcoin, blockchain, Burning Man, crony capitalism, cryptocurrency, currency peg, distributed ledger, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, Extropian, fiat currency, Fractional reserve banking, George Gilder, jimmy wales, litecoin, Marc Andreessen, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, new economy, obamacare, Peter Thiel, Philip Mirowski, risk tolerance, Ronald Reagan, Satoshi Nakamoto, seigniorage, Silicon Valley, Singularitarianism, smart contracts, Stewart Brand, technoutopianism, The Chicago School, Travis Kalanick, WikiLeaks

Of course, when we look to sites already aligned with the right, even if they usually avoid conspiracy theory, engagement with Bitcoin results in a veritable deluge of extremist sentiment. Paul Krugman’s 2013 article “Bitcoin Is Evil” produced a wealth of conspiratorial commentary on the New York Times site where it was originally published, and even more outraged commentary in social media and on blogs. A typical response was found on the rightist economics blog Against Crony Capitalism, whose editor Nick Sorrentino wrote a piece titled “Paul Krugman Is Scared: He Says ‘Bitcoin Is Evil’: Undermines Central Banks” (2013). Others immediately leapt to discredit Krugman’s authority altogether (see Gongloff 2013; Yarow 2013). Comments to the piece itself include user “Michael Werner” noting that “The Creature from Jekyll Island gives a great history of the Fed and the damage it’s done over the years”; user “Oh Be Newman” writing that “undermining central banks is EXACTLY what we need!!!!!”

Smart, Evander. 2015. “Why Bitcoin Qualifies as Money While the Dollar Is Just Currency.” CryptoCoinsNews (May 4). http://www.cryptocoinsnews.com/. Soltas, Evan. 2013. “Bitcoin Really Is an Existential Threat to the Modern Liberal State.” Bloomberg View (April). http://www.bloombergview.com/. Sorrentino, Nick. 2013. “Paul Krugman Is Scared: He Says ‘Bitcoin Is Evil’: Undermines Central Banks.” Against Crony Capitalism (December 29). http://www.againstcronycapitalism.org/. Suarez, Daniel. 2006. Daemon. New York: Dutton. —. 2010. Freedom™. New York: Dutton. Sutton, Anthony C. 1995. The Federal Reserve Conspiracy. San Diego: Dauphin Publications, 2014. Swan, Melanie. 2015. Blockchain: Blueprint for a New Economy. Sebastopol, Calif.: O’Reilly Media. Swanson, Tim. 2014. The Anatomy of a Money-Like Informational Commodity: A Study of Bitcoin.


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Deaths of Despair and the Future of Capitalism by Anne Case, Angus Deaton

Affordable Care Act / Obamacare, basic income, Bertrand Russell: In Praise of Idleness, business cycle, call centre, collapse of Lehman Brothers, collective bargaining, Corn Laws, corporate governance, correlation coefficient, crack epidemic, creative destruction, crony capitalism, declining real wages, deindustrialization, demographic transition, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Elon Musk, falling living standards, Fellow of the Royal Society, germ theory of disease, income inequality, Jeff Bezos, Joseph Schumpeter, Kenneth Arrow, labor-force participation, low skilled workers, Martin Wolf, Mikhail Gorbachev, obamacare, pensions crisis, randomized controlled trial, refrigerator car, rent-seeking, risk tolerance, shareholder value, Silicon Valley, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, universal basic income, working-age population, zero-sum game

This is what the economist and philosopher Amartya Sen calls the comparative approach, which he contrasts with the transcendental approach that begins by describing an ideal society.1 If we can agree on the identification of a list of injustices, each one removed takes us toward a better world. To take some concrete examples, there is wide agreement that making money out of human suffering is wrong, and that wealth inequality based on that suffering is unjust. There is also broad agreement, on both right and left, among people with very different political views, that rent-seeking and crony capitalism are unjust. Whatever we think about wealth seeking, we can agree that it is unjust to get rich through special favors, such as those excoriated by Adam Smith as supporting “absurd and oppressive monopolies.” By contrast, there is no such agreement that any action that reduces income inequality is thereby automatically desirable. Many economists who think about income distribution endorse the view, first extensively used in economics,2 and which philosophers now call “prioritarianism,”3 that the more people have, the less weight (priority) their wellbeing should be given in policy making.

., 280n16, 280n18 Campbell, James, 116, 274n16 Canada, 23, 38, 41, 114, 193, 195, 197 cancer, 23–24, 29, 207; in midlife, 41; new drugs for, 202; terminal, 116 Cannadine, David, 266n25 Canton (Guangzhou), 109 Cantril ladder, 53, 181 capital, 152, 232, 260; human, 153; immigration and, 217; owners of, 239; power of, 175, 187; rate of return to, 216; redistribution towards, 240; social, 174 capitalism, 11, 12, 130, 147, 153, 156, 227, 254, 260; central problem of, 213; competition and, 230; crisis of, 140; critiques of, 188; crony capitalism, 245; faults of contemporary, 186; future of, x, 228, 244, 261; Industrial Revolution and, ix; medical emergencies and, 200; modern, 187; regulated, 262; worst face of, 212. See also anticompetitive behavior; rent-seeking carbon monoxide, 99 Card, David, 263, 288n28 car dealers, 11, 230, 256, 257 cardiovascular disease, 43, 97, 107. See also heart disease; hypertension Carnegie, Andrew, 228 Carney, Tim, 286n6 cartels, 227 Case, Anne, 271n5, 271n7, 272n12, 272n15, 277n16 Case, Susan, 263 Cass, Oren, 255, 290n24, 290n32 Catholics, 176, 177 Catlin, Aaron, 281n1, 283n20, 284n39, 284n42 cause of death, 23, 28, 42, 91, 136 CDC Wonder, 29 Celebrex, 117 celecoxib, 117 cell phones, 230–31 Cengiz, Doruk, 236–37, 288n27 Census Bureau, 4, 219 Centers for Disease Control and Prevention (CDC), 2, 29, 38, 73–74 Chamber of Commerce, 242, 256 Chandler, Daniel, 263 Chandra, Amitabh, 267n3, 282n10, 283n20 Cher, Benjamin A.

., 284n41, 284n43 Comcast, 242 Coming Apart (Murray), 70 Commonwealth Fund, 197 communication, 229 communications technology, 233 community, 173, 179; destruction of, 189; white working-class losing, 178 competition: capitalism and, 230; elimination of, 232; foreign, 68; free markets and, 212; globalization and, 225; labor markets and, 236, 237; permanent advantage in, 235; Robinson and, 236; stifling of, 227 Congress, 13, 100, 120, 124–26, 197, 210, 211, 225, 242, 261 Conner, Marcy, 37, 49 consumer price index (CPI), 158 consumers, 208, 221, 230; benefits to, 227; immiseration of, 188; market power used against, 187; technological change socially beneficial for, 233 contraceptive pills, 160, 169 Cook, Tim, 12 Cooper, Zack, 283n27, 283n28, 284n56 copayments, 192 copyright laws, 256 Corn Laws, 14, 15 corporate choices, 227 corporate lobbies, 228, 232, 239, 241–43, 256–57; healthcare and, 209–11, 250 Corwin, Steven, 201 Cotton, Tom, 285n5 Courtwright, David, 115, 118, 274n11, 274n12 Cowen, Tyler, 286n6 Cox, Daniel, 265n8, 279n28 crack cocaine epidemic, 5, 62, 64; opioid epidemic and, 68–69 Craig, Stuart V., 283n27 creative destruction, 235 Crestor, 197 crime, 68, 179 crime rates, 5, 69 crony capitalism, 245. See also rent-seeking Culyer, Anthony J., 284n45 Cunningham, Rebecca M., 273n6 Currie, Janet, 263 Cutler, David M., 263, 277n11 Damasio, Antonio R., 271n3 Danziger, Sheldon H., 280n5 Daoguang Emperor, 109 Davis, Karen, 282n14 death certificates, 3, 29, 101, 118, 119, 136, 269n19 Deaton, Angus, 271n5, 271n7, 272n12, 272n15, 273n26, 276n3, 277n16, 291n37 deductibles, 192, 204 De Loecker, Jan, 287n14, 287n18 Delta Airlines, 231 delusional parasitosis, 112 democracy, ix, 14, 241, 246, 262; white working-class and, 13 Democratic Party, x Democrats, 210 Denmark, 163 depression, 27, 37, 92, 95, 96, 98, 99, 212 Desmond, Matthew, 276n3 detox, 122 Devine, Tom, 111, 273n4, 276n42 diabetes, 43 Diamond, Peter, 289n4 disability, 27, 161; insurance, 81, 85, 92, 157, 162, 252, 279n19 discrimination, 5, 31, 62, 65, 166, 189; reverse, 6, 166, 190; women and, 160 dissatisfaction, 181 dividends, 52 divorce, 98, 149 Dobson, Frank, 199 Doctor, Jason, 263, 274n20 doctors, 26, 52, 72, 73, 75, 84, 116 186, 198, 204, 210, 249; germ theory of disease and, 56; opioids and, 10, 113, 114, 117–19, 121–26, 247, 259; rent-seeking and, 10, 11, 12, 193, 196–97, 200–202, 241–42, 256 Doonesbury (cartoon), 62, 63 Dorn, David, 238, 278n21, 285n9, 285n10, 285n15, 287n8, 288n33 Doty, Michelle M., 284n41, 284n43 Dow Jones Index, 240 Dreamland (Quinones), 146 drug dealers, 10, 66, 69, 109–11, 114, 115, 120, 121 Drug Enforcement Agency (DEA), 110, 120, 124–25 drug manufacturers, 10, 40, 85, 112, 120, 124, 126, 127, 192, 193, 201, 202, 242, 259 drug overdoses, 2, 37, 38, 65–66, 111, 137, 185; African Americans and, 119; alcoholism and, 246; bachelor’s degrees and, 114, 121; common features of, 97; mortality rates from, 40, 121; rapid increases in, 45; rise in, 118; suicides and, 246.


Capitalism, Alone: The Future of the System That Rules the World by Branko Milanovic

"Robert Solow", affirmative action, Asian financial crisis, assortative mating, barriers to entry, basic income, Berlin Wall, bilateral investment treaty, Black Swan, Branko Milanovic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, dematerialisation, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, ghettoisation, gig economy, Gini coefficient, global supply chain, global value chain, high net worth, income inequality, income per capita, invention of the wheel, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, low skilled workers, Lyft, means of production, new economy, offshore financial centre, Paul Samuelson, plutocrats, Plutocrats, post-materialism, purchasing power parity, remote working, rent-seeking, ride hailing / ride sharing, Silicon Valley, single-payer health, special economic zone, The Wealth of Nations by Adam Smith, Thorstein Veblen, uber lyft, universal basic income, Vilfredo Pareto, Washington Consensus, women in the workforce, working-age population, Xiaogang Anhui farmers

Many societies have learned to live, or even thrive, with moderate to high levels of corruption that seep through the entire system and make the lives of many people easier than they would be in a purely “noncorrupt” system. In fact, many people who are used to functioning in a system where mutual favors are exchanged have a hard time adjusting to an entirely different, “clean” system. Bai, Hsieh, and Song (2014, 3) argue that decentralized local “crony capitalism” in China plays a role similar to the one that a multiplicity of European states played in the rise of capitalism: local administrations protect their own champions, but they cannot prevent other local administrations from favoring their own, perhaps more efficient, crony capitalists. Thus, cronyism joined with interlocal competition plays the role of Schumpeterian creative destruction. We should not naïvely believe that the rankings of government transparency (based on “expert surveys” of perceived corruption) that place northern European countries on top mean that this kind of transparency can be easily applied elsewhere in the world, or that populations of other countries aspire to that level of “cleanliness” in government.

“Top Incomes in the Long Run of History.” Journal of Economic Literature 49(1): 3–71. Avineri, Shlomo, ed. 1968. Karl Marx on Colonialism and Modernization. New York: Doubleday. Azar, José, Ioana Marinescu, and Marshall Steinbaum. 2017. “Labor Market Concentration.” NBER Working Paper No. 24147, National Bureau of Economic Research, Cambridge, MA, December. Bai, Chong-En, Chang-Tai Hsieh, and Zheng (Michael) Song. 2014. “Crony Capitalism with Chinese Characteristics.” Unpublished manuscript, May. http://china.ucsd.edu/_files/pe-2014/10062014_Paper_Bai_Chong.pdf. Bakija, Jon, Adam Cole, and Bradley T. Heim. 2010. “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data.” Unpublished manuscript. https://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf.

In Handbook of Critical International Political Economy: Theories, Issues and Regions, ed. Alan Cafruny, Leila Simona Talani, and Gonzalo Pozo-Martin, 309–329. London: Palgrave Macmillan. Pareto, Vilfredo. 1935. The Mind and Society, vol. 4 [Trattato di Sociologia Generale]. New York: Harcourt Brace. Pei, Minxin. 2006. China’s Trapped Transition. Cambridge, MA: Harvard University Press. Pei, Minxin. 2016. China’s Crony Capitalism. Cambridge, MA: Harvard University Press. Piketty, Thomas. 2014. Capital in the Twenty-First Century, trans. Arthur Goldhammer. Cambridge, MA: Harvard University Press. Piketty, Thomas, Li Yang, and Gabriel Zucman. 2017. “Capital Accumulation, Private Property and Rising Inequality in China, 1978–2015.” WID.world Working Paper Series 2017 / 6, April. https://wid.world/document/t-piketty-l-yang-and-g-zucman-capital-accumulation-private-property-and-inequality-in-china-1978-2015-2016/.


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Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, post-work, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

We have a regulatory system in which corporate greed, political timidity, and a culture of cronyism have rendered the public good a quaint afterthought. THEY’VE GOT LOW FRIENDS IN HIGH PLACES The third leg in the Access Triple Crown is the way corporate America has used its economic clout to cultivate—okay, “buy”—friends in high places. It’s so much easier to get a politician to take your call when you have donated millions to him or used to work in the office next to him. Facebook is great, but the crony capitalism of Washington takes social networking to a whole different level. We saw how all those former Senate and House staffers are making a buck by lobbying their former bosses and colleagues on behalf of the big banks looking to gut reform.74 It’s the same thing we saw during the health-care battle when those fighting against reform hired 350 former members of Congress and congressional staffers to influence the debate, including half a dozen former staffers of Senator Max Baucus, the influential chairman of the Senate Finance Committee.

Tom Daschle is a senator, then a near–cabinet member overseeing health-care reform, then a “special adviser” to companies looking to undermine health-care reform.96 Robert Rubin is co-chairman of Goldman Sachs, then secretary of the Treasury, then a senior counselor of Citigroup—pocketing more than $126 million in cash and stock during his almost ten years there.97 Dick Cheney is a congressman, then secretary of defense, then CEO of Halliburton, then the most powerful vice president in history—helping lead America into a war with Iraq that ends up netting his former company billions in sweetheart contracts.98 During the Bush-Cheney years, Halliburton became the poster child for crony capitalism, which is why it was both surprising and utterly predictable when the company came roaring back into the headlines during the BP oil spill fiasco. It’s like one of those horror movie killers who keeps popping back up from the grave. You thought Halliburton had been eradicated when government audits showed the company had bilked taxpayers out of a billion dollars during the war in Iraq?99 You thought it was over when the Justice Department brought a civil fraud suit against a Halliburton subsidiary in 2010 for charging the government for tens of millions in unauthorized security services in Iraq?

Given that the piece is about the economic meltdown, it’s telling that the bio doesn’t include his nearly ten years at Citigroup—during the very time that ended with the bank having to be saved by the American taxpayers.109 But that’s how our system “works” these days: Someone like Rubin is able to wreak destruction, collect an ungodly profit, then go along his merry way, pontificating about how “markets have an inherent and inevitable tendency—probably rooted in human nature—to go to excess, both on the upside and the downside.”110 This from the man who, as Bill Clinton’s Treasury secretary, was vociferous in opposing the regulation of derivatives—a key factor in the current economic crisis—and who lobbied the Treasury during the Bush years to prevent the downgrading of the credit rating of Enron—a debtor of Citigroup.111, 112 The hidden costs of such crony capitalism are monumental for the middle class. Why would people strive to build businesses—risking their money and their sweat equity—when they know there will always be someone on the other side of the table playing with a stacked deck? THE VULCAN MIND MELD BETWEEN WASHINGTON AND WALL STREET So the deck is stacked. The fix is in. The cards are marked. And our economy is as rigged as a carnival ring-toss game.


Global Governance and Financial Crises by Meghnad Desai, Yahia Said

Asian financial crisis, bank run, banking crisis, Bretton Woods, business cycle, capital controls, central bank independence, corporate governance, creative destruction, credit crunch, crony capitalism, currency peg, deglobalization, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, floating exchange rates, frictionless, frictionless market, German hyperinflation, information asymmetry, knowledge economy, liberal capitalism, liberal world order, Long Term Capital Management, market bubble, Mexican peso crisis / tequila crisis, moral hazard, Nick Leeson, oil shock, open economy, price mechanism, price stability, Real Time Gross Settlement, rent-seeking, short selling, special drawing rights, structural adjustment programs, Tobin tax, transaction costs, Washington Consensus

That is, did borrowers and lenders accumulate more risk than was privately (let alone socially) efficient due to exogenous market interference, which distorted their otherwise rational and efficient behaviour? Or did they do so because specific market failures within financial markets led them to be unable to assess and price their risks properly? In other words, did artificially created factors, such as ‘moral hazards’ or ‘crony capitalism’, interfere with the incentive mechanisms and resource allocation dynamics of financial markets? Or did the combination of a particular type of international financial market with a particular form of financial liberalisation lead to the creation of an economic environment in which the interaction among intelligent, self-interested, ‘maximising’ economic agents certainly did not lead towards ‘equilibrium’ (neither global nor local)?

Or that (in economies like Chile, Mexico, Thailand or Malaysia) sharp swings associated with asset bubbles and Kusnetz-type cycles would almost be things of the past? Or that in a financially-liberalised economy there would be no room for populism, and that governments (like Brazil’s) would have no option but to keep their fiscal accounts in order? And that, therefore, the logic of efficient markets is compelling?49 Sorry, I forgot, it is all the fault of moral hazards and crony capitalism. Or, more likely, as Stiglitz asks: Are international policies in this area [financial liberalisation] being designed on the basis of the best available economic theory and evidence, or is there another agenda, perhaps a special interest agenda, seemingly impervious to the effects of such policies, not only on growth, but on stability and poverty? If that is the case, is there a more fundamental problem in the international economic architecture going […] to issues of accountability and representativeness?

Index adverse selection 32 ageing population 67 agency problems 21–9, 41 Akyüz, Y. 99 Allen, F. 20–2, 29 Argentina 11–12, 61 Asian financial crisis 1, 4, 6, 64, 74–5, 79, 83–5, 120; IMF role in 91–4; recovery from 94–7, 101–2 Austrian school of economists 75–6, 81 corporate governance 101–5 cosmopolitan order, concept of 74–5, 79 Cox, R. 77 crashes 11–12 crises, financial 30; definition of 7–8; history of 11–16, 67; management of 57–9, 64–6; three routes to 122–40 crony capitalism 83, 121, 152 currency, international 52–3, 57, 66–7 currency unions 80 Baker, J. 48 Bank of England 2, 11–13, 29 Bank for International Settlements (BIS) 4, 78, 88, 93, 100 bank runs 30, 36–40 Baring Brothers 11–12 Basle Committee 61 Brazil 57, 120, 128–9, 133 Bretton Woods system 13, 15, 43–6, 50–1, 57 bubbles 3–4, 6, 19–24, 28, 70, 84, 129–30, 136–8, 144–8; negative 20–1, 31, 39, 41 business cycles, theory of 1, 6, 9, 13, 15, 30–1 debt, external 87–90 default 28–9 deregulation 70, 72, 103 devaluation, competitive 48 developing countries 54 Diamond, D. 30, 35–6, 39 Dybvig, P. 30, 35–6, 39 Calomiris, C. 31 capital flight 91, 96–7 capital flows 84–5, 89–90, 97–8, 104, 122, 127, 140; controls on 5, 45, 144–50 capitalism 76–7; alternative models of 79–81 Cardoso, Henrique 138 central banks, role of 39–41 Chile 122, 129, 140–6 conditionality 47, 55–6, 99, 104 contagion 57, 89, 91, 104, 137 contingent credit lines 57 convertibility of currencies 13 Federal Reserve 2, 6, 12–15, 30, 94–5 Financial Stability Forum 15–16, 61–2 Finland 19–20 foreign direct investment (FDI) 87, 89 Friedman, Milton 12 “fundamentals” (in asset pricing) 22–4, 28, 41 Furman, J. 92 early warning system, financial 62 Eatwell, J. 15–16 emerging markets 54, 61 Enron 6 euro (currency) 66 European integration 52, 72, 80 exchange rates, fixed 13–14 G5 meetings 15 G7 meetings 15, 66–7 Gale, D. 20–2, 29 General Agreement to Borrow (GAB) 50–1 160 Index General Agreement on Trade in Services (GATS) 100 Germany 53 globalisation 4; alternative views of 70–2 Goldsmith, Raymond 8, 10–11 gold standard 12, 49, 73 Goodhart, C. 64 Gorton, G. 12, 31 Great Depression 2, 12–14 Hamilton, Alexander 29 Hamilton-Hart, N. 103 Hayek, F.A. 2, 9–10, 15, 75 hedging, dynamic 62 hegemony 13, 43, 72, 77–81; collective 77 incentive compatibility 33, 37 Indonesia 92, 94, 115, 117 International Monetary Fund (IMF) 2–5, 13–15, 43–67, 77, 80, 84, 98–105; Articles of Agreement 65; mandate of 58; role in Asian financial crisis 91–4 ISLM model 10 Jackson, Andrew 29 Jamaica Accord 46–7 Japan 19–20, 72 Juglar cycles 9–10 Kahn, J. 12 Keohane, R. 77 Keynes, J.M. 2, 10, 44, 68, 120, 127, 140 Keynesian policies 94, 97, 102, 105 Kindleberger, C.P. 2–3, 7, 11, 19, 30, 77, 122, 127 Kitchin cycles 9–10 Kondratieff cycles 9–10 Korea see South Korea Krueger, Anne 65 Kusnetz cycle 132, 150 lender of last resort (LOLR) 2–4, 49, 57–9, 63–7 liberalisation, financial 48–9, 56, 59, 83–5, 90, 101–2, 120–2 Lindgren, C.J. 30 Long-Term Capital Management (LTCM) 6, 94, 97, 124, 151 McKinnon, R. 128 Malaysia 74, 84, 87, 90–1, 94–5, 102–5, 116, 119, 122, 130, 133, 139, 147–51 Malthus, Thomas 8 market failure 121 Marxism 76, 79, 81 Marx, Karl 2, 9–10 Meltzer Commission and Report 16, 64 Mexico 20, 48–9, 56, 64, 93, 130 Mill, James 8 Minsky, H.P. 2, 10–11, 127, 137 Mises, Ludwig von 75 Mishkin, F. 20 Mitchell, W. 30 monetarism 47 moral hazard 1, 49, 59, 64, 95, 121, 128, 152 nation-states, role of 70–5, 78–9 neo-liberalism 75–81, 104 New Agreement to Borrow (NAB) 57 Nixon, Richard 46 North American Free Trade Agreement (NAFTA) 30, 72, 93 Norway 19 oil prices 13 Organisation for Economic Co-operation and Development (OECD) 83 Overend, Gurney and Company 11, 29 panics 11–12, 29–32, 92 Perez, C. 127 Philippines, the 91 Pill, H. 128 Plaza Accord 15 protectionism 73–5, 78 prudential supervision 60, 100, 103 quantitative controls 147–50 reform programmes 84, 99–105 regionalism 71–2 regulation of the global economy 71–81; see also prudential supervision reserve requirements 25 Ricardo, David 8 Rio de Janeiro agreement (1967) 53 risk shifting 20–5, 28; optimal 32–6 Say, J.B. 8 Say’s Law 126 Schumpeter, J. 2, 9–10 September 11th 2001, events of 6 Shin, J.


pages: 122 words: 38,022

Kill All Normies: Online Culture Wars From 4Chan and Tumblr to Trump and the Alt-Right by Angela Nagle

4chan, A Declaration of the Independence of Cyberspace, affirmative action, anti-communist, battle of ideas, Bernie Sanders, bitcoin, citizen journalism, crony capitalism, death of newspapers, Donald Trump, feminist movement, game design, Hacker Ethic, hive mind, Julian Assange, Kickstarter, mass immigration, moral panic, Nelson Mandela, Norman Mailer, Occupy movement, open borders, post-industrial society, pre–internet, Ronald Reagan, sexual politics, Silicon Valley, The Wisdom of Crowds, WikiLeaks

After the election, Buzzfeed published a transcript of a long interview Steve Bannon gave to the Vatican from 2004. Presumably thinking this was a ready-made hit-piece that would destroy his reputation, Bannon came across in the interview as darkly fascinating and, relative to many Buzzfeed listicle writers, as quite a serious and intriguing person. He spoke of ‘the crisis of capitalism’, secularization, the Islamization of the West, the immorality of crony capitalism and the destruction of the West’s Judeo-Christian heritage. Contrary to what Buzzfeed may have intended, it revealed a thinker who could not be further from the neoconservative or neoliberal establishments within the two major US parties, but instead as an anti-establishment figure with ambitious ideas. Ben Shapiro was a key media figure to leave Breitbart over its flirtations with the anti-Semitic hard alt-right.

In particular, class politics and social liberalism have not always sat comfortably together, nor did social conservatism with free-market economics for many decades until the neocons perfected the formula when in power. As Hartman reminds us, Christian figures like William Jennings Bryan merged concerns about the family with criticisms of capitalism, while before the 60s, American Prairie radicals organized under a populist banner against corporate monopolies and crony capitalism. Large numbers of workers joined trade unions in response to the Great Depression. Ideas of transgression and cultural radicalism were largely irrelevant to this working-class left. The 1962 Port Huron statement, the manifesto of the Students for a Democratic Society, contained a very different kind of message: ‘We are people of this generation, bred in at least modest comfort, housed now in universities, looking uncomfortably at the world we inherit.’


pages: 422 words: 113,830

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route

Doing so is just as important in 2009 as it was in 1933. ONE Introduction The Panic of August We are living through the first crisis of our brave new world of securitised financial markets. It is too early to tell how economically important this upheaval will prove. But nobody can doubt its significance for the financial system. Its origins lie with credit expansion and financial innovation in the U.S. itself. It cannot be blamed on “crony capitalism” in peripheral economies, but rather on irresponsibility in the core of the world economy. —Martin Wolf, Financial Times, September 2007 The “crack cocaine” of our generation appears to be debt. We just can’t seem to get enough of it. And, every time it looks like the U.S. consumer may be approaching his maximum tolerance level, somebody figures out how to lever on even more debt using some new and more complex financing.

And if these multiple abuses overlap with the great unwinding of the 1982-2007 debt bubble, then they—and the financial sector that created, promoted, and so greatly profited from them—will have much to answer for. The nature of English-speaking capitalism as practiced especially by Wall Street but also by the City of London is drawing fire. Martin Wolf, the chief economic commentator at the Financial Times, noted at year’s end that “what is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-orientated financial capitalism. A mixture of crony capitalism and gross incompetence has been on display in the core financial markets of New York and London.”44 On the other side of the Atlantic, the iconic American investor Warren Buffett summarized his criticism: “You can’t turn a financial toad into a prince by securitizing it. . . . Wall Street started believing its own PR on this—they started holding this stuff themselves, maybe because they couldn’t sell it.

Connally, John ConocoPhillips Conservative Party, British Consumer Federation of America consumer price index (CPI) agflation and Boskin Commission and debasement of GDP and German hedonics in calculation of housing element of new methodology of Consumer Product Safety Commission consumer spending Corrigan, Gerald Corzine, Jon Coué, Émile Council of Economic Advisers Counter-Reformation Countrywide credit default swaps (CDSs) CreditSights Inc. crony capitalism Crudele, John Curzon, Lord Dalio, Raymond Das, Satyajit Davis, John W. Day of Reckoning (Friedman) debt credit card current account economic favoritism and EMH and expansion of federal bailouts and financial services sector and GDP and history of excessive LBOs and mortgage oil and in post-9/11 era private public in Reagan era see also mortgage crisis “Debt Explosion of the 1980s, The” (Synnott) Defense Department, U.S.


pages: 395 words: 116,675

The Evolution of Everything: How New Ideas Emerge by Matt Ridley

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, AltaVista, altcoin, anthropic principle, anti-communist, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Boris Johnson, British Empire, Broken windows theory, Columbian Exchange, computer age, Corn Laws, cosmological constant, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, cryptocurrency, David Ricardo: comparative advantage, demographic transition, Deng Xiaoping, discovery of DNA, Donald Davies, double helix, Downton Abbey, Edward Glaeser, Edward Lorenz: Chaos theory, Edward Snowden, endogenous growth, epigenetics, Ethereum, ethereum blockchain, facts on the ground, falling living standards, Ferguson, Missouri, financial deregulation, financial innovation, Frederick Winslow Taylor, Geoffrey West, Santa Fe Institute, George Gilder, George Santayana, Gunnar Myrdal, Henri Poincaré, hydraulic fracturing, imperial preference, income per capita, indoor plumbing, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Khan Academy, knowledge economy, land reform, Lao Tzu, long peace, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, meta analysis, meta-analysis, mobile money, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, Necker cube, obamacare, out of africa, packet switching, peer-to-peer, phenotype, Pierre-Simon Laplace, price mechanism, profit motive, RAND corporation, random walk, Ray Kurzweil, rent-seeking, reserve currency, Richard Feynman, rising living standards, road to serfdom, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, sharing economy, smart contracts, South Sea Bubble, Steve Jobs, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, twin studies, uber lyft, women in the workforce

Market failure is a favourite phrase; government failure is not. Take six basic needs of a human being: food, clothing, health, education, shelter and transport. Roughly speaking, in most countries the market provides food and clothing, the state provides healthcare and education, while shelter and transport are provided by a mixture of the two – private firms with semi-monopolistic privileges supplied by government: crony capitalism, in a phrase. Is it not striking that the cost of food and clothing has gone steadily downwards over the past fifty years, while the cost of healthcare and education has gone steadily upwards? In 1969 the average American household spent 22 per cent of consumption expenditure on food and 8 per cent on clothing. Now it spends 13 per cent on food and 4 per cent on clothing. Yet the quality and diversity of both food and clothing have improved immeasurably since 1969.

When Stockman was Ronald Reagan’s head of the Office of Management and Budget, he set out to strangle Fannie and Freddie by gradually forcing them to borrow at market rates. Horrified lenders, brokers, builders and suppliers joined in a ‘mighty coalition to keep private enterprise humming on cheap, socialized credit’. They lobbied Congress to stop him, and led by the Republicans, it did so. This was a paradigmatic case of crony capitalism in action against the free market. Meanwhile, commercial lenders were coming under pressure from groups like the Association of Community Organizers for Reform Now (ACORN) to lower their lending standards. ACORN discovered that in the period running up to the completion of a merger, when a date for completion had been set, such banks were highly vulnerable to lawsuits that claimed they were not complying with the 1977 Community Reinvestment Act, which forbade racial discrimination in lending.

And this was the biggest reason for the collapse of so many banks and the insurance giant AIG. To leave Fannie and Freddie out of the story of the Great Recession is impossible, and to omit the political mandates that drove them is unthinkable. They were from start to finish a top–down distortion of a bottom–up market. David Stockman in his book The Great Deformation is unsparing in his conclusion: ‘The Fannie Mae saga demonstrates that once crony capitalism captures an arm of the state, its potential for cancerous growth is truly perilous.’ Jeff Friedman, in a lengthy and influential essay on the financial crisis, came to a similar conclusion: ‘The financial crisis was caused by the complex, constantly growing web of regulations designed to constrain and redirect modern capitalism.’ Peter Wallison, a member of the government’s Financial Crisis Inquiry Commission, said something similar: ‘The financial crisis was not caused by weak or ineffective regulation.


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China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans, and the End of the Chinese Miracle by Dinny McMahon

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, American Society of Civil Engineers: Report Card, Andrei Shleifer, Asian financial crisis, bank run, business cycle, California gold rush, capital controls, crony capitalism, dark matter, Deng Xiaoping, Donald Trump, Edward Glaeser, eurozone crisis, financial innovation, fixed income, Gini coefficient, if you build it, they will come, income inequality, industrial robot, invisible hand, megacity, money market fund, mortgage debt, new economy, peer-to-peer lending, Ponzi scheme, Ronald Reagan, short selling, Silicon Valley, too big to fail, trickle-down economics, urban planning, working-age population, zero-sum game

And it nurtures state-owned champions at home with monopolies and other perks before sending them abroad to buy resources and strategically useful infrastructure. Still, an economy in which private companies can summon government thugs to do their bidding might best be described as crony capitalism. Certainly corruption appears to still be rampant, despite President Xi Jinping’s multiyear anticorruption campaign, and officials and private business continue to have complex—and mutually beneficial—relationships. Yet crony capitalism, state capitalism, and free-market capitalism all fail—both individually and in the aggregate—to sufficiently describe the nature of the Chinese economy. Markets thrive, but the presence of the government is ubiquitous. The interplay between the two is uniquely Chinese. The Chinese Communist Party’s own description of the dynamic goes like this.

Areddy, “China Sentences Son and Wife of Ex-Security Chief to Prison,” Wall Street Journal, updated June 15, 2016, http://www.wsj.com/articles/china-sentences-son-and-wife-of-ex-security-chief-to-prison-1465988099. apartments and villas: Benjamin Kang Lim and Ben Blanchard, “Exclusive: China Seizes $14.5 Billion Assets from Family, Associates of Ex-Security Chief: Sources,” Reuters, March 30, 2014, http://www.reuters.com/article/us-china-corruption-zhou-idUSBREA2T02S20140330. mines and property developments: Minxin Pei, China’s Crony Capitalism: The Dynamics of Regime Decay (Cambridge, Mass.: Harvard University Press, 2016), 2. “life of the party”: “党内不能存在形形色色的政治利益集团” [Political vested interests cannot exist inside the Party], Ministry of Supervision of People’s Republic of China, January 12, 2016, http://www.ccdi.gov.cn/yw/201601/t20160112_72582.html. “what people imagine”: Guo Ping, “坚定改革信心 保持定力和韧劲” [Have resolute faith in reform, maintain strength and tenacity], CCTV, August 19, 2015, http://opinion.cntv.cn/2015/08/19/ARTI1439979953357129.shtml.


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, G4S, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low skilled workers, market clearing, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

THE EMERGING-NATION WAR CHEST One of the big messages from the Asian economic crisis in 1997 and 1998 was that emerging economies could sometimes struggle under the burden of huge capital inflows. At that time, many emerging economies ran current-account deficits. In other words, domestic investment was higher than domestic saving, requiring inflows of capital from abroad to balance the books. These capital inflows were too often invested in unsound property deals or corrupt business ventures, leading to accusations of ‘crony capitalism’. As foreign investors took fright, capital left Asia and headed elsewhere. Without the inflows, Asia could no longer maintain its earlier standard of living: demand fell, imports dropped, exchange rates plummeted and economies collapsed. The Asian crisis demonstrated two things. First, in their hunt for yield, Western investors were happy to chase returns regardless of the risks involved.

Should the Great Depression be described as a victory for market forces? Should the credit crunch of 2007/8 be described as a success for soft knowledge? And should Asia’s relentless rise over the last sixty years – the greatest economic expansion of all time – be simply described as a multi-decade credit-fuelled flash-in-the-pan, a wealth-creating machine that will ultimately be brought to its heels by crony capitalism and silly bank lending? That, after all, is the argument. The claim that Asia and, indeed, other emerging economies offer no real threat to Western economic superiority strikes me, however, as absurd, for the reasons outlined in this book. Those who take comfort in the idea of the West’s destiny point to Japan’s stagnation since the 1990s, arguing that while Japan successfully caught up with the US and Western Europe economically, it never surpassed them, despite projections to the contrary.

(i) Canada (i), (ii), (iii) Canning, David (i) capital Asian economic growth (i) empires (i), (ii) inequalities (i), (ii), (iii), (iv) price stability (i) protectionism (i) resource scarcity (i) Spain and silver (i) state capitalism (i) trade (i), (ii), (iii) capital controls (i), (ii), (iii) capital flows see cross-border capital flows capital goods (i), (ii), (iii) capitalism (i), (ii), (iii), (iv) capital markets anarchy in capital markets (i) emerging nation war-chest (i) at the end of the rainbow (i) foreign-exchange reserves (i) gold rush revisited (i) the hole in the story (i) hunt for yield (i) Japan’s currency appreciation (i) liquidity and greed (i) mispricing of Western capital markets (i) no promised land (i) role of capital markets (i) economic integration, political proliferation (i), (ii), (iii) globalization (i) indulging the US no more (i), (ii), (iii), (iv) political economy and inequalities (i), (ii), (iii) resource scarcity (i), (ii) state capitalism (i) trade (i), (ii) the West’s diminished status (i), (ii), (iii) capital mobility (i), (ii), (iii), (iv), (v), (vi) car industry (i), (ii), (iii), (iv), (v), (vi), (vii) carry trades (i), (ii) Catholic Church (i) Ceauşescu, Nicolae (i) Celler, Emanuel (i) central banks capital controls (i) capital flows and nation states (i) price stability (i), (ii), (iii), (iv), (v), (vi), (vii) printing money (i) Central Europe (i), (ii), (iii), (iv), (v) Chang, Ha-Joon (i) Chelsea FC (i) Cheney, Dick (i) Chevron (i) China anarchy in capital markets (i), (ii), (iii), (iv), (v), (vi), (vii) currency (i) globalization (i), (ii) indulging the US no more (i), (ii), (iii) political economy and inequalities (i), (ii), (iii), (iv), (v), (vi), (vii) population demographics (i), (ii), (iii), (iv), (v) price stability (i), (ii), (iii), (iv) savings (i) scarcity (i), (ii), (iii), (iv), (v) secrets of Western success (i), (ii), (iii), (iv) state capitalism (i), (ii), (iii), (iv) trade (i), (ii), (iii) the West’s diminished status (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) China National Offshore Oil Corporation (CNOOC) (i), (ii) Chinese Exclusion Act (1882) (i) choice (i), (ii), (iii), (iv), (v) Christianity (i), (ii), (iii) Chrysler (i) Clark, Gregory (i) classical economists (i) climate change (i), (ii), (iii), (iv), (v), (vi), (vii) coal (i) COFER (currency composition of official foreign exchange reserves) (i), (ii) Collier, Paul (i) colonialism (i), (ii), (iii) Columbus, Christopher (i), (ii) Comet jet airliner (i), (ii) Commission of the European Union (i) Committee on Foreign Investment in the United States (CFIUS) (i) commodity prices globalization (i) income inequality (i) a post-dollar financial order (i) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi) savings (i) Spain and silver (i) state capitalism (i), (ii) Common Agricultural Policy (i) communications (i), (ii), (iii) communism capital markets (i) economic integration, political proliferation (i) fall of (i) political economy and inequalities (i) population demographics (i), (ii) scarcity (i), (ii) state capitalism (i) trade (i), (ii), (iii) the West’s diminished status (i), (ii), (iii) The Communist Manifesto (Marx and Engels) (i) Communist Party (i), (ii) comparative advantage political economy and inequalities (i), (ii), (iii) trade (i), (ii), (iii) the West’s diminished status (i), (ii) computers (i), (ii), (iii), (iv), (v) Congress of Vienna (i) Conservative Party (i) consumer prices (i), (ii), (iii), (iv) contraception (i), (ii), (iii), (iv), (v) ‘core’ inflation (i), (ii) corruption (i), (ii) Cortés, Hernando (i), (ii) Costa Rica (i) cotton industry (i), (ii) Cour de Cassation (i) credit (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) credit crunch anarchy in capital markets (i), (ii), (iii), (iv) indulging the US no more (i), (ii) politics and economics (i), (ii), (iii) price stability and economic instability (i), (ii), (iii), (iv) state capitalism (i), (ii) the West’s diminished status (i), (ii), (iii) crime (i), (ii), (iii) Crimean War (i) ‘crony capitalism’ (i) cross-border capital flows anarchy in capital markets (i), (ii) capital flows and nation states (i), (ii), (iii) comparative advantage (i) economic integration, political proliferation (i) economic models (i), (ii) globalization (i), (ii) Japan (i) price stability and economic instability (i), (ii) the West’s diminished status (i), (ii), (iii) Cuba (i), (ii) Cultural Revolution (i), (ii), (iii) currency capital markets (i), (ii), (iii), (iv), (v) economic integration, political proliferation (i) indulging the US no more (i), (ii), (iii), (iv), (v) monetary union (i), (ii), (iii) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi), (vii) protectionism (i) single capital market and many nations (i), (ii) state capitalism (i) current account (balance of payments) (i), (ii), (iii), (iv), (v), (vi) current-account deficit (i), (ii), (iii), (iv), (v), (vi) current-account surplus capital markets (i), (ii), (iii), (iv), (v), (vi) indulging the US no more (i), (ii) resource scarcity (i) state capitalism (i), (ii), (iii), (iv), (v) Cyprus (i) Czechoslovakia (i) Czech Republic (i), (ii), (iii), (iv) debt capital markets (i), (ii), (iii) globalization (i) indulging the US no more (i), (ii), (iii), (iv) political economy and inequalities (i) population ageing (i) price stability and economic instability (i) state capitalism (i), (ii) deflation (i), (ii), (iii) demand-management policies (i), (ii), (iii) democracy (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) demographic deficit (i), (ii), (iii) demographic dividend (i), (ii), (iii) demographic profile (i), (ii), (iii) Deng Xiaoping (i), (ii), (iii) dependency ratios (i), (ii), (iii), (iv) Depression see Great Depression Desai, Meghnad (i) Deutsche Mark (i), (ii), (iii) developed world capital markets (i), (ii), (iii) globalization (i) political economy and inequalities (i), (ii), (iii), (iv) population demographics (i), (ii), (iii), (iv), (v), (vi), (vii) price stability and economic instability (i), (ii) state capitalism (i), (ii), (iii), (iv) trade (i), (ii), (iii), (iv), (v) diet (i), (ii), (iii), (iv), (v), (vi) see also food diversification (i), (ii) division of labour (i) dollar see US dollar Dominican Republic (i) dot.com bubble (i), (ii) drugs (i), (ii), (iii) Dubai Ports World (DP World) (i), (ii) Dutch East India Company (i), (ii) East Asia (i), (ii) Eastern Europe capital markets (i), (ii) migration (i), (ii), (iii) scarcity (i) state capitalism (i) the West’s diminished status (i), (ii), (iii) East Germany (i), (ii), (iii), (iv), (v) East India Company (i), (ii), (iii), (iv), (v), (vi), (vii) Economic Consequences of the Peace (Keynes) (i), (ii), (iii) economic crisis see also Asian economic crisis anarchy in capital markets (i), (ii) economic instability (i) price stability and economic instability (i), (ii) state capitalism (i) trade (i), (ii) economic growth capital markets (i), (ii), (iii) demographic dividends and deficits (i) globalization (i), (ii), (iii) political economy and inequalities (i), (ii), (iii) a post-dollar financial order (i) price stability and economic instability (i), (ii), (iii), (iv) scarcity (i), (ii), (iii), (iv), (v), (vi) trade (i), (ii) US domestic reform (i) economic instability (i), (ii), (iii), (iv), (v), (vi), (vii) economic models (i), (ii), (iii) economic rent (i), (ii), (iii), (iv), (v), (vi) economics (i), (ii), (iii), (iv), (v) economies of scale (i), (ii), (iii) The Economist (i) Ecuador (i) EdF (Électricité de France) (i), (ii) education capital markets (i) migration (i), (ii), (iii) political economy and inequalities (i), (ii), (iii), (iv) resource scarcity (i) state capitalism (i) Eichengreen, Barry (i), (ii) elderly population (i), (ii), (iii), (iv), (v) electricity (i) Elizabeth II, Queen (i) Ellis Island (i), (ii) emerging economies anarchy in capital markets (i), (ii), (iii), (iv), (v) globalization (i), (ii), (iii), (iv), (v) indulging the US no more (i), (ii), (iii), (iv), (v), (vi) political economy and inequalities (i), (ii), (iii), (iv), (v) population demographics (i), (ii), (iii), (iv), (v), (vi) price stability and economic instability (i), (ii), (iii), (iv), (v) scarcity (i), (ii), (iii), (iv) secrets of Western success (i), (ii), (iii), (iv), (v), (vi), (vii) state capitalism (i), (ii), (iii), (iv), (v), (vi), (vii) trade (i), (ii), (iii), (iv), (v) Western progress (i), (ii), (iii) the West’s diminished status (i), (ii), (iii), (iv), (v) ‘enabling’ resources (i), (ii), (iii), (iv) The End of History (Fukuyama) (i) energy supplies political economy and inequalities (i), (ii), (iii), (iv) politics and economics (i) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi) resource scarcity (i), (ii) Russian power politics (i) Spain and silver (i) state capitalism (i), (ii), (iii) the West’s diminished status (i), (ii), (iii) Engels, Friedrich (i) England (i), (ii), (iii) English language (i) English Premier League (i), (ii), (iii) Enlightenment (i), (ii), (iii), (iv), (v), (vi) Enron (i) Entente Cordiale (i) equities anarchy in capital markets (i), (ii), (iii), (iv), (v) population ageing (i), (ii), (iii) a post-dollar financial order (i) price stability and economic instability (i), (ii), (iii), (iv), (v) savings (i) An Essay on the Principle of Population (Malthus) (i), (ii), (iii) EU see European Union euro (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Europe political economy and inequalities (i), (ii) population demographics (i), (ii), (iii), (iv), (v) price stability and economic instability (i), (ii), (iii) secrets of Western success (i), (ii), (iii), (iv), (v) Spain and silver (i) state capitalism (i), (ii) trade (i), (ii) the West’s diminished status (i), (ii), (iii), (iv), (v), (vi) European Central Bank (i), (ii), (iii), (iv) European Union (EU) economic integration, political proliferation (i), (ii) migration (i), (ii), (iii) state capitalism (i) trade (i) the West’s diminished status (i), (ii), (iii), (iv), (v), (vi) exchange rates anarchy in capital markets (i), (ii), (iii), (iv), (v), (vi) income inequality (i) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi), (vii) sovereign wealth funds (i) the West’s diminished status (i) exports China (i), (ii) political economy and inequalities (i) price stability and economic instability (i), (ii), (iii) state capitalism (i), (ii) trade (i), (ii), (iii), (iv) Eyser, George (i) Fannie Mae (i) Federal Open Markets Committee (FOMC) (i), (ii) Federal Reserve anarchy in capital markets (i), (ii), (iii) economic integration, political proliferation (i) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi) the West’s diminished status (i), (ii), (iii) Ferrari (i) fertility rates (i), (ii), (iii), (iv), (v), (vi) Fidelity International (i) financial services industry (i), (ii), (iii), (iv) Finland (i) First World War (i), (ii), (iii), (iv), (v), (vi) FOMC see Federal Open Markets Committee food political economy and inequalities (i), (ii), (iii), (iv) price stability and economic instability (i), (ii), (iii), (iv), (v) rent-seeking behaviour (i) resource scarcity (i), (ii) savings (i) state capitalism (i), (ii), (iii) the West’s diminished status (i), (ii), (iii) Forbes.com (i) foreign direct investment anarchy in capital markets (i), (ii) income inequality (i) population demographics (i), (ii) trade (i), (ii), (iii), (iv), (v) foreign-exchange reserves anarchy in capital markets (i), (ii), (iii), (iv), (v), (vi), (vii) indulging the US no more (i), (ii), (iii), (iv), (v) price stability and economic instability (i) single capital market and many nations (i) state capitalism (i), (ii), (iii), (iv) fossil fuels (i) France economic integration, political proliferation (i), (ii) indulging the US no more (i), (ii) Louisiana Purchase (i), (ii) political economy and inequalities (i), (ii) population demographics (i) state capitalism (i), (ii), (iii), (iv), (v), (vi) trade (i) the West’s diminished status (i), (ii) Frank, Barney (i) Freddie Mac (i) freedom of speech (i), (ii) free market (i), (ii), (iii), (iv), (v), (vi) free trade (i), (ii), (iii), (iv), (v) Friedman, Milton (i), (ii), (iii) Friedman, Thomas (i) Fu Chengyu (i) fuel (i), (ii), (iii), (iv) Fukuyama, Francis (i) fund managers (i), (ii), (iii), (iv) G7 (i), (ii), (iii), (iv), (v) G8 (i), (ii), (iii) G20 (i), (ii), (iii), (iv), (v), (vi), (vii) Gagon, Joseph E.


The Power Surge: Energy, Opportunity, and the Battle for America's Future by Michael Levi

addicted to oil, American energy revolution, Berlin Wall, British Empire, business cycle, Carmen Reinhart, crony capitalism, deglobalization, energy security, Exxon Valdez, fixed income, full employment, global supply chain, hiring and firing, hydraulic fracturing, Induced demand, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, manufacturing employment, oil shale / tar sands, oil shock, peak oil, RAND corporation, Ronald Reagan, Silicon Valley, South China Sea

Worse was what the episode apparently revealed about the relationship between renewable energy and government. Solyndra, they said, existed only because government bureaucrats had handed it hundreds of millions of taxpayer dollars. At best, its executives squandered that money, in the process destroying more than a thousand jobs. At worst, some pundits and political operatives darkly suggested, the pile of cash was an invitation to crony capitalism, with money simply steered to the president’s political friends.20 Here, in one small company, was everything that many people found wrong with alternative energy. The technology was nowhere close to being ready to compete with fossil fuels. This meant it required so much government intervention that corruption and incompetence were inevitable results. It certainly wasn’t a recipe for economic revival; one merely needed to ask the laid-off Solyndra employees about that.

There are doubtless many occasions in which more innovation would be beneficial. But it is far from clear that governments are much good at identifying them. Government analysts evaluating projects for potential support don’t face the same financial incentives to get things right that private sector financiers do. Worse, this all can quickly be compounded by politics. That doesn’t require anything nefarious, like the debunked claims of crony capitalism surrounding Solyndra; it simply requires governments and their agencies to seek their own survival, as they are wont to do. Regular failures of government-backed companies make for awful politics, so in the long run big-ticket risk-taking government programs are rare. Instead, those programs often end up supporting less-than-innovative activities; alternatively, they sometimes just die. And there’s a final problem with government efforts to drive innovation so extensively that renewable energy beats fossil fuels: even if they work the way they ought to in theory, it’s far from clear that they will actually succeed in their ultimate goals.

American Bankruptcy Insitute, “Annual Business and Non-business Filings by Year (1980‒2011),” 2012, http://www.abiworld.org/AM/ AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay. cfm&CONTENTID=65139. 19. Chris Gentilviso, “President Obama Visits Green Energy Start-Up Solyndra,” Time.com, May 26, 2010, http://newsfeed.time.com/2010/05/26/ president-obama-visits-green-energy-start-up-solyndra/. 20. Seema Mehta, “Romney Accuses Obama of ‘Crony Capitalism’ in Solyndra Trip,” Los Angeles Times, May 31, 2012. 21. Clean Energy Ministerial, “Energy Ministers Announce Achievements and Actions for a Clean Energy Future at CEM3,” 2012, http://www. cleanenergyministerial.org/MediaPublications/Newsletters/Summer2012/TopStory1.aspx. 22. Krister Aanesen, Stefan Heck, and Dickon Pinner, Solar Power: Darkest before Dawn (New York: McKinsey and Company, May 2012). 23.


American Secession: The Looming Threat of a National Breakup by F. H. Buckley

Affordable Care Act / Obamacare, Andrei Shleifer, Bernie Sanders, British Empire, Cass Sunstein, colonial rule, crony capitalism, desegregation, diversified portfolio, Donald Trump, Francis Fukuyama: the end of history, hindsight bias, illegal immigration, immigration reform, income inequality, old-boy network, race to the bottom, Republic of Letters, reserve currency, Ronald Coase, transaction costs, Washington Consensus, wealth creators

—Marvin Olasky, The World Buckley is by turns scathing, funny, and sympathetic, but always well-informed. He rolls the stone away from the American heart. —Allen Guelzo An important and provocative book. —Michael Ledeen, Front Page Magazine Frank Buckley is one of the most astute observers of the modern American scene. —Deroy Murdock Praise for The Republic of Virtue Bracing stuff … his writing is lucid and often witty. —Wall Street Journal Political corruption, in the form of crony capitalism, is a silent killer of our economy. Frank Buckley’s new book shows how we can rein it in and help restore the Republic. —William Bennett, former Secretary of Education This is Buckley at his colorful, muckraking best—an intelligent, powerful, but depressing argument laced with humor. —Gordon S. Wood, Pulitzer Prize winner Praise for The Way Back: Restoring the Promise of America Frank Buckley marshals tremendous data and insight in a compelling study.

Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W. W. Norton, 2012), p. 244. Politically connected banks received larger bailouts than financial institutions that spent less on lobbying or political contributions. Benjamin M. Blau, “Central Bank Intervention and the Role of Political Connections,” Mercatus Center, George Mason University, October 2013. 18 Malcolm S. Salter, “Crony Capitalism American Style: What Are We Talking About Here?” Harvard Business School Working Paper 15-025 (October 22, 2014). See Timothy P. Carney, The Big Ripoff: How Big Business and Big Government Steal Your Money (Hoboken, N.J.: John Wiley, 2006). 19 Cheol Liu and John L. Mikesell, “The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending,” Public Administration Review, vol. 74, no. 3 (May/June 2014): 346–59. 20 Howard Ball, Murder in Mississippi: United States v.


pages: 240 words: 60,660

Models. Behaving. Badly.: Why Confusing Illusion With Reality Can Lead to Disaster, on Wall Street and in Life by Emanuel Derman

Albert Einstein, Asian financial crisis, Augustin-Louis Cauchy, Black-Scholes formula, British Empire, Brownian motion, capital asset pricing model, Cepheid variable, creative destruction, crony capitalism, diversified portfolio, Douglas Hofstadter, Emanuel Derman, Eugene Fama: efficient market hypothesis, fixed income, Henri Poincaré, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, Isaac Newton, Johannes Kepler, law of one price, Mikhail Gorbachev, Myron Scholes, quantitative trading / quantitative finance, random walk, Richard Feynman, riskless arbitrage, savings glut, Schrödinger's Cat, Sharpe ratio, stochastic volatility, the scientific method, washing machines reduced drudgery, yield curve

Now we prop up our own markets because it suits us to do so. The great financial crisis has been marked by the failure of models both qualitative and quantitative. During the past two decades the United States has suffered the decline of manufacturing; the ballooning of the financial sector; that sector’s capture of the regulatory system; ceaseless stimulus whenever the economy has wavered; taxpayer-funded bailouts of large capitalist corporations; crony capitalism; private profits and public losses; the redemption of the rich and powerful by the poor and weak; companies that shorted stock for a living being legally protected from the shorting of their own stock; compromised yet unpunished ratings agencies; government policies that tried to cure insolvency by branding it as illiquidity; and, on the quantitative side, the widespread use of obviously poor quantitative security valuation models for the purpose of marketing.

Everyone should understand the difference between a model and reality and be unastonished at the inability of oneor two-inch equations to represent the convolutions of people and markets. What did shock and disturb me was the abandonment of the principle that everyone had paid lip service to: the link between democracy and capitalism. We were told not to expect reward without risk, gain without the possibility of loss. Now we have been forced to accept crony capitalism, private profits and socialized losses, and corporate welfare. We have seen corporations treated with the kindness owed to individuals and individuals treated pragmamorphically, as things. When models in physics fail, they fail precisely, and often expose a paradox that opens a door. When models in the social sciences fail, they fail bluntly, with no hint as to what went wrong and no clue as to what to do next.


pages: 547 words: 172,226

Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu, James Robinson

"Robert Solow", Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, banking crisis, Bartolomé de las Casas, Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, collective bargaining, colonial rule, conceptual framework, Corn Laws, creative destruction, crony capitalism, Deng Xiaoping, desegregation, discovery of the americas, en.wikipedia.org, European colonialism, failed state, Fall of the Berlin Wall, falling living standards, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Francisco Pizarro, full employment, income inequality, income per capita, indoor plumbing, invention of movable type, invisible hand, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kickstarter, land reform, mass immigration, Mikhail Gorbachev, minimum wage unemployment, Mohammed Bouazizi, Paul Samuelson, price stability, profit motive, Rosa Parks, Scramble for Africa, Simon Kuznets, spice trade, spinning jenny, Steve Ballmer, Steve Jobs, trade liberalization, trade route, transatlantic slave trade, union organizing, upwardly mobile, Washington Consensus, working poor

In contrast, the Egyptian Revolution was more a coup by a group of military officers. When Egypt changed sides in the cold war and became pro-Western, it was therefore relatively easy, as well as expedient, for the Egyptian military to change from central command to crony capitalism as a method of extraction. Even so, the better economic performance of Egypt compared with North Korea was a consequence of the more limited extractive nature of Egyptian institutions. For one thing, lacking the stifling control of the North Korean Communist Party, the Egyptian regime had to placate its population in a way that the North Korean regime does not. For another, even crony capitalism generates some incentives for investment, at least among those favored by the regime, that are totally absent in North Korea. Though these details are all important and interesting, the more critical lessons are in the big picture, which reveals that in each of these cases, extractive political institutions have created extractive economic institutions, transferring wealth and power toward the elite.

These structures themselves were the outcome of a long vicious circle that featured lack of political centralization and the disastrous effects of the slave trade. In Zimbabwe, there was much more of a construction of a new form of extractive institutions, because the British South Africa Company created a dual economy. Uzbekistan could take over the extractive institutions of the Soviet Union and, like Egypt, modify them into crony capitalism. The Soviet Union’s extractive institutions themselves were in many ways a continuation of those of the tsarist regime, again in a pattern predicated on the iron law of oligarchy. As these various vicious circles played out in different parts of the world over the past 250 years, world inequality emerged, and persists. The solution to the economic and political failure of nations today is to transform their extractive institutions toward inclusive ones.

Our discussion of child labor and its use for picking cotton in Uzbeksitan follows Kandiyoti (2008), available at www.soas.ac.uk/cccac/events/cotton-sector-in-central-asia-2005/file49842.pdf. The quote from Gulnaz is on p. 20 of Kandiyoti. On the Andijon uprising, see International Crisis Group (2005). The description of the election of Joseph Stalin in the Soviet Union is reproduced from Denny (1937). Our analysis of “crony capitalism” in Egypt follows Sfakianakis (2004). CHAPTER 14 : BREAKING THE MOLD Our treatment of Botswana follows Acemoglu, Johnson, and Robinson (2003); Robinson and Parsons (2006); and Leith (2005). Schapera (1970) and Parsons, Henderson, and Tlou (1995) are fundamental works. High Commissioner Rey is quoted in Acemoglu, Johnson, and Robinson (2003), p. 96. The discussion of the three chiefs’ visit to England follows Parsons (1998), and all quotes relating to this come from his book: Chamberlain, pp. 206–7; Fairfield, p. 209; and Rhodes, p. 223.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Black Swan, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, joint-stock company, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

Several senior officials of the august Ministry of Finance were entertained at a ‘pantyless shabu-shabu restaurant’ that had a mirrored floor; the suspicion was that these officials provided advance information to their hosts about impending changes in financial regulations. When the real estate bubbles in Thailand and Malaysia and the other nearby Asian countries imploded and the banks incurred large losses, ‘crony capitalism’ suddenly appeared – favored treatment for certain borrowers that somehow had not been evident in the earlier years of exuberant economic growth. Indonesia had been a ‘Suharto family business’ for more than thirty years – and remarkably successful measured by the increase in its GDP. When Indonesia was doing well, the banks were happy to make loans to the business enterprises headed by President Suharto’s children – indeed some of the banks were headed by his children.

Most banks, with the exception of those in Singapore and Hong Kong, failed. The closing of many banks in Indonesia triggered racial strife, and an immense run on the currency which lost more than 70 percent of its value. When the crises occurred, the play script was a reprise of similar events in Japan in the previous decade. The chatter about the East Asian miracle disappeared and new buzzwords arose – crony capitalism, spontaneous privatization, and destabilizing speculation. The sharp depreciation of the currencies led to significant losses for those firms that had borrowed US dollars or Japanese yen or some other foreign currency. The banks that had lent to these firms also incurred losses; the banks in most of the Asian countries toppled into bankruptcy because of their own revaluation losses and the losses of the firms to which they had made loans.

Loans on a scale that seems beyond any possible need can be seen as lending freely. The East Asian crisis of 1997 The financial crisis in East Asia that started in July 1997 involved euphoric lenders in developed countries keen on diversifying their portfolios, and developing-country borrowers that wanted to increase their investments and their growth rates and that had been pushed by industrial countries to deregulate their financial markets. Other factors included crony capitalism in Indonesia, weak government in Thailand, enormous conglomerates (chaebol) in South Korea, and many bad bank loans. The catatonic state of economic policy in Japan robbed the area of what had been a strong source of demand, and the expansion of Japanese direct investment into lower-wage areas and of Japanese bank loans contributed to the increases in the current account deficits in these countries.


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They Don't Represent Us: Reclaiming Our Democracy by Lawrence Lessig

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Berlin Wall, Bernie Sanders, blockchain, Cass Sunstein, Columbine, crony capitalism, crowdsourcing, David Brooks, do-ocracy, Donald Trump, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, illegal immigration, income inequality, Jaron Lanier, Jeff Bezos, Joi Ito, Mark Zuckerberg, obamacare, Parag Khanna, plutocrats, Plutocrats, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Ronald Reagan, Shoshana Zuboff, Silicon Valley, Skype, speech recognition, Steven Levy, Upton Sinclair

Raskin and John Bonifaz, The Wealth Primary (Washington, DC: Center for Responsive Politics, 1994). 124.Bernie Sanders, “A World for All of Us, Not Just the Billionaires,” Nation, June 21, 2018, available at link #77. 125.Tad Dehaven, “Corporate Welfare and the Global Economic Crisis,” Policy Analysis no. 703 (July 25, 2012), available at link #78; Jason Brennan, “The Right to Good Faith: How Crony Capitalism Delegitimizes the Administrative State,” Georgetown Journal of Law & Public Policy 317, 334 (2013); Malcolm S. Salter, “Crony Capitalism, American Style: What Are We Talking About Here?,” Harvard Edmond J. Safra Center for Ethics, Working Papers No. 50 (October 22, 2014). 126.Benjamin I. Page, Jason Seawright, and Matthew J. Lacombe, Billionaires and Stealth Politics (Chicago: University of Chicago Press, 2018). 127.See Theda Skocpol and Vanessa Williamson, The Tea Party and the Remaking of Republican Conservatism (Oxford: Oxford University Press, 2016). 128.Indeed, the median household income of the twenty smallest states is below the median household income of the top twenty.

But if the technique of suppressing the vote of your opponent were open and notorious, the beneficiaries would turn on local political control, and not the economic interests of the most wealthy. What these five differently distorting inequalities do together is not easy to predict. Along some vectors—tax cuts—they may be additive. But along a wide range of issues, they conflict. Tea Party Republicans hate crony capitalism. The rich don’t. Swing-state Democrats turn a blind eye to steel tariffs. Democrats generally don’t. Rather than a bias that runs in an obvious direction, the sum of these different inequalities bends consistently in no particular direction. This is not the physics of a plutocracy. It is the dynamic of a vetocracy—a “veto-ocracy,” as Francis Fukuyama puts it.129 As Fukuyama describes, the American Constitution already embeds many veto points for any substantial legislation.


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The Jakarta Method: Washington's Anticommunist Crusade and the Mass Murder Program That Shaped Our World by Vincent Bevins

Albert Einstein, American ideology, anti-communist, Berlin Wall, Branko Milanovic, British Empire, centre right, colonial rule, crony capitalism, cuban missile crisis, Deng Xiaoping, European colonialism, Fall of the Berlin Wall, feminist movement, Gini coefficient, income inequality, land reform, market fundamentalism, megacity, Nelson Mandela, RAND corporation, Ronald Reagan, sexual politics, South China Sea, structural adjustment programs, union organizing

Young Barack Obama had seen what this dynamic did to his stepfather. “Guilt is a luxury only foreigners can afford,” Lolo told Barack’s mother. Lolo did understand. “She didn’t know what it is like to lose everything, to wake up and feel her belly eating itself… without absolute concentration, one could easily slip, tumble backward.”2 There’s a term that broadly describes this kind of economic arrangement. The people of Indonesia and Brazil lived under “crony capitalism.” This was a very different reality from that of Washington’s European, capitalist allies. Francisca and her family arrived in Holland in 1968, and saw immediately how different Western Europe’s dynamic, successful societies were from the Suharto regime. The Communist Party had won a few seats in the most recent Dutch election, and participated in Parliament. In France and Italy, the communist parties aligned with Moscow were still major players.

They also claimed, on the same day, that all of this left them no choice but to declare martial law. Military units fanned out to arrest opposition leaders, the first of whom was the Liberal Party Senator Benigno Aquino Jr. Suharto already had an anticommunist ally in Marcos, but now he—and Washington—had a friendly authoritarian regime in Southeast Asia’s second most-populous country. Marcos, with active US support, created his own version of crony capitalism with record-setting levels of corruption. He went on to kill thousands of people, often dumping their bodies in public in order to terrorize his enemies.46 Marineros Constitucionalistas As 1973 started, Pedro Blaset was twenty-three, a working-class sailor in Chile’s traditionally more upper-class, conservative Navy. He was lucky enough to hop on a cruiser trip to Switzerland for six months, and had missed much of the radicalization back home.

“In an historical sense—and especially as seen from the South—the Cold War was a continuation of colonialism through slightly different means,” writes Odd Arne Westad. “The new and rampant interventionism we have seen after the Islamist attacks on America in September 2001 is not an aberration but a continuation—in a slightly more extreme form—of US policy during the Cold War.”64 In Africa, the civil wars ended in different ways, but crony capitalism and resource extraction became the rule almost everywhere.65 In Eastern Europe, the collapse of communism was not as clean a process as the West often believed. Nury, the daughter of Sukarno’s ambassador to Cuba, had moved to Bulgaria with her Bulgarian husband after she left Fidel’s care in Havana. In 1990, Bulgaria held an election. Despite Washington’s generous support for the opposition, the Bulgarian Socialist Party—the new name for the Communists—won.


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Pity the Billionaire: The Unexpected Resurgence of the American Right by Thomas Frank

Affordable Care Act / Obamacare, bank run, big-box store, bonus culture, business cycle, collateralized debt obligation, collective bargaining, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Deng Xiaoping, financial innovation, housing crisis, invisible hand, Kickstarter, money market fund, Naomi Klein, obamacare, payday loans, profit maximization, profit motive, road to serfdom, Robert Bork, Ronald Reagan, shareholder value, strikebreaker, The Chicago School, The Myth of the Rational Market, Thorstein Veblen, too big to fail, union organizing, Washington Consensus, white flight, Works Progress Administration

The age of the giant corporation is here to stay of course, and as long as it is, big government must be on hand to curb its abuses. When the system is corrupted, as it obviously was in the case of the bailouts—and the subprime lending spree, and the West Virginia mine disaster, and the BP oil spill—the obvious answer is to clean up government so it can perform its police function properly. But that’s not how the revivified Right understands things. Instead, they blast the entire structure of the modern economy as “crony capitalism” or “socialism” and find, conveniently, that we can only cure its ills by doing away with the big-government side of the equation—with the regulating and taxing and pension-giving side. And thus are our choices spread before us. On the one hand, the small-business utopia; on the other, “socialism.” One system is “capitalism,” the “American Way of Life”; it is in harmony with the rhythms of nature itself; but the other is something alien, something impure, something dishonest.24 Taking this tack allowed the renaissance Right to do a very remarkable thing: to pretend to be an enemy of big business.* Not because market actors misbehave, of course, but because big business is insufficiently capitalist.

Even the issues on which Pompeo focused his efforts were also, according to the Washington Post, signature Koch concerns: zapping EPA regulations and defunding an online database where people can look up product recalls.31 But what the sociologist Mills called “the ideology of utopian capitalism” blurs all this. The Tea Partiers aren’t the pawns of big business; because they believe in markets, they’re the sworn enemies of big business. Got that? And the way they’re going to take their revenge on the crony-capitalist behemoth is by attacking government. Recall, again, Paul Ryan’s famous Forbes essay, “Down with Big Business.” In it this conservative’s conservative painted a noxious picture of “crony capitalism,” telling us how lobbyists for the biggest firms cut deals with government and secured favors like the hated TARP, which Ryan called “an ad hoc, opaque slush fund for large institutions that are able to influence the Treasury Department’s investment decisions behind-the-scenes.” Which was accurate enough. What surprises is the direction Ryan’s animus takes us from this starting point: the problem, in his telling, was not lousy decisions by government; it was that government made any decisions at all.


pages: 538 words: 121,670

Republic, Lost: How Money Corrupts Congress--And a Plan to Stop It by Lawrence Lessig

asset-backed security, banking crisis, carried interest, circulation of elites, cognitive dissonance, corporate personhood, correlation does not imply causation, crony capitalism, David Brooks, Edward Glaeser, Filter Bubble, financial deregulation, financial innovation, financial intermediation, invisible hand, jimmy wales, Martin Wolf, meta analysis, meta-analysis, Mikhail Gorbachev, moral hazard, Pareto efficiency, place-making, profit maximization, Ralph Nader, regulatory arbitrage, rent-seeking, Ronald Reagan, Sam Peltzman, Silicon Valley, single-payer health, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, WikiLeaks, Zipcar

What wins in the market is too often not what “a free market” would choose, but what a market bent by tariffs and subsidies and endless incumbency protective regulation defaults to. Call that “crony capitalism.” Our tax system is an abysmal inefficient mess not because of idiots at the IRS or on the Joint Committee on Taxation, but because crony capitalists pay top dollar to distort the system to their benefit. We don’t have real financial reform, because millions have been spent to protect bloated banks. We don’t have real health care reform, because the insurance companies and pharmaceutical companies had the power to veto any real change to the insanely inefficient status quo. Adam Smith never defended crony capitalism. Neither did Friedrich Hayek, or Milton Friedman, or William F. Buckley, or Barry Goldwater, or Ronald Reagan. Franklin Delano Roosevelt almost did, but he was shaken back to his senses by his own Supreme Court.

It may well be, as John Kenneth Galbraith puts it, that “out of the pecuniary and political pressures and fashions of the time, economics and larger economic and political systems cultivate their own version of truth.”51 But these “versions” are still experienced as “versions of the truth,” not outright fraud. “No conspiracy was necessary,” as Simon Johnson and James Kwak put it in their 2010 book, 13 Bankers: “By 1998, it was part of the worldview of the Washington elite that what was good for Wall Street was good for America.”52 As Raghuram Rajan writes, “Cognitive capture is a better description of this phenomenon than crony capitalism.”53 Still, pure ideas are not the whole story. Not by a long shot. The campaign to deregulate the financial services sector was a campaign, even if it was also an ideology. When it began, none could have thought it would succeed. But soon after it began, as I describe in chapter 9, both Democrats and Republicans alike became starved for campaign funds. And as that starvation grew, both parties, but the Democrats in particular, found it made both dollars and sense to believe as the ideologues of deregulation told them to believe.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

"Robert Solow", Airbnb, Albert Einstein, American ideology, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, laissez-faire capitalism, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, uber lyft, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

There is a bigger story about regulation embedded in these examples. Anchored among incumbents’ existing structures, regulation all too often helps to saturate or cement markets. While many existing firms complain about the effects of regulations, they know how to manage business under them and, if they are skilled operators, they can turn government interventions in their favor. In the extreme form, the relation between regulator and business mutates into crony capitalism. “In much of the world,” writes economist Luigi Zingales, “the best way to make lots of money is not to come up with brilliant ideas and work hard at implementing them but, instead, to cultivate a government ally.”9 Surveying the battlefields of political lobbying, this rings true. It is not an unfamiliar thought that cronyism is an important part of Western economies – and perhaps it has been for a long time.

Chance character (i), (ii) Belgium profit margins (i) taxi services and regulation (i) Bell, Alexander Graham (i), (ii) Bell Labs (AT&T) (i) Bellamy, Edward (i) Bellman, Richard (i) benchmarking (i), (ii) benefits, and incomes (i) Benz, Karl (i) Bergman, Ingmar (i) Berkshire Hathaway (i) Berle, Adolf (i) Berra, Yogi (i) Bezos, Jeff (i) Bhide, Amar (i) big firms big firm market dominance (i) and investment allocation for innovation (i) and private standards (i) relative importance of in European countries (i) reputation of (i) see also firm boundaries; firms; multinational (global) companies “big swinging dicks” (i) big-data business models (i) biofuels and EU regulation (i) see also energy sector biotechnological sector, and EU regulation (i) Bismarck, Otto von (i) bitcoin (i) BlackBerry (i) blackboard economics (i) Blackrock (i) blockchain (mutual distributed ledger) technology (i) Blue Ribbon Commission (US) (i) The Blues Brothers (movie) (i) boom and bust cycles (i), (ii), (iii) boomer (or baby boomer) generation (i), (ii), (iii), (iv) Boston Consulting Group index of complicatedness (i) on performance imperatives (i) on working time of managing teams (i) branding (i), (ii) Brazil and BRIC concept (i), (ii) taxi services and regulation (i) BRIC as a Bloody Ridiculous Investment Concept (i) countries (Brazil, India, Russia, and China) (i), (ii) Bridgewater (i) Brin, Sergey (i) Britain see United Kingdom (UK) British managerialism (i) Brockovich, Erin (i) Brookings (i) Brown, Gordon (i) Brynjolfsson, Erik, The Second Machine Age (Brynjolfsson and McAfee) (i), (ii) budget process, and compliance officers (i) Buffett, Warren (i), (ii) bureaucracy and capitalism (i), (ii) and competition (i) and compliance officers (i) and globalization (i), (ii), (iii), (iv) and IBM (i) and index of complicatedness (Boston Consulting Group) (i) and Indian economy (i) and managerialism (i), (ii), (iii) and organizational diversification (i) and principal–agent debate (i) and socialism (i) see also bureaucracy brake; bureaucrats; corporate managerialism; managerialism bureaucracy brake, and regulation (Germany) (i) bureaucrats vs. entrepreneurs (i), (ii) see also bureaucracy; bureaucracy brake Burning Man festival (Nevada) (i) Burns, Scott, The Clash of Generations (Kotlikoff and Burns) (i) business-building skills, vs. financial skills (i) business cycles, and productivity (i) business development, and strategy (i), (ii) business information technology (IT) services (i) business investment and cash hoarding (i) and corporate net lending (i), (ii) declining trend (i) explanations for decline (i) and financial regulation (i), (ii) and gray capitalism (i) investment allocation for innovation and big firms (i) low investment growth vs. fast corporate borrowing growth (i) measuring issues (i) and mergers and acquisitions (i) and policy uncertainty (i), (ii) and shareholders (i), (ii), (iii) UK business investment (i), (ii) US business investment (i), (ii) see also asset managers; investment; R&D business management (i), (ii) see also corporate managerialism business productivity growth (i) Business Week, on Peter Drucker (i) CAC 40 index (France) (i) cadmium (i), (ii) Canada diffusion of innovations (i) GDP figures (i) North American Free Trade Agreement (i) cancer research, and innovation (i), (ii) capital accumulation, and capitalism (i) capital expenditure (capex) (i), (ii), (iii), (iv)n39 capital markets (external) (i), (ii), (iii), (iv), (v) capitalism and agency (i) and asset bubbles (i) and bureaucracy (i), (ii) and capital accumulation (i) “complex by design” capitalism (i) criticism of Western capitalism (i) crony capitalism (i) death of capitalism utopia and socialism (i) decline of Western capitalism (i) and digital age (i) and dissent (i), (ii), (iii) and eccentricity (i), (ii), (iii), (iv), (v) and economic dynamism (i), (ii), (iii) and Enlightenment (i), (ii) and entrepreneurship (i), (ii) financial capitalism (i), (ii), (iii), (iv) free-market capitalism (i) and individual freedom (i), (ii), (iii) and innovation (i), (ii), (iii), (iv), (v) joint-stock capitalism (i), (ii) and labor vs. work (i) vs. the market (i), (ii) Marxist monopolistic theory of (i) “middle-aged” capitalism (i), (ii), (iii) “money manager capitalism” (Hyman Minsky) (i) and organization (i) and planning machines (i) rentier capitalism (i), (ii), (iii), (iv), (v), (vi) and Swedish hybrid economy (i) and technology (i) see also capitalist ownership; corporate managerialism; entrepreneurs; entrepreneurship; the future (and how to prevent it); globalization; gray capitalism; regulation; rich people capitalist ownership and corporate globalism (i) and diversification (i) and gray capitalism: case of Harley-Davidson Motor Company (HD) (i); decline/obituary of capitalist ownership (i); dispersed ownership (i); gray ownership (i), (ii), (iii), (iv), (v), (vi); severing gray capital–corporate ownership link (i) ownership structure reforms (i) and pensions (i) and principal–agent problem (i) and uncertainty (i) car industry car sales and regulation (i) driverless vehicles (i), (ii), (iii), (iv) German car production and value chains (i) lean production (i) US environment-related regulations (i) Carew, Diana G.

(i) cargo services and deregulation (i) see also air cargo services cash hoarding (corporate savings) (i), (ii), (iii), (iv), (v) catalytic converter technology (i) Central Europe, German-Central European supply chain (i), (ii) chemicals, and EU regulation (i), (ii) Chicago school of economics (i) Chili, and Cybersyn project (i) China and BRIC concept (i), (ii) exports from European Union (i) GDP (2014) (i), (ii) and globalization (i), (ii), (iii) R&D spending (i) sovereign wealth fund (i) Christensen, Clayton (i), (ii) Churchill, Winston (i) Clark, Gregory (i), (ii)n41 classical market liberalism (i) Clinton, Bill (i) Club des Chiffrephiles (i) Coase, Ronald (i), (ii), (iii), (iv), (v) Coca-Cola (i) Code of Federal Regulations (US) (i) cognition, mechanistic vs. organic (i) collaboration “noise” (i) Comin, Diego (i) command economies (i), (ii) command-and-control (i), (ii) community-generated content, and socialism (i) companies see big firms; firm boundaries; firms; multinational (global) companies competition and bureaucracy (i) and containerization (of global trade) (i) vs. contesting markets (i) and financial regulation (i) and firm boundaries (i), (ii) and geography of production (i) and globalization (i) life-or-death competition (i), (ii), (iii), (iv) and market concentration (i) and mergers and acquisitions (i) move of from countries to firms (i), (ii) and multinationals (i) oligopolistic (or monopolistic) competition (i) and planning machines (i) see also market contestability competitive forces concept (i) complexity “complex by design” capitalism (i) market complexity (i) see also regulatory complexity/uncertainty compliance officers (i) complicatedness index (Boston Consulting Group) (i) compound growth (i) Compustat, corporate cash holdings (i) computer technology/computerization and corporate managerialism (i) and knowledge obsolescence (i) and labor (i) and leisure (i) and market socialism (i) and production (i) and quantum dots/cadmium (i) see also digitalization; ICT (information and communications technology); information technology (IT); software technology Conference Board (economics consultancy) (i), (ii) consolidation (i), (ii) see also mergers and acquisitions Consumer Protection Act (US) (i) containerization (of global trade) (i) contestability see market contestability contracts (i) copying, and strategy (i), (ii) corporate borrowing and low investment growth (i) see also corporate net lending corporate control, and specialization (i) corporate failure see failure corporate globalism (i), (ii), (iii) corporate managerialism and bureaucracy (i), (ii), (iii), (iv), (v) and capitalism, decline of (i), (ii), (iii) corporate destruction and innovation: IBM (i); Microsoft (i), (ii); Nokia (i), (ii), (iii), (iv), (v) formula of failure (i) and globalist worldview (i) and globalization (i), (ii), (iii), (iv) managerial ideology on the rise (i), (ii) planning: planning machines (i), (ii), (iii); risk and uncertainty (i); strategy (i) regulation (i), (ii) regulation and compliance officers (i) Swedish managerialist culture (i), (ii) value vs. numbers (i) see also bureaucracy corporate medical research, and financial regulation (i) corporate net lending (i), (ii) see also corporate borrowing corporate politics (i), (ii), (iii), (iv) see also political world corporate savings (cash hoarding) (i), (ii), (iii), (iv), (v) corporate size and entrepreneurship (i) and globalization (i) and regulation (i) corporate social responsibility (CSR) (i) corporate socialism (i), (ii) corporate socialization (i) corporate valuations (i) costs production costs (i), (ii), (iii) sunk costs (i), (ii), (iii), (iv) transaction costs (i), (ii), (iii), (iv), (v), (vi) transmission costs (i), (ii), (iii) Cowen, Tyler (i) creative destruction fear of and political institutions (i) and globalization (i) and innovation (i), (ii), (iii), (iv), (v) and New Machine Age (i) and Nokia (i) and present-day capitalism (i) see also withering credit rating agencies (i), (ii), (iii) Credit Suisse, on stock markets (i) crony capitalism (i) cronyism (i), (ii), (iii), (iv) culture of experimentation (i), (ii) see also entrepreneurs; entrepreneurship culture of individualism (i) see also dissent; eccentricity; freedom customer loyalty (i) Cybersyn project (i) cyclical effects, and productivity (i) da Vinci, Leonardo see Leonardo da Vinci Darwinianism (i), (ii) Das, Gurcharan (i) data see recorded data (national accounts) data economy, and productivity (i) DAX 30 index (Germany) (i) de Blasio, Bill (i) debt and dividends/share buybacks vs. investment (i), (ii) and economic decline (i) vs. equity funding (i), (ii), (iii), (iv), (v), (vi) and retirement savings (i), (ii) decision-making probabilistic decision-making (i), (ii) and strategy (i) decoupling (productivity/incomes) thesis (i), (ii) deregulation case of air cargo services (FedEx) (i) and diffusion of innovations (i), (ii) OECD product market regulation (PMR) indicators (i), (ii) and reallocation of business (i) and regulatory accumulation (i) wave in 1980s–1990s (i), (ii) see also regulation; regulatory complexity/uncertainty Descartes, René (i) design (i) development vs. research (i), (ii) see also incremental development; R&D diffusion and deregulation (i), (ii) and globalization (i), (ii) and occupational licenses (i) and productivity (i) and R&D (i) “diffusion machine” (i), (ii), (iii) digital age and capitalism (i) and politics (i) digitalization and innovation (i) and leisure (i) and managerialism (i) and productivity growth (i) and regulation (i) and second unbundling of production (i) see also computer technology/computerization; ICT (information and communications technology); information technology (IT); “servicification” (or “servitization”) direct-to-consumer sales (i) dirigisme (France) (i) discriminate dynamism theory (i) dispersed ownership (i) dissent (i), (ii), (iii), (iv) see also culture of individualism; eccentricity diversification and investment (i), (ii) organizational (i), (ii) dividends (i), (ii), (iii), (iv), (v) DJs, and jobs and technology debate (i) dock labor, and containerization (of global trade) (i) Dodd-–Frank Act (US) (i), (ii), (iii), (iv) Dolly the Sheep (i) Dr.


pages: 556 words: 141,069

The Profiteers by Sally Denton

Albert Einstein, anti-communist, Ayatollah Khomeini, Bay Area Rapid Transit, Berlin Wall, Boycotts of Israel, clean water, corporate governance, crony capitalism, Donald Trump, Edward Snowden, energy security, Fall of the Berlin Wall, G4S, invisible hand, James Watt: steam engine, Joan Didion, Kitchen Debate, laissez-faire capitalism, Mikhail Gorbachev, mutually assured destruction, Naomi Klein, new economy, nuclear winter, profit motive, Robert Hanssen: Double agent, Ronald Reagan, Silicon Valley, trickle-down economics, uranium enrichment, urban planning, WikiLeaks, wikimedia commons, William Langewiesche

The very day the hurricane struck, the US government’s Federal Emergency Management Agency (FEMA) contracted with Bechtel to provide mobile homes for 100,000 people in the region who had been displaced by the storm. (12) The legendary, nationally syndicated columnist Drew Pearson, seen here in the White House garden with President Lyndon Baines Johnson in 1964, was the harshest critic of John McCone and Bechtel. Pearson, and then his equally legendary successor, Jack Anderson, drew repeated public attention to the crony capitalism and revolving door they thought McCone and Bechtel epitomized. (13) Greg Mello, executive director of the Los Alamos Study Group, thought Wen Ho Lee “was an invented crisis, not an intelligence operation.” As Mello saw it, the arrest of Lee as a spy set the stage for the nation’s nuclear laboratory to be transferred into private hands. (14) Oakland California attorney J. Gary Gwilliam.

Institute for National Strategic Studies, National Defense University. January 1996. Burrows, Anne Platt, Paul Kucik; William Skinnyhorn; and John Straigis. “A Systems Analysis of the A.Q. Khan Network.” Social Sciences Seminar, December 8, 2005. Presented at the Freeman Spogli Institute for International Studies at Stanford University. Authors: “Competition—or Collusion? Privatization and Crony Capitalism in the Nuclear Weapons Complex: Some Questions from New Mexico.” Los Alamos Study Group. Authors: Damon Hill and Greg Mello. May 30, 2006. Fehner, Terrence R. “The U.S. Department of Energy and the Cold War.” Presented at the Conference on The Power of Free Inquiry and Cold War International History at the National Archives at College Park, Maryland. September 26, 1998. Israel, Rebekah. “American Responses to Israeli Foreign Policy Initiatives.”

Memorandum for Executive Secretary, CIA Management Committee. May 16, 1973. Declassified June 2007. National Security Archive. From Alfred L. Atherton, Jr., to Secretary of State. Department of State Action Memorandum. From CIA Director John McCone to President Lyndon Johnson. April 28, 1965. Declassified January 3, 1986. Hill, Damon, and Greg Mello. “Competition—or Collusion? Privatization and Crony Capitalism in the Nuclear Weapons Complex: Some Questions from New Mexico.” Los Alamos Study Group. May 30, 2006. “Iran-Contra Investigation. Testimony of George P. Shultz and Edwin Meese, III.” U.S. Congress. Joint Hearings Before the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition and the House Select Committee to Investigate Covert Arms Transactions with Iran. 100th Cong., 1st Sess.


pages: 296 words: 78,112

Devil's Bargain: Steve Bannon, Donald Trump, and the Storming of the Presidency by Joshua Green

4chan, Affordable Care Act / Obamacare, Ayatollah Khomeini, Bernie Sanders, business climate, centre right, Charles Lindbergh, coherent worldview, collateralized debt obligation, conceptual framework, corporate raider, crony capitalism, currency manipulation / currency intervention, Donald Trump, Fractional reserve banking, Goldman Sachs: Vampire Squid, Gordon Gekko, guest worker program, illegal immigration, immigration reform, liberation theology, low skilled workers, Nate Silver, Nelson Mandela, nuclear winter, obamacare, Peace of Westphalia, Peter Thiel, quantitative hedge fund, Renaissance Technologies, Robert Mercer, Ronald Reagan, Silicon Valley, social intelligence, speech recognition, urban planning

“There’s nothing to do in Tallahassee, so I get a lot more work done,” Schweizer joked to a visitor in the autumn of 2015. GAI is housed in a sleepy cul-de-sac of two-story brick buildings that looks like what you’d get if Scarlett O’Hara designed an office park. The unmarked entrance is framed by palmetto trees and sits beneath a large, second-story veranda with sweeping overhead fans, where the (mostly male) staff gathers in the afternoons to smoke cigars and brainstorm. Established in 2012 to study crony capitalism and governmental malfeasance, GAI is staffed with lawyers, data scientists, and forensic investigators and has collaborated with such mainstream news outlets as Newsweek, ABC News, and CBS’s 60 Minutes on stories ranging from insider trading in Congress to credit-card fraud among presidential campaigns. It’s a mining operation for political scoops that, for two years, had trained its investigative firepower on the Clintons.

“Trump,” Bannon proclaimed, “is the leader of a populist uprising. . . . What Trump represents is a restoration—a restoration of true American capitalism and a revolution against state-sponsored socialism. Elites have taken all the upside for themselves and pushed the downside to the working- and middle-class Americans.” Bernie Sanders had tried to warn them, but the Democrats hadn’t listened and didn’t break free of crony capitalism. “Trump saw this,” Bannon said. “The American people saw this. And they have risen up to smash it.” For all his early-morning bravado, Bannon sounded as if he still couldn’t quite believe it all. And what an incredible story it was. Given the central role he had played in the greatest political upset in American history, the reporter suggested that it had all the makings of a Hollywood movie.


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A Brief History of Neoliberalism by David Harvey

affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, business cycle, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

While the wealthiest Chinese business elite decamped to Singapore, a wave of revenge killings and attacks on property engulfed the rest of the Chinese minority, as ethnonationalism reared its ugly head in search of a scapegoat for the social collapse.9 The standard IMF/US Treasury explanation for the crisis was too much state intervention and corrupt relationships between state and business (‘crony capitalism’). Further neoliberalization was the answer. The Treasury and the IMF acted accordingly, with disastrous consequences. The alternative view of the crisis was that impetuous financial deregulation and the failure to construct adequate regulatory controls over unruly and speculative portfolio investments lay at the heart of the problem. The evidence for this latter view is substantial: those countries that had not liberated their capital markets—Singapore, Taiwan, and China—were far less affected than those countries, such as Thailand, Indonesia, Malaysia, and the Philippines, that had.

D. 183, 184, 206 Rosenblum, N. 212 Rosenthal, E. 218 Ross, A. 219 Rua, F. de la 105 rural areas 159 urban areas different 125, 126–7, 142–7 Russia 96, 105, 122, 139, 156, 182 freedom concept 17, 19, 32 freedom’s prospect 201, 202 neoliberal state 66, 76, 86 see also Soviet Union Sable, C. 212 Sachs, J. 186, 221 Saez, E. 208 Salerno, J. 214 Salim Group 34, 35–6 Salinas, C. 100–1 Saudi Arabia 27, 104, 139 Scandinavia 12–13 see also Sweden Schwab, K. 81 Seabrook, J. 219 Sen, A. 184 Shah of Persia 28 Shanghai 88, 127, 128, 131–3 passim, 136, 147–8 freedom’s prospect 157, 160 Sharapura, S. 214 Sharma, S. 216 Shenzhen 131, 133, 134, 136, 147 Shi, L. 217 ‘shock therapy’ 71 short-term contracts 166, 168 Silver, B. 222 Simon, W. 46, 49 Singapore 2, 169 and China 120, 138 neoliberal state 71, 81, 85–6 uneven development 89, 91, 96, 97, 116 slave trade 159 Slim, C. 17, 34, 35–6, 104 Smadja, C. 81 Smith, A. 20, 185 Smith, B. 221, 222 Smith, N. 27 social justice 41–2 socialism/communism 2, 12–13, 15, 86 consent 41–3 fight against 28 see also Cold War see also central planning; China; Marx; Soviet Union Soederberg, S. 214, 219 SOEs (state-owned enterprises, China) 125–6, 128, 129, 130, 132, 138, 144, 145 solidarity, social 80–1 Sommer, J. 219 Soros, G. 31, 34, 97–8, 186, 221 South Africa 3, 169 freedom’s prospect 185, 199, 203, 206 uneven development 91, 108, 116, 118 South America 120, 139, 140 consent, construction of 39, 40, 46, 54, 63 freedom concept 7–9, 11, 15–16, 28 freedom’s prospect 185, 186, 201, 206 neoliberal state 65, 74, 75, 79 neoliberalism on trial 153, 154, 160, 163, 165, 167, 174–5, 181 uneven development 91, 94–6, 104–6, 109, 115–18 US comparison with 189, 193, 194 see also Argentina; Brazil; Chile South East Asia 2 ASEAN 79 and China 120, 122, 130, 138–41 passim consent, construction of 40, 41, 53 freedom concept 5, 19, 31–2 neoliberal state 71, 76, 81, 85–6 neoliberalism on trial 153, 154, 156, 163, 167–9, 175, 178 uneven development 89, 91, 94, 96–7, 108–9, 116, 117, 118 see also crisis under Asia; Indonesia; Malaysia; Singapore; Thailand South Korea 2, 35, 169 and China 120, 123, 134, 136, 138–40 freedom’s prospect 199, 206 neoliberal state 72, 85 uneven development 89–91 passim, 94, 96, 97, 106–12, 115, 116, 118 ‘sovereignty’ 7 Soviet Union 117, 154 collapse of 3, 32, 87 freedom concept 5, 10, 22, 32 see also Russia Spain 12, 15 special economic zones (China) 130 sport 85, 132, 164 stagflation see under inflation Stanislaw, J. 51, 208, 211 state authoritarianism and market economy combined see China ‘crony capitalism’ 97 monopoly 98 -owned enterprises see SOEs uneven development 112, 115 see also neoliberal state; welfare Stevenson, C. 215 Stiglitz, J. 29, 51, 74, 152 freedom’s prospect 186, 221 uneven development 93, 98, 111, 118, 211, 213, 214 Strauss, L. 92 Stren, R. 212 strikes see unions structural adjustment 163, 188–9 student movements 99, 100 consent, construction of 41, 42, 44 Tiananmen Square 5, 123, 142, 176 Sudan 139, 173 Suez venture (UK) 55–6 Suharto, T.


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Equal Is Unfair: America's Misguided Fight Against Income Inequality by Don Watkins, Yaron Brook

3D printing, Affordable Care Act / Obamacare, Apple II, barriers to entry, Berlin Wall, Bernie Madoff, blue-collar work, business process, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, collective bargaining, colonial exploitation, corporate governance, correlation does not imply causation, creative destruction, Credit Default Swap, crony capitalism, David Brooks, deskilling, Edward Glaeser, Elon Musk, en.wikipedia.org, financial deregulation, immigration reform, income inequality, indoor plumbing, inventory management, invisible hand, Isaac Newton, Jeff Bezos, Jony Ive, laissez-faire capitalism, Louis Pasteur, low skilled workers, means of production, minimum wage unemployment, Naomi Klein, new economy, obamacare, Peter Singer: altruism, Peter Thiel, profit motive, rent control, Ronald Reagan, Silicon Valley, Skype, statistical model, Steve Jobs, Steve Wozniak, The Spirit Level, too big to fail, trickle-down economics, Uber for X, urban renewal, War on Poverty, wealth creators, women in the workforce, working poor, zero-sum game

Matthew Mitchell, “The Pathology of Privilege: The Economic Consequences of Government Favoritism,” Mercatus Center, July 9, 2012, http://mercatus.org/sites/default/files/The-Pathology-of-Privilege-Final_2.pdf (accessed May 28, 2015). 10. Timothy P. Carney, The Big Ripoff (New York: Wiley, 2006), pp. 59–61. 11. Chris Edwards, “Agricultural Subsidies,” DownsizingGovernment.org, June 2009, http://www.downsizinggovernment.org/agriculture/subsidies (accessed May 28, 2015). 12. Timothy P. Carney, Obamanomics (Washington, DC: Regnery, 2009), p. 122. 13. Hunter Lewis, Crony Capitalism in America: 2008–2012 (Edinburg, VA: AC2 Books, 2013), p. 104. 14. Timothy P. Carney, “Carney: How Hatch Forced Microsoft to Play K Street’s Game,” Washington Examiner, June 24, 2012, http://www.washingtonexaminer.com/carney-how-hatch-forced-microsoft-to-play-k-streets-game/article/2500453 (accessed May 28, 2015), Michael Kinsley, “Michael Kinsley: The Washington Lobbying Dance,” Los Angeles Times, April 5, 2011, http://articles.latimes.com/print/2011/apr/05/opinion/la-oe-kinsley-column-microsoft-20110405 (May 28, 2015). 15.

Russell Roberts, “Gambling with Other People’s Money: How Perverted Incentives Caused the Financial Crisis,” Mercatus Center, April 28, 2010, http://mercatus.org/publication/gambling-other-peoples-money (accessed May 28, 2015). 27. Jim Manzi, “Do CEOs Matter? Absolutely,” Atlantic, June 5, 2009, http://www.theatlantic.com/business/archive/2009/06/do-ceos-matter-absolutely/18819/ (accessed May 28, 2015). 28. Steven N. Kaplan, “The Real Story behind Executive Pay: The Myth of Crony Capitalism,” Foreign Affairs, April 3, 2013, https://www.foreignaffairs.com/articles/2013-04-03/real-story-behind-executive-pay (accessed May 28, 2015). 29. Piketty, Capital in the Twenty-First Century, pp. 302–303. 30. Albert R. Hunt, “Corporate Chiefs May Come to Rue Fat Paydays: Albert R. Hunt,” Bloomberg Business, February 19, 2007, http://www.bloomberg.com/apps/news?pid=newsarchive&refer=columnist_hunt&sid=arth8j9wbrcc (accessed May 28, 2015). 31.


pages: 352 words: 90,622

Thieves of State: Why Corruption Threatens Global Security by Sarah Chayes

Celtic Tiger, colonial rule, crony capitalism, drone strike, failed state, income inequality, microcredit, offshore financial centre, plutocrats, Plutocrats, structural adjustment programs, trade route, ultimatum game, WikiLeaks, winner-take-all economy, young professional

See also John of Salisbury’s description of the pope: “The Roman pontiff himself is burdensome and almost intolerable to everyone, since . . . he erects palaces and parades himself about not only in purple vestments but in gilded clothes.” John of Salisbury, Policraticus, trans. Cary J. Nederman (Cambridge: Cambridge University Press, 1990), bk. 6, chap. 24, p. 133. 4. Niccolò Machiavelli, The Prince, trans. (into French) Marie Gaille-Nikodimov (Paris: Librairie générale française, 2000), p. 131. 5. By 2014, the pattern was even visible to the mainstream Economist Magazine. See “Our Crony Capitalism Index: Planet Plutocrat,” March 15, 2014. Chapter Seven: Variation 1 1. Shana Marshall and Joshua Stacher, “Egypt’s Generals and Transnational Capital,” Middle East Research and Information Project 262: Spring 2012. 2. Robert Springborg, Naval Postgraduate School professor, quoted in Cam Simpson and Mariam Fan, “Egypt’s Army Marches, Fights, Sells Chickens,” Bloomberg Businessweek, February 17, 2011, http://buswk.co/1mh6qaN. 3.

Nederman (Cambridge: Cambridge University Press, 1990), bk. 5, chap. 10, p. 88. 11. Nathan Brown, “Why Do Egyptian Courts Say the Darndest Things,” Washington Post, March 25, 2014. 12. Gamal Amin, Egypt in the Era of Hosni Mubarak (Cairo: American University in Cairo Press, 2011), p. 8. 13. “Underlying the movement’s economic views is a conviction that the old order was run on the basis of corruption at all levels: crony capitalism at the top seeping down to lower-level coping mechanisms of those left out of the scramble to exploit state resources for private ends. What the Brotherhood offers as a remedy is virtue.” Nathan J. Brown, When Victory Becomes an Option: Egypt’s Muslim Brotherhood Confronts Success (Washington, D.C.: Carnegie Endowment for International Peace, January 2012), p. 15. A BBC interviewee described the Muslim Brotherhood as “untainted by sleaze, corruption, and cronyism” in “Egypt Election Results: Your Views,” BBC, June 24, 2012, http://bbc.in/Ot5ORd.


pages: 324 words: 93,606

No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy by Linsey McGoey

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, agricultural Revolution, American Legislative Exchange Council, bitcoin, Bob Geldof, cashless society, clean water, cognitive dissonance, collapse of Lehman Brothers, colonial rule, corporate governance, corporate social responsibility, crony capitalism, effective altruism, Etonian, financial innovation, Food sovereignty, Ford paid five dollars a day, germ theory of disease, hiring and firing, Howard Zinn, income inequality, income per capita, invisible hand, Jane Jacobs, Joseph Schumpeter, liquidationism / Banker’s doctrine / the Treasury view, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, meta analysis, meta-analysis, microcredit, Mitch Kapor, Mont Pelerin Society, Naomi Klein, obamacare, Peter Singer: altruism, Peter Thiel, plutocrats, Plutocrats, price mechanism, profit motive, Ralph Waldo Emerson, rent-seeking, road to serfdom, Ronald Reagan, school choice, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Slavoj Žižek, Steve Jobs, strikebreaker, The Wealth of Nations by Adam Smith, Thorstein Veblen, trickle-down economics, urban planning, wealth creators

In both pre-industrial and capitalist economies, wealth is often augmented through what Offer calls ‘economies of regard’: the ability to court favour through extending a network of exclusive political or social contacts; through knowing how to act, dress, and speak around such contacts; through sensitive adherence to duties of gift-giving and economic ‘freebies’ (the corporate box, the Wimbledon tickets, the conference goodie bags).14 Attention to ‘economies of regard’ helps to underscore a rather obvious point. Often, people lament the rise of ‘crony capitalism’ as if cronyism is an aberration of good operating practices. In reality, crony capitalism is not a perversion of business as usual. It is business as usual. In Guistra’s words, ‘generosity can be very profitable’. A curiosity noted by early anthropologists such as Malinowski is that gift-giving often increased the power of the initiator of a gift exchange more so than the recipient, augmenting a donor’s ability to capitalize on an ever-growing number of dependents.


pages: 307 words: 88,745

War for Eternity: Inside Bannon's Far-Right Circle of Global Power Brokers by Benjamin R. Teitelbaum

Affordable Care Act / Obamacare, bitcoin, Boris Johnson, creative destruction, crony capitalism, cryptocurrency, Donald Trump, Etonian, Francis Fukuyama: the end of history, illegal immigration, Joseph Schumpeter, liberal capitalism, liberal world order, mass immigration, mutually assured destruction, Network effects, Saturday Night Live, school choice, side project, Skype, South China Sea, Westphalian system, WikiLeaks

And about the prospect of violence returning to Europe and North America. He called for capitalism to be subordinated to spirituality—to Jewish or Christian values in particular—so as to blunt its instinct to treat human beings as commodities. He called for a conservative revolution, not against leftists, but against the conservative establishment in the West, which was peddling elitism and ensuring crony capitalism. A rebellion was bound to happen, he was sure. It would happen in Europe with nationalist parties like the UK Independence Party (UKIP) and National Rally (formerly National Front) in France. It would happen in the United States through the Tea Party—even Latin America and India were likely candidates. It’s not all good, he said: some of the movements are attracting racists and anti-Semites, but those elements are likely to disappear as the cause matures.

Evola was the partisan of the Western tradition but in absolute opposition to the Modernity and to the USA,” he wrote as the opening sally of his response. Dugin saw deep problems in Olavo’s accounting of the power dynamics in the world as well. Could you really equate the economic and cultural globalism emanating from the United States with that coming from the others? In other words, is there really as much Russo-Chinese militarism and Islam in the world as there is crony capitalism? Of course not, and any opponent of globalism should accordingly get his priorities straight. Further, while he understood the criticisms against the Russian state, what about America’s crimes? “Hiroshima and Nagasaki, the occupation of Iraq and Afghanistan, the bombing of Serbia.” It seemed preposterous to separate that legacy and “Western finance” from the United States on the grounds that its native culture was a helpless victim of it all.


pages: 554 words: 167,247

America's Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System by Steven Brill

Affordable Care Act / Obamacare, barriers to entry, Bernie Sanders, business process, call centre, collapse of Lehman Brothers, collective bargaining, crony capitalism, desegregation, Donald Trump, Edward Snowden, employer provided health coverage, medical malpractice, Menlo Park, Nate Silver, obamacare, Potemkin village, Ronald Reagan, Saturday Night Live, side project, Silicon Valley, the payments system, young professional

Santelli had concluded by suggesting that people in Chicago should stage their own “tea party” to protest the government’s heavy hand. Most political observers would later consider this the beginning of the Tea Party movement, the loosely organized assortment of grassroots groups of mostly conservative people that staged rallies across the country beginning in the spring of 2009 to protest all varieties of government interference and Washington crony capitalism. By the summer of 2009, Washington’s idea of healthcare reform would become the Tea Party’s prime target. For as Santelli screamed into his microphone, a group of capital insiders representing multiple factions of America’s biggest industry—healthcare—was negotiating exactly the kinds of secret deals that would have made Santelli scream louder had he known about them. CHAPTER 8 DEAL TIME March–April 2009 FOR THE SENATE FINANCE COMMITTEE, THERE WAS A SILVER LINING in the collapse of Lehman Brothers that had accelerated the financial meltdown: Antonios “Tony” Clapsis, a bearded, wiry twenty-eight-year-old who loved crunching numbers.

Then he had routinely vowed, as he put it during a town hall in Virginia, that in framing his healthcare reform bill, “We’ll have the negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.” Instead, he had given the Tea Party activists exhibit A in crony capitalism—if they ever found out about it. THE NONPROFITS’ PROFITS The hospitals were next up at the Finance Committee negotiating table. More than 75 percent of America’s 5,700 hospitals were officially nonprofit institutions. So, they have no shareholders and, therefore, no stock analysts following them and issuing reports that Tony Clapsis could read. However, more than a thousand were run by for-profit companies, most of which had publicly held stocks that the analysts did follow.

But that shouldn’t have been a problem in Democratic Philadelphia, especially for Specter, who had begun his political career there. What had inflamed the crowd was healthcare reform, which was now starting to be called Obamacare. The crowd had been organized by one of the Tea Party groups that had sprung up following Rick Santelli’s CNBC rant in February. They were fed up, they proclaimed, with bailouts, crony capitalism, secret deals, and the government relentlessly trying to interfere with their lives. To them, Obamacare epitomized all that. The next day, in Adel, Iowa, Chuck Grassley got booed off the stage by hecklers holding “You’re fired” signs. Their principal complaint, too, was the purported government takeover of their healthcare. Other Grassley town halls that day were more polite, but no less hostile.


pages: 364 words: 99,613

Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

back-to-the-land, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, call centre, centre right, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, disruptive innovation, falling living standards, financial deregulation, financial innovation, full employment, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kickstarter, lake wobegon effect, Long Term Capital Management, market fundamentalism, Martin Wolf, McMansion, medical malpractice, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, Paul Samuelson, plutocrats, Plutocrats, price mechanism, price stability, private military company, Ralph Nader, reserve currency, rising living standards, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, school vouchers, Silicon Valley, single-payer health, South China Sea, statistical model, Steve Jobs, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War

When there is an economic downturn and the money stops rolling in, not only will the banking system spasm, but the entire fabric of Chinese society will shudder.”22 Friedman’s confidence in China’s meltdown is shared by a significant portion of U.S. policy intellectuals. It rests on an assumption that China’s ethnic conflicts make it an inherently unstable country, unnaturally held together by Mao’s revolutionary dictatorship and then by the wealth generated by crony capitalism. But British journalist Martin Jacques has pointed out that the Han Chinese represent 92 percent of the population and consider themselves not only one people but one race. “The explanation for this,” writes Jacques, “lies in the unique longevity of Chinese civilization, which has engendered a strong sense of unity and common identity while also, over a period of thousands of years, enabled a mixing and melding of a multitude of diverse races.”23 Jacques reminds us that the overwhelming majority of Chinese have lived in the same regions for about two thousand years, “acquiring a unity which has, despite long periods of Balkanization, lasted until the present.”24 From the mid-nineteenth century until the 1949 revolution, the country was exploited by outsiders, and this created a profound sense of nationalism.

So he asked the advice of his daughter, who had not gone to college. She replied, “Get the pigs out of the trough.” If you are an American, your future depends on us doing just that. Notes 1. Martin Fackler, “Japan Goes from Dynamic to Disheartened,” New York Times, October 17, 2010. 2. Naomi Klein, “Capitalism vs. the Climate,” Nation, November 28, 2011. 3. “Bank Bailouts Supporter Palin Criticizes TARP as ‘Crony Capitalism,’ ‘Slush Fund . . . Just As We Had Been Warned About,’ ” Media Matters, February 6, 2010, http://mediamatters.org/mmtv/201002060024. 4. John Nichols, “Rick Perry’s Attack on Democracy,” Nation, October 10, 2011, http://www.thenation.com/article/163548/rick-perrys-attack-democracy. 5. Mark Danner, “State of Exception,” New York Review of Books, October 13, 2011. 6. Chris Hedges, “American Psychosis,” Share the World’s Resources, June 24, 2010, http://www.stwr.org/united-states-of-america/american-psychosis.html. 7.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, women in the workforce, young professional

Even Asher Edelman, the real-life Gordon Gekko on whom the movie Wall Street’s ruthlessly greedy protagonist was partly modeled, has turned dissident, arguing for the self-proclaimed democratic socialist Bernie Sanders as the best option for the U.S. economy.18 The economic discontent has led to unprecedented political polarization, pitting the “have-nots” against the “haves,” the proletariat against the intellectual elite, and the young against the old. People are acutely aware of the democratic deficit resulting from the undue collusion of the financial, corporate, and political sectors, and many feel that the system has been hijacked and rigged by special interests. They have come to detest crony capitalism—in which gains are privatized and losses are borne by the public, while bankers continue to award themselves record-setting bonuses. EU populist parties and “extremist” U.S. presidential candidates reflect the explosive anger of globalization’s losers, who are now lobbying for radical change in greater numbers. Protectionism and isolationism are resurging, manifesting themselves in the opposition to trade agreements, and in separatist movements in the U.K. with regard to Europe, in Scotland with regard to the U.K., and in Catalonia with regard to Spain.

See Personal connections Conspiracy theories, 111 Consultancy firms, 43 Consulting, 49 Consumer Financial Protection Bureau, 153 Contagion effect, 217 Contextual intelligence, 62, 97 “Convening power,” 25 Cooperatives, 90 Corbat, Michael, 88, 174 Corporate culture, 223–224 Corporations, global, 178–179 Corzine, Jon, 85 Council of Economic Advisers, 47–48, 84, 188 Council on Foreign Relations, 105, 166, 168, 170 Council on Systemic Financial Risk, 1 Coups d’état, 139–141 Credibility, 25 Credit Suisse, 2–3, 138 Crisis of Global Capitalism, The, 65 Crony capitalism, 212 Cult of failure, 64–65 Cultural capture, 46 “Cultural fit,” 80 Culture, 220–221, 223–224 Currency information as, 39–41 misinformation as, 41 D D. E. Shaw, 188 Dakota building, 199–200 Daley, William, 165 Dalio, Ray, xxvii Anthony Scaramucci and, 24 background on, 69–72 meditation by, 62, 70 net worth of, 88 Principles, 63, 71 Robin Hood Foundation and, 76 spouse of, 135 Dallara, Charles, 27, 107, 131–133 Dallara, Peixin, 131–133 D’Andrea Tyson, Laura, 185 Das, Satyajit, 210 Davos access to, 113 attendees of, 2, 4, 113–114 central bankers at, 33 critics of, 95 description of, 1–4, 96, 112–116 drawbacks of, 113 environment of, 2–3 hierarchy at, 114 hotels in, 2–3 networking at, 113–114 parties at, 114–116 peer-to-peer networking at, 5, 9 purpose of, 4 status markers at, 114 superhubs at, 8–12 Dealbreaker, 71 Debt, 210 Decision makers, proximity to, 42 Dell, Michael, 115 Democratic Party, 168 Den of Thieves, 190 Depression, 137 Deripaska, Oleg, 9, 69 Deutsche Bank, 27, 42, 101, 105, 118, 120–121, 131, 136, 141, 143, 176 Diamond, Bob, 43, 137, 205 Dijsselbloem, Jeroen, 121 DiMartino, Joseph, 199 Dimon, Jamie alma mater of, 174 as superhub, 11, 56 as type A personality, 56–57 background on, 55–58 charity by, 76 Elizabeth Warren and, 225 financial losses by, 23, 51 firings by, 140–141 general references to, xxv, 79 at JPMorgan, 9.


pages: 160 words: 6,876

Shaky Ground: The Strange Saga of the U.S. Mortgage Giants by Bethany McLean

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, collateralized debt obligation, crony capitalism, housing crisis, mortgage debt, negative equity, obamacare, race to the bottom

q=306BF929-5A1A-41FC-9737-691E189D7D2F&app=eccafile 56wealthiest 40 percent of borrowers: “Changes in Buyer Composition and the Expansion of Credit During the Boom,” by Manuel Adelino, Antoinette Schoar, and Felipe Severino, National Bureau of Economic Research, January 2015. http://www.nber.org/papers/w20848 58“What’s good for American housing”: “Fannie Mae’s Last Stand,” by Bethany McLean, Vanity Fair, February 2009. http://www.vanityfair.com/news/2009/02/fannie-and-freddie200902 59“attracts too little private capital”: “Early Steps Down the Path of GSE Reform,” by Jim Parrott, the Urban Institute, March 2015. http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000155-Early-Steps-Down-the-Path-of-GSE-Reform.pdf 60“scoring an executive post at Fannie Mae”: “Nice work if you can get it: how Fannie Mae became Washington’s biggest power player,” by Michelle Cottle, Washington Monthly, June 1, 1998. http://www.thefreelibrary.com/Nice+work+if+you+can+get+it%3A+how+Fannie+Mae+became+Washington%27s…-a020789484 61“Fannie has this grandmotherly image”: “Crony Capitalism: American Style,” by Owen Ullmann, The International Economy, July/ August 1999. http://www.international-economy.com/TIE_JA99_Ullmann.pdf 62Sarah Lehman Quinn’s dissertation: “Government Policy, Housing, and the Origins of Securitization, 1780–1968,” by Sarah Lehman Quinn, 2010. https://escholarship.org/uc/item/7sq3f6xk 63“Roosevelt Charges Federal Neglect of ‘Little Fellow,’” New York Timest April 8, 1932. http://query.nytimes.com/gst/abstract.html?


pages: 386 words: 113,709

Why We Drive: Toward a Philosophy of the Open Road by Matthew B. Crawford

1960s counterculture, Airbus A320, airport security, augmented reality, autonomous vehicles, Bernie Sanders, Boeing 737 MAX, British Empire, Burning Man, call centre, collective bargaining, crony capitalism, deskilling, digital map, don't be evil, Donald Trump, Elon Musk, en.wikipedia.org, Fellow of the Royal Society, gig economy, Google Earth, hive mind, income inequality, informal economy, Internet of things, Jane Jacobs, labour mobility, Lyft, Network effects, New Journalism, New Urbanism, Nicholas Carr, Ponzi scheme, Ralph Nader, ride hailing / ride sharing, Ronald Reagan, Sam Peltzman, security theater, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, smart cities, social graph, social intelligence, Stephen Hawking, technoutopianism, the built environment, The Death and Life of Great American Cities, the High Line, too big to fail, traffic fines, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Unsafe at Any Speed, urban planning, Wall-E, Works Progress Administration

I think it best to give the citizen-statistician Randy Whitfield the last word, as he states the lesson of this episode with admirable clarity: The larger question is whether the field experience of autonomous vehicles and advanced driver-assistance systems will be fairly and transparently assessed by the public officials charged with insuring the public’s safety while this technology is “beta-tested” on public roads. The litigation record in our case documents the resources which both NHTSA and Tesla were willing to commit to prevent public scrutiny of this taxpayer funded research, based on a fear of competitive harm to Tesla. The adversarial relationship which ought to obtain between regulators and industry, and between both of these and the profession of journalism, becomes a fiction under “crony capitalism.” One gets the sense that these are no longer separate elites; that they have merged into a super-elite bent on controlling the narrative of progress, even if at the cost of the public interest. WE HAVE A RISK BUDGET At a conceptual level, the difficulties of disentangling the causal factors in traffic accidents, and the toll of such accidents when they occur, remain much as they were in 1975 when Sam Peltzman published his influential study Regulation of Automobile Safety.

See California Highway Patrol (CHP) corporate libertarianism, 43 corrosion, 130–131 countersteering, 167 courtesy pullovers, 23 crankshaft, 144–145, 149 crankshafts, 143 crashes, speeding-related, 226–228 Crawford, L. Elizabeth, 59–65. See also Crawford-Lambert rat driving project Crawford-Lambert rat driving project building rat car, 61 Crawford, L. Elizabeth and, 59–65 driver’s education, 62–63 effort-driven rewards, 64–65 inducing a conditioned response, 62–63 rat ergonomics and, 61–62 self-motion and, 59–60 skills vs. tasks, 60 tool use, 62–63 Croly, Herbert, 38, 138 crony capitalism, 90 cultural development, 65 Daimler, 304 Datsun 510, 80 David, Joe, 203 Davis, Joe, 19 death algorithm, 117 The Death and Life of Great American Cities (Jacobs), 35–36 deference to machines, 126 delegation, societal effect of, 119 demolition derby, 184–187. See also motor sports; soap box derby Department of Motor Vehicles experience, 213–214 digital Rust Belt, 290 dilemma zone, 219–220 dirt bike riding.


The Road to Unfreedom: Russia, Europe, America by Timothy Snyder

active measures, affirmative action, Affordable Care Act / Obamacare, American ideology, anti-globalists, Bernie Sanders, centre right, Charles Lindbergh, crony capitalism, Dissolution of the Soviet Union, Donald Trump, hiring and firing, income inequality, John Markoff, means of production, Mikhail Gorbachev, New Journalism, obamacare, offshore financial centre, Robert Mercer, sexual politics, Transnistria, WikiLeaks, women in the workforce, zero-sum game

Weber defined two mechanisms that would allow a burst of charisma to become durable institutions: (1) through custom, as for example in a monarchy where the eldest son succeeded the father; or (2) through law, as for example in a democracy where regular voting allows parliaments and rulers to be replaced. Putin did not seem to be planning a monarchical succession. He has kept his daughters at a distance from public politics (although the family did benefit from crony capitalism). The logical possibility that remains is thus law, which in the modern world usually means democracy. Putin himself dismissed this alternative. And so the display of masculinity provided a semblance of power at the expense of Russia’s integrity as a state. During self-inflicted catastrophes of this kind, a certain kind of man always finds a way to blame a woman. In Vladimir Putin’s case, that woman was Hillary Clinton

Donald Trump, announcement of candidacy, June 15, 2015: “Sadly, the American dream is dead.” It is easy to see Trotsky, 2017, dir. Aleksandr Kott and Konstantyn Statskii, debate between Trotsky and Ilyin in episode 8, at 26:20–29.40. In 2016, Russia Figures from Anastasiya Novatorskaya, “Economic Inequality in the United States and Russia, 1989–2012,” 2017; see also (89% and 76%) Credit Suisse, “Global Wealth Report 2016.” Friends: Anders Åslund, “Russia’s Crony Capitalism,” Zeszyty mBank, no. 128, 2017. Cellist: Luke Harding, “Revealed: the $2bn offshore trail that leads to Vladimir Putin,” TG, April 3, 2006. The case of the billionaire cellist $7 trillion: Oxfam Briefing Paper, Jan. 18, 2016. $21 trillion: Interview with James Henry, “World’s Super-Rich Hide $21 Trillion Offshore,” RFE/RL, July 31, 2016. In June 2016 Anders Åslund, “Putin’s greatest weakness may be located on US shores,” The Hill, Oct. 17, 2017; Harding, Collusion, 244; Anne Applebaum, “The ugly way Trump’s rise and Putin’s are connected,” WP, July 25, 2017.


pages: 185 words: 43,609

Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel, Blake Masters

Airbnb, Albert Einstein, Andrew Wiles, Andy Kessler, Berlin Wall, cleantech, cloud computing, crony capitalism, discounted cash flows, diversified portfolio, don't be evil, Elon Musk, eurozone crisis, income inequality, Jeff Bezos, Lean Startup, life extension, lone genius, Long Term Capital Management, Lyft, Marc Andreessen, Mark Zuckerberg, minimum viable product, Nate Silver, Network effects, new economy, paypal mafia, Peter Thiel, pets.com, profit motive, Ralph Waldo Emerson, Ray Kurzweil, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, Singularitarianism, software is eating the world, Steve Jobs, strong AI, Ted Kaczynski, Tesla Model S, uber lyft, Vilfredo Pareto, working poor

In December ’96—more than three years before the bubble actually burst—Fed chairman Alan Greenspan warned that “irrational exuberance” might have “unduly escalated asset values.” Tech investors were exuberant, but it’s not clear that they were so irrational. It is too easy to forget that things weren’t going very well in the rest of the world at the time. The East Asian financial crises hit in July 1997. Crony capitalism and massive foreign debt brought the Thai, Indonesian, and South Korean economies to their knees. The ruble crisis followed in August ’98 when Russia, hamstrung by chronic fiscal deficits, devalued its currency and defaulted on its debt. American investors grew nervous about a nation with 10,000 nukes and no money; the Dow Jones Industrial Average plunged more than 10% in a matter of days.


City Parks by Catie Marron

Berlin Wall, crony capitalism, Fall of the Berlin Wall, Fellow of the Royal Society, Frank Gehry, Golden Gate Park, the High Line, urban sprawl

Except for me all the passengers were Russians, including young kids and teenagers. The quiet respect with which even grade school groups in Russia will listen to docents talking about Pushkin is unlike anything I know of in America. Russians, as it seems to me, always favor the orthodox approach—they’ve been Orthodox Christians, orthodox Marxists, orthodox atheists, and now orthodox followers of modern-day crony capitalism. When they fall for a belief they don’t mess around; they go all the way. Passionate as they have been about these systems, what they really believe is deeper and survives all creeds that come from outside. The true, deep-down Russian religion is animism. Russians believe that things in the world possess individual spirits of their own. This applies to any tree, plant, place, machine, or object of any kind.


pages: 138 words: 43,748

Conscience of a Conservative: A Rejection of Destructive Politics and a Return to Principle by Jeff Flake

4chan, Affordable Care Act / Obamacare, battle of ideas, Berlin Wall, cognitive dissonance, crony capitalism, David Brooks, Donald Trump, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global supply chain, immigration reform, impulse control, invisible hand, Mark Zuckerberg, obamacare, Potemkin village, race to the bottom, road to serfdom, Ronald Reagan, Silicon Valley, uranium enrichment, zero-sum game

Impulsive and lacking a coherent economic analysis, Trump moved beyond the election attempting to demonstrate his vaunted deal-making abilities. He promptly began to commit Hayek’s fatal conceit, but with a twist that not even Hayek himself could have imagined: The new president would not merely demonstrate a preference for specific sectors of the economy, he would meddle in the economy by advocating for—or conversely, by intimidating—specific companies. To conservatives, this is the essence of crony capitalism. For the conservative, the role of government is to create a conducive tax and regulatory environment and let the free market prosper. But if a president is incoherently intervening wherever he or she sees fit, it can only lead to bad things. President Trump would go on to propose the worst kind of uneconomic “deals” with the coal miners who so ardently supported him and believed his promises about the resurgence of an industry long in decline, but their old jobs really weren’t coming back.


pages: 476 words: 125,219

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, Automated Insights, barriers to entry, Berlin Wall, business cycle, Cass Sunstein, citizen journalism, cloud computing, collaborative consumption, collective bargaining, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, Double Irish / Dutch Sandwich, Erik Brynjolfsson, failed state, Filter Bubble, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, offshore financial centre, patent troll, Peter Thiel, plutocrats, Plutocrats, post scarcity, price mechanism, profit maximization, profit motive, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, Telecommunications Act of 1996, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism

To top it off, the political power of these firms in Washington and state capitals has reached Olympian heights.60 Accordingly, politicians pretty much ignored their platitudes about increasing competition. The George W. Bush administration, as Tim Wu puts it, “tended to agree that competition didn’t necessarily require that there be any extant competitors.”61 These monopolists are the poster children for crony capitalism, which in theory promarket types despise but in practice invariably champion, at least when they’re anywhere near political power. Increasing monopoly power and crushing the threat of competition was all well and good, but it did not solve the problem posed by the Internet. The telephone companies provided the main wires for Internet access in the late 1990s, but the FCC required that they fulfill the “common carriage” statutes, which meant that the shrinking number of Baby Bells had to allow open access at nondiscriminatory prices for other firms to use their lines as Internet service providers (ISPs).

As comfortable as the free-market catechism is with a minimal government when it comes to interfering with the affairs of the wealthy on behalf of the general population, it is equally comfortable with a government that has considerable incarceration and policing powers over the general population. See Bernard E. Harcourt, The Illusion of Free Markets (Cambridge, MA: Harvard University Press, 2011). 2. Luigi Zingales makes a passionate defense of the catechism as the American way—and a criticism of many of the attributes of dominant “crony capitalism”—in A Capitalism for the People: Recapturing the Lost Genius of American Prosperity (New York: Basic Books, 2012). 3. I am obviously generalizing. For the classic explanation of this process, see Morton H. Fried, The Evolution of Political Society: An Essay in Political Anthropology (New York: McGraw-Hill, 1967). 4. Marcel Mazoyer and Laurence Roudart, A History of World Agriculture: From the Neolithic Age to the Current Crisis (New York: Monthly Review Press, 2006). 5.


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Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros

affirmative action, Asian financial crisis, big-box store, BRICs, cognitive dissonance, creative destruction, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, NetJets, offshore financial centre, profit motive, rent-seeking, risk/return, Rubik’s Cube, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, We are the 99%, William Langewiesche

His name is Marcelo Miterhof and he’s a lefty who admires Franklin Delano Roosevelt. When I asked him about the government’s decision to fund companies that had backed the military regime, he told me, “You can’t develop the country just with the kind of people you’d invite home for dinner.” In the nineteenth-century United States, after all, railroad tycoons laid tens of thousands of miles of track not out of selfless civic interest but for profit, engaging in a crony capitalism that would be very familiar to Brazil’s “cordial man.” Like the leaders of the military regime in the sixties and seventies, Lula wanted to build highways and dams and ports, to get Brazil caught up with the developed world. He wanted to build huge refineries to process Petrobras’s oil discoveries, and he wanted Brazilian companies employing Brazilian workers to do the job. If he’d gotten hung up on who collaborated with the dictatorship, he’d have few people to work with whether in business or politics.

, 91 Salve Jorge, 100–101, 102–7, 131 TV Record, 108, 110, 115, 121–22, 123, 126, 300n110 Macedo’s takeover of, 119–22, 301n120 R7 news, 231 TV SBT, 256 TV Tupi, 84, 297n84 TVX, 153–54, 155–56, 170, 180, 187–88 UBS (Swiss bank), 28, 218 UHNW (ultra-high-net-worth), 23 Ulloa, Santiago, 22–23 Ultragaz, 40, 42, 291n41, 291n42 Ultrapar, 291n41 United Arab Emirates, 180, 181, 183, 184, 217–18, 253 United States billionaires, 24, 26 Brazilian investment in, 18, 19, 144 campaign financing, 286, 317n286 capitalism and bubbles, 244 CIA and Brazilian politics, 39 crony capitalism, 55 Federal Reserve and 2008 crisis, 181 Hoover’s “Buy American Act,” 184 interest rates, 18 prosperity gospel and, 109 shale gas extraction, 67 “too big to fail” banks, 274 Universal Church of the Kingdom of God, 108–18, 123–26 Congress of Winners, 116–17, 124–25 cures and liberation, 115–17 Fogueiras Santas campaigns, 118 Globo targeting of, 122 Love Therapy, 114, 115 number of churches, 108, 110, 300n109 number of followers, 109, 300n109 radio network, 301n118 revenues, 110, 112, 118–19, 300n110 São Paulo church, 111, 114, 301n114 solicitation, 118–19, 125, 301n119 Solomon’s Temple replica, 126, 301n114 suits against, 301n118, 301n119 tax fines against, 123, 302n123 in the U.S., 109–10 University of São Paulo, 11 Uruguay, 24, 177 Vale, 136, 137, 138, 140, 160, 168, 171, 214, 305n160, 306n167 Valor Econômico, 244–45 Vanguarda Agro, 59 Vargas, Getúlio, 83, 86, 96, 172 Veja, 44–45, 120, 164, 166 Vilardi, Celso, 228–29 Villela family, 290n39 Volkswagen, 290n39, 294n69 Voz da Comunidade, 101, 106–7, 208 “Wagner,” 178, 179, 180–81, 205 Waimiri-Atroari tribe, 69 Wallace, David Foster, 194 Wallach, Joe, 88 Walton, Sam, 197 Warby Parker, 213 Wealth of Nations, The (Smith), 176, 280 Welch, Jack, 197 White, Richard, 244 Wilson, Charlie, 293n56 Winkler, Matt, 96 Workers Party, 54, 55, 56, 67, 95, 96, 131, 183, 191, 239–40, 257, 275.


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How Markets Fail: The Logic of Economic Calamities by John Cassidy

"Robert Solow", Albert Einstein, Andrei Shleifer, anti-communist, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black-Scholes formula, Blythe Masters, Bretton Woods, British Empire, business cycle, capital asset pricing model, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Ponzi scheme, price discrimination, price stability, principal–agent problem, profit maximization, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

Instead, he helped make it easier for financiers to take on extra leverage and risk while pursuing a monetary policy that often seemed designed to protect them from their mistakes. The combination of a Fed that can print money, deposit insurance, and a Congress that can authorize bailouts provides an extensive safety net for big financial firms. In such an environment, pursuing a policy of easy money plus deregulation doesn’t amount to free market economics; it is a form of crony capitalism. The gains of financial innovation and speculation are privatized, with the bulk of them going to a small group of wealthy people who sit at the apex of the system. Much of the losses are socialized. Such a policy framework isn’t merely inequitable; it is also destabilizing. Once the Fed abdicates its responsibility of preventing excessive risk-taking, rational irrationality will eventually ensure that the system moves toward what Minsky referred to as Ponzi finance.

Incentives for excessive risk-taking will revive, and so will the lobbying power of banks and other financial firms. If these special interests succeed in blocking meaningful reform, we could well end up with the worst of all worlds: a financial system dominated by a handful of firms that are “too big to fail,” but that can take on as much risk as they please, secure in the knowledge that if things go wrong the taxpayer will be there to bail them out. Such an arrangement would amount to crony capitalism writ large, and it would make a mockery of the democratic ideals that both major parties claim to represent. Before the political will for reform dissipates, it is essential to put Wall Street in its place and to confront utopian economics with reality-based economics. Hopefully, this book can play a small part in that effort. NOTES INTRODUCTION 4 Greenspan and Waxman’s exchange: See transcript of remarks of “The Financial Crisis and the Role of Federal Regulators,” House Committee on Oversight and Government Reform, Washington, D.C., October 23, 2008, available at http://oversight.house.gov/documents/20081024163819.pdf. 11 “The crisis is primarily . . .”: Richard Posner, “Financial Crisis: A Business Failure to a Government Failure?”


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The Future Is Asian by Parag Khanna

3D printing, Admiral Zheng, affirmative action, Airbnb, Amazon Web Services, anti-communist, Asian financial crisis, asset-backed security, augmented reality, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Basel III, blockchain, Boycotts of Israel, Branko Milanovic, British Empire, call centre, capital controls, carbon footprint, cashless society, clean water, cloud computing, colonial rule, computer vision, connected car, corporate governance, crony capitalism, currency peg, deindustrialization, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, energy security, European colonialism, factory automation, failed state, falling living standards, family office, fixed income, flex fuel, gig economy, global reserve currency, global supply chain, haute couture, haute cuisine, illegal immigration, income inequality, industrial robot, informal economy, Internet of things, Kevin Kelly, Kickstarter, knowledge worker, light touch regulation, low cost airline, low cost carrier, low skilled workers, Lyft, Malacca Straits, Mark Zuckerberg, megacity, Mikhail Gorbachev, money market fund, Monroe Doctrine, mortgage debt, natural language processing, Netflix Prize, new economy, off grid, oil shale / tar sands, open economy, Parag Khanna, payday loans, Pearl River Delta, prediction markets, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, Ronald Reagan, Scramble for Africa, self-driving car, Silicon Valley, smart cities, South China Sea, sovereign wealth fund, special economic zone, stem cell, Steve Jobs, Steven Pinker, supply-chain management, sustainable-tourism, trade liberalization, trade route, transaction costs, Travis Kalanick, uber lyft, upwardly mobile, urban planning, Washington Consensus, working-age population, Yom Kippur War

The kleptocratic Marcos regime in the Philippines was toppled, replaced through democratic elections in 1986 by Corazon Aquino, who was hailed as the “mother of Asian democracy,” followed by Fidel Ramos in 1992. Southeast Asia’s export-led growth surge suffered a significant setback with the financial contagion of 1997, in which insufficient foreign currency reserves forced major devaluations and skyrocketing debt in Thailand, Malaysia, the Philippines, and even mature economies such as South Korea. The collapse of local currencies laid bare the crony capitalism governing countries such as Indonesia. After three decades of rule, Suharto lost the backing of the army and resigned in 1998 amid waves of demonstrations. The Soviet collapse was also a major precipitating factor in India’s 1990s shift toward an open economy. As the once significant trade volumes with the Soviet Union plummented and the Persian Gulf War caused a doubling of oil prices, India’s prime minister, P V.

“Developing Local Currency Bond Markets in Asia,” Asian Development Bank Economics Working Paper no. 495, August 2016. https://www.adb.org/sites/default/files/publication/190289/ewp-495.pdf. Park, Jehoon, T. J. Pempel, and Gérard Roland, eds. Political Economy of Northeast Asian Regionalism: Political Conflict and Economic Integration. London: Edward Elgar, 2008. Park, Yeonmi. In Order to Live: A North Korean Girl’s Journey to Freedom. New York: Penguin, 2015. Pei, Minxin. China’s Crony Capitalism: The Dynamics of Regime Decay. Cambridge, MA: Harvard University Press, 2016. ———. China’s Trapped Transition: The Limits of Developmental Autocracy. Cambridge, MA: Harvard University Press, 2006. ———. From Reform to Revolution: The Demise of Communism in China and the Soviet Union. Cambridge, MA: Harvard University Press, 1994. Pempel, T. J. The Economic-Security Nexus in Northeast Asia.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

Finance regularly outspends every other industry on lobbying efforts in Washington, D.C.,46 which has enabled it to turn back key areas of regulation (remember the trading loopholes pushed into the federal spending bill by the banking industry in 2014?) and change our tax and legal codes at will. Increasingly, the power of these large, oligopolistic interests is remaking our unique brand of American capitalism into a crony capitalism more suited to a third-world autocracy than a supposedly free-market democracy.47 Thanks to these changes, our economy is gradually becoming “a zero-sum game between financial wealth-holders and the rest of America,” says former Goldman Sachs banker Wallace Turbeville, who runs a multiyear project on financialization at the nonprofit think tank Demos.48 Indeed, one of the most pernicious effects of the rise of finance has been the growth of massive inequality, the likes of which haven’t been seen since the Gilded Age.

“The issue in AIG was that AIG was a key player in the derivatives system, and that solvent megainstitutions like Chase and Goldman couldn’t afford the systemic effect of an AIG collapse,” says Damon Silvers, policy director for the AFL-CIO, who was one of the Democratic appointees to the TARP oversight commission.” The Fed knew this and asked Chase and Goldman to take first dollar risk in the bailout, and then took ‘no’ for an answer. I think that the AIG bailout was a moment in which public confidence in the government’s decisions in the crisis being in the public interest started to collapse. Later on, some called this dynamic ‘crony capitalism.’ ” To be fair, Geithner was probably doing his best in a tough situation, one that had been unfolding for quite a while, rather than exploding in a short burst like LTCM. But it’s interesting to note, as the TARP investigation report does, that he backed down rather quickly when bank leaders like J.P. Morgan’s Dimon and Goldman’s Blankfein refused to pony up their own institutions’ cash to save AIG.


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

Airbnb, Albert Einstein, algorithmic trading, barriers to entry, cloud computing, collaborative economy, commoditize, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, demand response, disintermediation, disruptive innovation, double helix, Downton Abbey, Erik Brynjolfsson, experimental economics, Firefox, framing effect, Google Chrome, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, offshore financial centre, pattern recognition, prediction markets, price discrimination, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

Price regulation has taken a beating, especially, as Chapter 3 explores, with the rise of neoclassical economic theories associated with the University of Chicago. Granted, the appeal of the invisible hand has diminished in recent years—after the financial crisis, the Great Recession, growing income and wealth inequality in the United States and U.K.,1 reduced social mobility, and the sheer arrogance of crony capitalism. Nonetheless, despite the growing appeal of conscious capitalism and shared value, many policymakers still praise the unrestrained free market, and are far more vocal over the cost of false positives from governmental intervention than the cost of false negatives from governmental abstention. Aggregated Information and Competition: The Sum of All Knowledge In defending a market economy, one should first inquire what one is defending.

Money, Power, and Politics Besides the deadweight welfare loss, the rise of market giants in control of data, analytics, and the ecosystems raises challenging questions about the concentration of power.57 To what extent does economic concentration affect enforcement? Economic power can translate into political power. Corporations and trade groups spend billions of dollars lobbying the U.S. government.58 And with the rise of private economic power, the dividing line between corporate action and the political realm may easily fade.59 The extent of crony capitalism may surprise some. Many of us knew that the major financial institutions had clout, but the economic crisis and subsequent U.S. taxpayer bailouts exposed the extent to which they manipulated the regulatory environment in their favor, and how the economically powerful have every incentive to use the government to protect their economic interests. Not surprisingly, two-thirds of Americans, including a majority of Republicans, believe that the economy “unfairly favors powerful interests.”60 Now the clout of the tech giants and their influence on government policies are coming to light.


The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

"Robert Solow", addicted to oil, air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, Right to Buy, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, stocks for the long run, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K, zero-sum game

When a government's leaders routinely seek out private-sector individuals or businesses and, in exchange for political support, bestow favors on them, the 274 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. THE M O D E S OF C A P I T A L I S M society is said to be in the grip of "crony capitalism." Particularly appalling was Indonesia under Suharto in the last third of the twentieth century, Russia immediately following the collapse of the Soviet Union, and Mexico during its many years under the PRI (the Institutional Revolutionary Party). The favors generally take the form of monopoly access to certain markets, preferred access to sales of government assets, or special access to those in political power. Such actions distort the effective use of capital, and, accordingly, lower standards of living. Then there is the broader issue of corruption of which crony capitalism is but a part. In general, corruption tends to exist whenever governments have favors to extend, or something to sell.

Korea, mimicking Japan, granted favored positions to large business conglomerates [chaebol). Taiwan had significant governmentowned companies and, like the other Tigers, heavy trade protection of domestic industry. Most had charismatic but autocratic leaders. Singapore's Lee Kuan Yew sparked the emergence of a small but world-class city; other autocrats, like General Suharto, who ruled over Indonesia's system of crony capitalism, were arguably less successful. Malaysia's prime minister Mahathir Mohamad, still harboring resentments of his country's colonial past, was a very forceful nationalist leader. I have met, but cannot say I have gotten to know, many of these leaders. Over the years, I have had the most contact with Lee Kuan Yew, most recently in 2006, and have always found him impressive, even though we do not always see eye to eye.


End the Fed by Ron Paul

affirmative action, Bernie Madoff, Bernie Sanders, Bretton Woods, business cycle, crony capitalism, currency manipulation / currency intervention, fiat currency, Fractional reserve banking, hiring and firing, housing crisis, illegal immigration, invisible hand, Khyber Pass, Long Term Capital Management, market bubble, means of production, moral hazard, Ponzi scheme, price mechanism, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, too big to fail, tulip mania, Y2K

As a matter of fact, a lot of truth to it is that we brought this upon ourselves, that we had too much government, too much interference in interest rates, too much risk, moral risk, built into the system.” Because if you come from the viewpoint that says that the market does not work, I can understand everything you do. But if I see that you totally rejected the market, and that we have to do something about it, I can understand why we in the Congress, and you in Treasury, and you in the Fed continue to do this. So where do you put the blame, on the market or on crony capitalism that we’ve been living with probably for three decades? BEN BERNANKE: Congressman, I certainly do not reject capitalism. I don’t think this is a failure of capitalism per se, and I also think that free markets should be the primary mechanism for allocating capital. They’ve shown over many decades that they can allocate money to new enterprises, to new technologies very effectively, and so we want to maintain that free capital market structure.


The New Class War: Saving Democracy From the Metropolitan Elite by Michael Lind

affirmative action, anti-communist, basic income, Bernie Sanders, Boris Johnson, Bretton Woods, business cycle, capital controls, Cass Sunstein, central bank independence, centre right, collective bargaining, commoditize, corporate governance, crony capitalism, deindustrialization, Doha Development Round, Donald Trump, Edward Snowden, future of work, global supply chain, guest worker program, Haight Ashbury, illegal immigration, immigration reform, invisible hand, knowledge economy, liberal world order, low skilled workers, low-wage service sector, manufacturing employment, Mark Zuckerberg, mass immigration, means of production, moral panic, Nate Silver, new economy, offshore financial centre, oil shock, open borders, plutocrats, Plutocrats, Ponzi scheme, purchasing power parity, Ralph Nader, regulatory arbitrage, rent-seeking, Richard Florida, Ronald Reagan, Silicon Valley, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, union organizing, universal basic income, upwardly mobile, WikiLeaks, Wolfgang Streeck, working poor

* * * — IN THE ECONOMIC REALM, the revolution from above began in the 1970s. An intellectual and political insurgency treated institutions like tripartite business-labor-government wage setting, trade unions, and the regulation of industries as public utilities as obstacles to both economic progress and individual liberty. On the overclass right, such institutions were denounced by libertarian economists as “crony capitalism” and by conservative constitutional lawyers in the United States as infringements on the supposed quasi-royalist “unitary power” of the president. On the overclass left, many of the same structures were demonized by public interest progressives like Ralph Nader whose constituency consisted of affluent and educated reformers.1 The political scientist Theodore Lowi coined the term “interest group liberalism” for New Deal arrangements as an insult.2 By 1986, a bipartisan consensus among American intellectuals and policy makers held that inherited democratic pluralist institutions were both corrupt and inefficient.


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European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, disruptive innovation, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

Harmful regulations ossify economies and stunt enterprise. A cultural conservatism that is suspicious of change, hostile to diversity and deeply pessimistic about the future hampers innovation, investment and growth. The biggest underlying problem is the capture of governments by vested interests and self-serving elites who appropriate value created by others rather than creating it themselves – call it crony capitalism. Most European countries have an overmighty and dysfunctional financial sector that benefits from taxpayer bailouts and subsidised borrowing, extracts value from companies and households, and does a poor job of channelling savings to productive investments. Big landowners in rigged property markets benefit from vast subsidies from the EU’s Common Agricultural Policy in rural areas and capture the value created by others’ investment and hard work in urban ones.

The opportunity to start your own business and build it up. Shifting tax off hard work and enterprise and on to unearned rewards from land ownership and inheritance. The ability to save for your retirement tax-free without your returns being gobbled up in fees. A future-proofed state pension system. The security that enables you to sleep easily at night – and take risks. Open capitalism, not crony capitalism. The freedom to be who you want to be, live the life you want to lead and still have a place in society. How, though, can one overcome entrenched vested interests? Sometimes war – or revolution – wipes out the old power structure. Change can also come about peacefully. Reform can be precipitated by external forces or domestic ones. The lure and then the process of joining the EU have a huge impact on candidate countries.


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Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

conceptual framework, crony capitalism, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, East Village, financial independence, Gini coefficient, income inequality, indoor plumbing, information asymmetry, land reform, Lao Tzu, low skilled workers, market fundamentalism, Mohammed Bouazizi, plutocrats, Plutocrats, rolodex, scientific worldview, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, Steve Jobs, transcontinental railway, Washington Consensus, Xiaogang Anhui farmers, young professional

He remained an official adviser to China’s cabinet, but he sounded more like a gadfly. “It’s entirely obvious that the biggest problem China faces right now is corruption,” he told me. “Corruption is the reason for the gap between rich and poor. Where did this corruption come from? From the fact that government continues to control too many resources.” In a furious stream of essays and books, Wu pointed to crony capitalism and the gap between rich and poor as evidence that China’s economic model had run up against the limit of what was possible without the government’s permitting greater political openness to mediate competing demands. In recent years, he had gone so far as to argue that China needed to adopt a Western-style democracy, and nationalists had blasted him for apostasy. At one point, the debate turned personal: the People’s Daily published Internet rumors that Wu was being investigated for spying for the United States.

The central government would not allow them to issue their own debt, so they raised cash by selling land they already owned or by offering low prices to farmers (the source of many of China’s protests). In Beijing, one of Lin Yifu’s former students, a professor named Yao Yang, published a view of China’s political and economic future that was strikingly at odds with his mentor’s. Yao pointed to the rise of crony capitalism and the gap between rich and poor as evidence that China’s economic model had run up against the limit of what was possible without permitting greater political openness “to balance the demands of different social groups.” He cited control of the Internet and labor unions, and unsafe working conditions. “Chinese citizens will not remain silent in the face of these infringements, and their discontent will inevitably lead to periodic resistance,” he warned.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

"Robert Solow", 1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, commoditize, complexity theory, continuation of politics by other means, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, digital map, disruptive innovation, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, Ethereum, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, fixed income, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial cluster, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, LNG terminal, low cost airline, low cost carrier, low earth orbit, manufacturing employment, mass affluent, mass immigration, megacity, Mercator projection, Metcalfe’s law, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, off grid, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Parag Khanna, Peace of Westphalia, peak oil, Pearl River Delta, Peter Thiel, Philip Mirowski, plutocrats, Plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

The ruling class knows full well that were it not for upgrading to superior international standards for governing every sector, Dubai would have remained little more than a shipping entrepôt. Most important, opening the door to foreign-operated zones has paved the way for a post-oil future in which already 75 percent of Dubai’s economy is construction, real estate, finance, manufacturing, retail, and other services. As Dubai’s rapid rebound since the crisis has proved, governments and companies working hand in hand is crony capitalism only in theoretical orthodoxy.2 In the real world, it is part of strategic economic survival. — DESERTS ARE LIMITLESS PLACES, but only with modern desalination and irrigation—and air-conditioning—has man been able to colonize the desert at large scale rather than merely, though with great fortitude, crossing it as Bedouin have done in the Sahara and the Gulf’s fabled Empty Quarter. With the full benefit of modern technologies, Dubai’s expansion plans involve nothing less than replicating itself endlessly southward toward the Empty Quarter through concentric rings of real estate developments whose footprint will be larger than Beijing, London, Paris, New York, Barcelona, and several other major cities—combined.

In Somalia, armadas of warships and private flotillas won’t stop piracy attacks on oil and cargo tankers, while basic fishing boats would help Somali fishermen return to a more legitimate economy. Bringing better supply chains to people is the only way to prevent them from being exploited by worse ones. GETTING BEYOND CORRUPTION? The world is awash not only in cheap capital but also in crony capital as trillions of dollars of wealth seeking safe havens from government crackdowns are laundered into real estate and other assets from New York and London to Dubai and Singapore. The world’s economic pie is growing larger, and everyone wants a slice. The same trends free-market advocates celebrate such as privatization and foreign investment liberalization also enable surging volumes of corruption worldwide.


pages: 524 words: 155,947

More: The 10,000-Year Rise of the World Economy by Philip Coggan

"Robert Solow", accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Andrei Shleifer, anti-communist, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Berlin Wall, Bob Noyce, Branko Milanovic, Bretton Woods, British Empire, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, credit crunch, Credit Default Swap, crony capitalism, currency peg, debt deflation, Deng Xiaoping, discovery of the americas, Donald Trump, Erik Brynjolfsson, European colonialism, eurozone crisis, falling living standards, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, Frederick Winslow Taylor, full employment, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, global supply chain, global value chain, Gordon Gekko, greed is good, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, Ignaz Semmelweis: hand washing, income inequality, income per capita, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, TaskRabbit, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, Yom Kippur War, zero-sum game

All those companies and banks that had borrowed in dollars now faced a much bigger bill for repayment. And once investors saw the Thais devalue, they worried about the prospect of other countries following suit. There was a sell-off across the region, and at one point, the Indonesian currency dropped 80% against the dollar.20 This brought many criticisms of the Asian model, as it was dubbed. The most significant was that the economies were marked by “crony capitalism”, in which governments handed out favours such as monopoly rights or subsidies to friendly businessmen. The clearest example was President Suharto of Indonesia, who had ruled for 30 years and whose family had amassed assets of around $30bn in the process.21 One study found that the family had significant stakes in 1,246 companies.22 Suharto was forced to call in the IMF, which insisted on its standard package of spending cuts and the dismantling of monopolies.

Paul Kuznets, “An East Asian model of economic development: Japan, Taiwan, and South Korea”, Economic Development and Cultural Change, vol. 36, no. 3, April 1988 19. Pam Woodall, “Tigers adrift”, The Economist, March 5th 1998 20. Ibid. 21. Philip Shenon, “The Suharto billions”, The New York Times, Jan 16th 1998 22. Victor Mallet, The Trouble with Tigers: The Rise and Fall of South-East Asia 23. Alan Beattie, “Suharto and the crisis of Asian crony capitalism, January 1998”, Financial Times, July 19th 2008 24. Paul Krugman, “The myth of Asia’s miracle”, Foreign Affairs, November/December 1994, https://www.foreignaffairs.com/articles/asia/1994–11–01/myth-asias-miracle 25. Mallet, The Trouble with Tigers, op. cit. 26. “One more push”, The Economist, July 21st 2011 27. “The Bangalore paradox”, The Economist, April 21st 2005 28. “India no longer home to the largest number of poor”, Times of India, June 27th 2018 29.


pages: 353 words: 355

The Long Boom: A Vision for the Coming Age of Prosperity by Peter Schwartz, Peter Leyden, Joel Hyatt

American ideology, Asian financial crisis, Berlin Wall, centre right, computer age, crony capitalism, cross-subsidies, Deng Xiaoping, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, financial innovation, hydrogen economy, industrial cluster, informal economy, intangible asset, Just-in-time delivery, knowledge economy, knowledge worker, life extension, market bubble, mass immigration, megacity, Mikhail Gorbachev, Nelson Mandela, new economy, oil shock, open borders, Productivity paradox, QR code, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, the scientific method, upwardly mobile, Washington Consensus, Y2K

That's the Long Boom attitude: When faced with a crisis in global capitalism, move full speed ahead—forward through the transition, not backward. The Russians don't want to go back to communism. No one has to tell them that it didn't work—they lived under it for seventy-five years. As long as they can find a reasonable transition to a decent form of capitalism, as opposed to the wild form of gangster capitalism that they have experienced, they'll move forward. The peoples of Southeast Asia don't want to go back to crony capitalism—certainly not if it will get them back into the same kind of trouble they experienced in the late 1990s. They want to do whatever it takes to get back to a high-growth economy, back into a boom—only this time a sustainable one built on solid financial foundations. The MilleNNiAl TRANSITION 55 The IMPERATIVE of GROwrk The millennial transition in global capitalism presents a choice to the world community: Do we proceed to a high-growth economic strategy; or do we maintain the status quo, a less dynamic economy of slow growth; or, as some radical environmentalists advocate, do we opt for no growth?


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Charles Lindbergh, Corn Laws, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, industrial cluster, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

Clever young Japanese bankers and businesspeople migrated to Western firms that were prepared to give them more responsibility, not to mention money. Keiretsu firms tended to overproduce and overinvest when compared with independent firms. Even in the boom years of 1971 to 1982, they derived significantly lower returns on assets.13 In the 1990s, they drifted from one disaster to another. The decade was also a humbling one both for the chaebol, which were flattened by the Asian currency crisis and charges of crony capitalism, and for German companies, which were hamstrung by the high labor costs that stakeholder capitalism entailed. The relative absence of “short-term” shareholder pressure proved a comparative weakness—all the more so because Anglo-Saxon firms, particularly American ones, were just beginning to benefit from genuine investor pressure. BARBARIANS AND PENSION FUNDS In the heyday of managerial capitalism, “shareholder activism” was limited to cases so extreme that they made a nonsense of the term, such as the occasion in 1955 when City of London institutions forced the dictatorial Sir Bernard Docker out of BSA/Daimler, after a series of revelations about his luxurious lifestyle, including Lady Docker’s frequent use of a bespoke gold-plated Daimler.


pages: 219 words: 61,720

American Made: Why Making Things Will Return Us to Greatness by Dan Dimicco

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, American energy revolution, American Society of Civil Engineers: Report Card, Bakken shale, barriers to entry, Bernie Madoff, carbon footprint, clean water, crony capitalism, currency manipulation / currency intervention, David Ricardo: comparative advantage, decarbonisation, fear of failure, full employment, Google Glasses, hydraulic fracturing, invisible hand, job automation, knowledge economy, laissez-faire capitalism, Loma Prieta earthquake, low earth orbit, manufacturing employment, oil shale / tar sands, Ponzi scheme, profit motive, Report Card for America’s Infrastructure, Ronald Reagan, Silicon Valley, smart grid, smart meter, sovereign wealth fund, The Wealth of Nations by Adam Smith, too big to fail, uranium enrichment, Washington Consensus, Works Progress Administration

We’re going to have to live with that for a while as we rebuild a healthy economy by rebuilding manufacturing. Government and Business Shouldn’t Be Antagonists An American industrial policy assumes government and business will work together with some degree of harmony. But aren’t government and business too close as it is? What’s the difference between government policy that encourages private enterprise at home and abroad versus one that’s out-and-out crony capitalism? Truth is, the relationship between the private and public sector right now is a lot more complicated than most Americans realize. When government regulates business, it’s in the business’s interest to make sure government doesn’t regulate too much. Problems start when lobbyists jockey for special favors and exceptions. Larger businesses can afford better lobbyists than small businesses can.


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, break the buck, business cycle, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial innovation, financial intermediation, fixed income, George Akerlof, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, peer-to-peer lending, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Satyajit Das, shareholder value, sovereign wealth fund, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

.… Encouragingly, history does point to warning signs that policy makers can look at to assess risk—if only they do not become too drunk with their credit bubble-fueled success.” Similarly, Lawrence Summers, the U.S. Treasury secretary from 1999 to 2001, refers to “the increasing salience of long-standing financial-sector weaknesses, arising from some combination of insufficient capitalization and supervision of banks and excessive leverage and guarantee—the combination that, along with directed lending, has been captured in the term ‘crony capitalism,’ ” as a root cause of most crises (Summers 2000, 5). Turning to runs, Summers (2000, 7) states that “they are not driven by sunspots: their likelihood is driven and determined by the extent of fundamental weaknesses” and concludes that “preventing crises is heavily an issue of avoiding situations where the bank run psychology takes hold, and that will depend heavily on strengthening core institutions and other fundamentals.”

See also AIG; credit default swaps credit limits, regulations on, 88, 268n24 Crédit Lyonnais: cost of bailout of, 318n7; failure of, 55–56, 252n37 creditors: benefits of guarantees to, 129, 142; collateral used by, 164, 301n57; covenants of, 141; default as problem of, 36, 244n3; deposit insurance and, 62, 163; lending through repo (repurchase) agreements, 164; motivations for short-term lending by, 163–65; response to default, 35–36 credit ratings: guarantees in, role of, 9, 143, 235nn31–32, 290n28; for mortgage-related securities, 156–57, 185; risks hidden in, 124–25, 156–57, 222, 296n29; in securitization of mortgages, 259n33 credit risks: AIG and, 74, 161; definition of, 313n64; in financial crisis of 2007-2009, 157, 185; in risk-weighted approach, 183, 313n64, 313n66 creditworthiness assessments, 50; careless-ness in, 56, 277n12; challenges of, 50; economizing on, 249n13; hard versus soft information in, 50, 248n9; for mortgages, 56, 58, 248n9, 277n12 criminal proceedings, 208, 215, 228, 321n27 crony capitalism, 331n19 culture of banking: complacency in, 206; greed in, 208–9, 328n6; lying in, 328n5; return on equity in, 115, 125–28, 284–85nn29–30; unethical behavior in, 209, 328n6, 329n8 Cumming, Christine, 262n60, 263n62 currency, and risk of sovereign default, 276n6 currency boards, 294n15, 333n39 currency swaps, 260n37 Curry, Timothy, 252n34, 289n20, 293n3 Das, Satyajit, 230n9, 253n42, 259n34, 260nn37–38, 260n41, 261n43, 261n46, 261n50, 262nn52–53, 284n24, 284n29, 285n37, 286n40, 308n41, 323n38, 328n5, 329n6, 329n8 Dattel, Danny, 252n36 Davies, Richard, 270n31, 290n29, 291n34 Davydenko, Sergei A., 245n13 debit cards, 49, 150 debt, treated as equity, 187–88.


pages: 558 words: 168,179

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer

affirmative action, Affordable Care Act / Obamacare, American Legislative Exchange Council, anti-communist, Bakken shale, bank run, battle of ideas, Berlin Wall, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Climategate, Climatic Research Unit, collective bargaining, corporate raider, crony capitalism, David Brooks, desegregation, diversified portfolio, Donald Trump, energy security, estate planning, Fall of the Berlin Wall, George Gilder, housing crisis, hydraulic fracturing, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, job automation, low skilled workers, mandatory minimum, market fundamentalism, mass incarceration, Mont Pelerin Society, More Guns, Less Crime, Nate Silver, New Journalism, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, oil shock, plutocrats, Plutocrats, Powell Memorandum, Ralph Nader, Renaissance Technologies, road to serfdom, Robert Mercer, Ronald Reagan, school choice, school vouchers, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, the scientific method, University of East Anglia, Unsafe at Any Speed, War on Poverty, working poor

Harold Varmus, a former director of the National Cancer Institute, who knew Koch as a donor to scientific institutions, noted that many philanthropists had large business interests but admitted that he was “surprised” to learn of the company’s stance on formaldehyde. The Kochs’ corporate interests clashed with their philosophical positions on other issues as well, including their opposition to government-supported “crony capitalism.” Koch Industries took full advantage of a panoply of federal subsidies, ranging from artificially low grazing fees on the 40 percent of their 500,000 acres of cattle ranches that used federal lands, to a deal with the Bush administration in 2002 to sell eight million barrels of crude oil to fill the Strategic Petroleum Reserve, a federal supply set aside as a hedge against market disruptions.

Moreover, while Solyndra’s investors were portrayed as Obama supporters, among its biggest backers were members of the conservative Walton family, the founders of Walmart. A huge investor in another solar company that went bust after taking the same Energy Department loans was the venture capitalist Dixon Doll, a major contributor to the Kochs’ donor network. But as the House held hearings and various conservative front groups whipped up outrage about “crony capitalism,” the facts were buried in favor of a narrative that helped the fossil fuel industry. Congressman Upton insisted that he hadn’t changed his position on environmental issues. But Jeremy Symons, then a senior vice president of the nonpartisan National Wildlife Federation, said that the transformation was “like night and day.” He continued, “In the past the committee majority viewed the Clean Air Act as an effective way to protect the public.


pages: 202 words: 66,742

The Payoff by Jeff Connaughton

algorithmic trading, bank run, banking crisis, Bernie Madoff, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, desegregation, Flash crash, locking in a profit, London Interbank Offered Rate, London Whale, Long Term Capital Management, naked short selling, Neil Kinnock, plutocrats, Plutocrats, Ponzi scheme, risk tolerance, Robert Bork, short selling, Silicon Valley, too big to fail, two-sided market, young professional

We need citizen power to stand up to politicians of both parties who refuse to hold Wall Street to account and bring about meaningful reforms. If you believe, as I do, that Wall Street’s capture of Washington is America’s biggest problem, it’s time to stop voting for the lesser of two evils and stand on principle. The Occupy Wall Street movement for a time had been a refreshing gust of renewed hope for change. When will the Tea Party and Occupy Wall Street realize that, when it comes to crony capitalism, they share common ground? We still need structural reform of Wall Street, either by separating federally insured commercial banking from risky investment banking by reinstating Glass-Steagall, or by passing Brown-Kaufman to place a size-and-leverage limit on too-big-to-fail institutions. We still need a Justice Department and SEC willing to enforce the law against the most powerful by holding accountable those individuals who are responsible for fraud.


pages: 251 words: 69,245

The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality by Branko Milanovic

Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, plutocrats, Plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

Actually, one of the greatest draws to soccer lay in the unpredictability of its outcomes, its replication of life5—namely, the combination of deserved wins of a “better” team with random outcomes where an obviously weaker side would, by a stroke of luck or sudden inspiration, overwhelm a Goliath. Today, as the gap between the Goliaths and Davids is much greater than ever, surprises are much less likely to happen. Goliaths always win; moreover, they often do not deign to play with Davids. Vignette 3.6 Income Inequality and the Global Financial Crisis The current financial crisis is generally blamed on feckless bankers, financial deregulation, crony capitalism, and the like.1 Although all of these elements may have contributed, this purely financial explanation of the crisis overlooks its fundamental reasons. They lie in the real sector, and more exactly in the distribution of income across individuals and social classes. Deregulation, by helping irresponsible behavior, just exacerbated the crisis; it did not create it. To understand the origins of the crisis, one needs to go to rising income inequality within practically all countries in the world, and the United States in particular, over the past thirty years.


pages: 222 words: 70,132

Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy by Jonathan Taplin

1960s counterculture, affirmative action, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, American Legislative Exchange Council, Apple's 1984 Super Bowl advert, back-to-the-land, barriers to entry, basic income, battle of ideas, big data - Walmart - Pop Tarts, bitcoin, Brewster Kahle, Buckminster Fuller, Burning Man, Clayton Christensen, commoditize, creative destruction, crony capitalism, crowdsourcing, data is the new oil, David Brooks, David Graeber, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dynabook, Edward Snowden, Elon Musk, equal pay for equal work, Erik Brynjolfsson, future of journalism, future of work, George Akerlof, George Gilder, Google bus, Hacker Ethic, Howard Rheingold, income inequality, informal economy, information asymmetry, information retrieval, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Joseph Schumpeter, Kevin Kelly, Kickstarter, labor-force participation, life extension, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Mother of all demos, move fast and break things, move fast and break things, natural language processing, Network effects, new economy, Norbert Wiener, offshore financial centre, packet switching, Paul Graham, paypal mafia, Peter Thiel, plutocrats, Plutocrats, pre–internet, Ray Kurzweil, recommendation engine, rent-seeking, revision control, Robert Bork, Robert Gordon, Robert Metcalfe, Ronald Reagan, Ross Ulbricht, Sam Altman, Sand Hill Road, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, smart grid, Snapchat, software is eating the world, Steve Jobs, Stewart Brand, technoutopianism, The Chicago School, The Market for Lemons, The Rise and Fall of American Growth, Tim Cook: Apple, trade route, transfer pricing, Travis Kalanick, trickle-down economics, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, We wanted flying cars, instead we got 140 characters, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator

In June of 2009 James Moroney, publisher of the Dallas Morning News, testified in Congress about his negotiations with Amazon over publishing the newspaper’s content on the Amazon Kindle. Amazon demanded 70 percent of the subscription revenues, leaving him with 30 percent to cover the cost of creating 100 percent of the content. This, he noted, could hardly be characterized as a fair business deal. 6. It is Peter Thiel’s investment in Palantir that demonstrates a certain libertarian hypocrisy about corporate welfare. Thiel is always complaining about crony capitalism, but the initial investment in the company came from the CIA’s venture capital arm, and the firm is now valued at more than $10 billion. Palantir was founded three years after the 9/11 terrorist attacks on the United States and was set up as a data-mining company that could sell its services to the CIA. Palantir’s data-mining software has illuminated terror networks and figured out safe driving routes through war-torn Baghdad.


pages: 232

Planet of Slums by Mike Davis

barriers to entry, Branko Milanovic, Bretton Woods, British Empire, Brownian motion, centre right, clean water, conceptual framework, crony capitalism, declining real wages, deindustrialization, Deng Xiaoping, edge city, European colonialism, failed state, Gini coefficient, Hernando de Soto, housing crisis, illegal immigration, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, jitney, jobless men, Kibera, labor-force participation, land reform, land tenure, liberation theology, low-wage service sector, mandelbrot fractal, market bubble, megacity, microcredit, Nelson Mandela, New Urbanism, Pearl River Delta, Ponzi scheme, RAND corporation, rent control, structural adjustment programs, surplus humans, upwardly mobile, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor

With land inflation raging even on the distant urban edge, the only choices seemingly left to the poorest Manilenos are either to risk death in the flood-prone metropolis by squatting in the beds of esteros or along the precarious banks of rivers, or to occupy the interstices of wealthier barangays where violent eviction is an imminent threat. Throughout the Third World, then, the (John) Turnerian frontier of free land for poor squatters has ended: the "slums of hope" have been replaced by urban latifundia and crony capitalism. The constriction or closure of opportunities for non-market setdement at the edge, in turn, has immense repercussions for the stability of poor cities. In lockstep with the increasing percentage of renters, the most dramatic consequence in the short run has been soaring population density in Third World slums — land inflation in the context of stagnant or declining formal employment has been the piston driving this compression of people.


pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

Airbnb, bank run, Bernie Madoff, bitcoin, Bretton Woods, buy and hold, Carmen Reinhart, corporate raider, correlation does not imply causation, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, money market fund, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Travis Kalanick, Uber for X, War on Poverty, yield curve

Not long before he was elected president of the United States, Barack Obama correctly criticized The Export-Import Bank (Ex-Im) as “little more than a fund for corporate welfare.”6 He was right. It exists to lend taxpayer funds to foreign companies interested in buying U.S. exports. Since reaching the White House, Obama has changed his position on the Bank. As of this writing, even a Republican-controlled Congress is still struggling to fully close this monument to crony capitalism. The existence of Ex-Im, along with the TVA and the War on Poverty, shows why supply-siders are so wrong when they sell income tax cuts to the political class as a way to get politicians more money to spend. That all three programs and subsidies still exist is a reminder that surging federal revenues morph into a major tax on future growth as politicians divine new ways to spend the money; the ideas hatched are exceedingly difficult to sunset.


pages: 232 words: 71,965

Dead Companies Walking by Scott Fearon

bank run, Bernie Madoff, business cycle, corporate raider, creative destruction, crony capitalism, Donald Trump, Eugene Fama: efficient market hypothesis, fear of failure, Golden Gate Park, hiring and firing, housing crisis, index fund, Jeff Bezos, Joseph Schumpeter, late fees, McMansion, moral hazard, new economy, pets.com, Ponzi scheme, Ronald Reagan, short selling, Silicon Valley, Snapchat, South of Market, San Francisco, Steve Jobs, survivorship bias, Upton Sinclair, Vanguard fund, young professional

In a healthy economy, capital markets fuel growth by allocating resources to smart ideas and well-run companies while starving out less-deserving ventures. But by protecting investors in the stocks and especially the bonds of failed companies, we’ve warped that process. Capital increasingly flows to politically favored businesses instead of innovative and well-managed concerns. That’s not a free market; it’s crony capitalism—a surefire way to hamper growth, job creation, and economic vitality. I know it sounds contradictory, but I believe that if we want to return to a growing and dynamic economy, we have to learn to embrace failure again. We have to let the markets get back to their normal function of elevating good ideas and eliminating bad ones. I’m not saying this book can single-handedly accomplish this or undo the damage that’s been done.


pages: 338 words: 74,302

Only Americans Burn in Hell by Jarett Kobek

AltaVista, coherent worldview, corporate governance, crony capitalism, Donald Trump, East Village, ghettoisation, Google Chrome, haute couture, illegal immigration, indoor plumbing, Jeff Bezos, mandelbrot fractal, MITM: man-in-the-middle, pre–internet, sexual politics, Skype, Snapchat, Steve Jobs, Telecommunications Act of 1996

Orson’s hobbies included skipping rocks across ponds, speaking in a high-pitched voice while imitating his mother’s folk wisdom, and pretending that he was a beautiful princess waiting to be rescued by a dashing knight. Being an asymptomatic carrier of typhoid fever meant that although Orson never showed any signs of having the disease, his body was in a state of constant typhoid production. Orson was like a factory worker under crony capitalism: he was making something, but he didn’t share in the gains of that production. One night, Orson was corralled into helping prepare a feast. This had happened because one of the usual preparers of food was busy fucking out his brains in a shadowy elm grove by the Ancient Rocks of Forever. And so Orson helped prepare the feast for the Red-Rose Knight, the Red-Rose Knight’s men, and all the women of Fairy Land.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, plutocrats, Plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

Longtime civil servants were on the defensive, now considered to be part of the problem. And self-regulation prevailed whose inevitable outcome was described by Martin Wolf, chief economic columnist for the Financial Times, in December 2007: “What is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-oriented financial capitalism. A mixture of crony capitalism and gross incompetence has been on display in the core financial markets of New York and London. From … subprime lending to the placing (and favourable rating) of assets that turn out to be almost impossible to understand, value or sell, these activities have been riddled with conflicts of interest and incompetence.”62 The rather dire consequences for the real economy of regulatory capture were also noticed in Asia.

Two quasi-independent entities comprise this structure, Fair Work Australia and the Australian Productivity Commission; similar institutional arrangements exist in the other family capitalism countries.39 These institutions enjoy powerful support from voters and enforce government rules supporting broadly based prosperity. On a spectrum of income disparity, the Reagan-era US income distribution leans toward the crony capitalism of nations such as China, with wide disparities. At the other end of the spectrum are Australia and the other family capitalism countries, where families broadly enjoy economic sovereignty and garner a considerable portion of the gains from growth. As I have emphasized, it’s not the quantity of government regulations, taxes, or the size of government that distinguish Australia or Germany from the US, but whether government rules broadcast the gains from growth widely or narrowly.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

As Dezalay and Garth observed generally of IFIs in relation to the developing world: “The grand principles associated with the cosmopolitan elite, including the rule of law, were far from being fully implemented in the local contexts of power. But both the grand principles and the local clientelism and patronage were totally embedded in local notables and balances of power.”83 This was the “crony capitalism” that the IMF would demand be extirpated in exchange for its emergency loan packages after the Asian financial crisis erupted in 1997. And when the contagion from that crisis spread to Russia the following year, it was the IMF’s very public despair at not being able to do anything about this “crony capitalism” in the Russian case that led it to pull back from its emergency lending, sparking the Russian government’s default in August 1998 on its foreign debt (which at $61 billion represented 17 percent of Russian GDP). Yet until then the pretence had been maintained.


pages: 812 words: 205,147

The Anarchy: The Relentless Rise of the East India Company by William Dalrymple

British Empire, colonial rule, crony capitalism, Dava Sobel, deindustrialization, European colonialism, Fellow of the Royal Society, global reserve currency, John Harrison: Longitude, joint-stock company, land reform, lone genius, megacity, offshore financial centre, reserve currency, spice trade, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile

In September 2015, the then governor of India’s central bank, Raghuram Rajan, made a speech in Mumbai expressing his anxieties about corporate money eroding the integrity of parliament: ‘Even as our democracy and our economy have become more vibrant,’ he said, ‘an important issue in the recent election was whether we had substituted the crony socialism of the past with crony capitalism, where the rich and the influential are alleged to have received land, natural resources and spectrum in return for payoffs to venal politicians. By killing transparency and competition, crony capitalism is harmful to free enterprise, and economic growth. And by substituting special interests for the public interest, it is harmful to democratic expression.’ His anxieties were remarkably similar to those expressed by Horace Walpole and many others in Britain more than 300 years earlier, when the East India Company had become synonymous with ostentatious wealth and political corruption.


pages: 270 words: 79,992

The End of Big: How the Internet Makes David the New Goliath by Nicco Mele

4chan, A Declaration of the Independence of Cyberspace, Airbnb, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, Apple's 1984 Super Bowl advert, barriers to entry, Berlin Wall, big-box store, bitcoin, business climate, call centre, Cass Sunstein, centralized clearinghouse, Chelsea Manning, citizen journalism, cloud computing, collaborative consumption, collaborative editing, commoditize, creative destruction, crony capitalism, cross-subsidies, crowdsourcing, David Brooks, death of newspapers, disruptive innovation, Donald Trump, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Exxon Valdez, Fall of the Berlin Wall, Filter Bubble, Firefox, global supply chain, Google Chrome, Gordon Gekko, Hacker Ethic, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, Julian Assange, Kevin Kelly, Khan Academy, Kickstarter, Lean Startup, Mark Zuckerberg, minimum viable product, Mitch Kapor, Mohammed Bouazizi, Mother of all demos, Narrative Science, new economy, Occupy movement, old-boy network, peer-to-peer, period drama, Peter Thiel, pirate software, publication bias, Robert Metcalfe, Ronald Reagan, Ronald Reagan: Tear down this wall, sharing economy, Silicon Valley, Skype, social web, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, Ted Nelson, Telecommunications Act of 1996, telemarketer, The Wisdom of Crowds, transaction costs, uranium enrichment, Whole Earth Catalog, WikiLeaks, Zipcar

And I was surprised to discover that the quality and depth of every submission transcended the vast majority of the output of bloggers or citizen journalists. Professionalism in journalism might not be sexy, it might seem old-fashioned, but it does matter. Consider what happened in the small town of Bell, California. The town’s mayor paid himself ever-larger salaries—over $800,000 a year—and engaged in the most crooked, crony capitalism, handing out other oversize salaries to his friends. Meanwhile, through a combination of lies and intimidation, he kept the largely poor, Hispanic city population in the dark, continuing to cut critical municipal services while giving himself and his buddies pay raises. After months of research and work, the Los Angeles Times delivered a pounding exposé of the corruption that led to multiple arrests.


pages: 309 words: 81,975

Brave New Work: Are You Ready to Reinvent Your Organization? by Aaron Dignan

"side hustle", activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, autonomous vehicles, basic income, Bertrand Russell: In Praise of Idleness, bitcoin, Black Swan, blockchain, Buckminster Fuller, Burning Man, butterfly effect, cashless society, Clayton Christensen, clean water, cognitive bias, cognitive dissonance, corporate governance, corporate social responsibility, correlation does not imply causation, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, David Heinemeier Hansson, deliberate practice, DevOps, disruptive innovation, don't be evil, Elon Musk, endowment effect, Ethereum, ethereum blockchain, Frederick Winslow Taylor, future of work, gender pay gap, Geoffrey West, Santa Fe Institute, gig economy, Google X / Alphabet X, hiring and firing, hive mind, income inequality, information asymmetry, Internet of things, Jeff Bezos, job satisfaction, Kevin Kelly, Kickstarter, Lean Startup, loose coupling, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, minimum viable product, new economy, Paul Graham, race to the bottom, remote working, Richard Thaler, shareholder value, Silicon Valley, six sigma, smart contracts, Social Responsibility of Business Is to Increase Its Profits, software is eating the world, source of truth, Stanford marshmallow experiment, Steve Jobs, TaskRabbit, the High Line, too big to fail, Toyota Production System, uber lyft, universal basic income, Y Combinator, zero-sum game

A stock market driven more by policy and punditry than performance. And the coup de grâce, accelerating climate change that threatens the safety and security of billions of people. All of it the result of our mindless adherence to the ways of the past—to an operating system that fundamentally misunderstands complexity and human nature. This isn’t the uplifting capitalism of a burgeoning economy, it’s advanced capitalism at best and crony capitalism at worst. That future doesn’t work for me. Somehow we have to reconcile that twentieth-century bureaucracy and capitalism got us here, but they won’t get us where we need to go unless they (and we) evolve. We are being called to lead that renaissance. You can feel it in your gut that this is the turning point. The future is up for grabs. And what I keep wondering is, What if we get it right?


pages: 362 words: 83,464

The New Class Conflict by Joel Kotkin

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, Bob Noyce, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, creative destruction, crony capitalism, David Graeber, deindustrialization, don't be evil, Downton Abbey, Edward Glaeser, Elon Musk, energy security, falling living standards, future of work, Gini coefficient, Google bus, housing crisis, income inequality, informal economy, Internet of things, Jane Jacobs, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John von Neumann, Joseph Schumpeter, Kevin Kelly, labor-force participation, low-wage service sector, Marc Andreessen, Mark Zuckerberg, mass affluent, McJob, McMansion, medical bankruptcy, Nate Silver, New Economic Geography, new economy, New Urbanism, obamacare, offshore financial centre, Paul Buchheit, payday loans, Peter Calthorpe, plutocrats, Plutocrats, post-industrial society, RAND corporation, Ray Kurzweil, rent control, rent-seeking, Report Card for America’s Infrastructure, Richard Florida, Silicon Valley, Silicon Valley ideology, Steve Jobs, technoutopianism, The Death and Life of Great American Cities, Thomas L Friedman, too big to fail, transcontinental railway, trickle-down economics, Tyler Cowen: Great Stagnation, upwardly mobile, urban planning, urban sprawl, War on Poverty, women in the workforce, working poor, young professional

America is simply not well suited, even in the best of conditions, to become a small, tidy, steady-state welfare society, a giant Norway.19 But is the die already cast, so that even the idea of restoring wide prosperity and property ownership now seems absurd? Much of conventional opinion on the right generally embraces the idea of a “new normal” and certainly has little appetite, perhaps outside the early Tea Party, to confront either the old oligarchy or even the new one. Most Republicans, particularly in the Senate, embraced the bailout of the large financial institutions, the very essence of the crony capitalism that favors large, established, and connected institutions over smaller ones.20 But such negativity and defeatism is not necessary, given the basic strengths of the U.S. economy. The American economy may not possess the “almost limitless resiliency” claimed by Kiplinger during the mid-80s Reagan-era boom, but its capacity for renewal is still much greater than is widely believed.21 The notion that America faces a negative trajectory has been commonplace since the time of the Depression.


pages: 290 words: 83,248

The Greed Merchants: How the Investment Banks Exploited the System by Philip Augar

Andy Kessler, barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, business cycle, buttonwood tree, buy and hold, capital asset pricing model, commoditize, corporate governance, corporate raider, crony capitalism, cross-subsidies, financial deregulation, financial innovation, fixed income, Gordon Gekko, high net worth, information retrieval, interest rate derivative, invisible hand, John Meriwether, Long Term Capital Management, Martin Wolf, new economy, Nick Leeson, offshore financial centre, pensions crisis, regulatory arbitrage, Sand Hill Road, shareholder value, short selling, Silicon Valley, South Sea Bubble, statistical model, Telecommunications Act of 1996, The Chicago School, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, tulip mania, value at risk, yield curve

The close connections between senior business people and their advisers mean that the investment bank is frequently selling into a receptive environment. A consequence was outlined to me by one of the world’s top investment bankers: ‘A true relationship comes when the CEO feels comfortable with one person and one bank. You are expected to deliver a reasonable price but it is not the be-all and end-all. Everyone feels comfortable and does not inquire about price. It is a rough and ready thing.’21 A better description of crony capitalism I have yet to hear. Issuers One of the mysteries of the IPO process is why issuers were so forgiving of the investment banks, allowing them to persist with high fees and not objecting when the shares they had just sold very often rose to a premium. The difference between the price at which shares are issued and the price at which they open is known as ‘money left on the table’ by the issuer.


pages: 352 words: 87,930

Space 2.0 by Rod Pyle

additive manufacturing, air freight, barriers to entry, Colonization of Mars, commoditize, crony capitalism, crowdsourcing, Donald Trump, Elon Musk, experimental subject, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, low earth orbit, Mars Rover, mouse model, risk-adjusted returns, Search for Extraterrestrial Intelligence, Silicon Valley, Silicon Valley startup, stealth mode startup, Stephen Hawking, telerobotics, trade route, wikimedia commons, X Prize, Y Combinator

While costs in Russia are lower than in the US—technicians and engineers generally earn between $200 and $300 per month—the differential does not close the gap. As John Logsdon, former director of the Space Policy Institute at George Washington University, put it, “Their budget is not adequate to maintain a world-class space effort across the board.”111 The situation was put in a starker light by space historian Asif Siddiqui: “Roscosmos has been beset with corruption, mismanagement, and crony capitalism that is the hallmark of the larger post-Soviet economy. In a tech sector that needs to meet very high standards, these problems have led the workforce on the ground to cut corners.”112 In November 2017, a Soyuz upper stage failed at liftoff, after an earlier launch failure in 2016 and three in 2015. These do not necessarily indicate flaws in the specific hardware used to shuttle crews to the ISS, but they surely indicate larger quality-control problems at Roscosmos.113 Since the US has relied on Russia since 2011 for crew access to and from the ISS, NASA watches Russian launch activities carefully.


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, negative equity, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, plutocrats, Plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, wealth creators, working poor, yield curve

Second, less well known and maybe more interesting, is the pattern of industrial ownership, in which large family-owned companies invest for the very long term, with complex and overlapping patterns of ownership and relationship between big, stable companies—the opposite of the Anglo-Saxon model in which everyone looks at the stock market price and the quarterly profits figures ahead of everything else. This Swedish industrial model is sometimes admired abroad for its long-termism and stability, sometimes deplored for its crony capitalism, depending on how it is perceived as performing relative to its foreign alternatives. synergy Mainly bullshit, but when it does mean anything, it means merging two companies and taking the opportunity to sack people. For instance, if two companies that make similar products merge, they will have similar warehouse and delivery operations: so one of the two sets of employees will lose their jobs.


pages: 301 words: 88,082

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, Double Irish / Dutch Sandwich, financial deregulation, haute couture, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing

David Cameron promised that his government would be ‘business-friendly to small businesses’, whereas ‘with the large companies, that have the fancy corporate lawyers and the rest of it, I think we need a tougher approach’.‌15 Not to be outdone, his deputy Nick Clegg clearly had Vodafone and Goldman Sachs in mind when he promised to take on ‘a wealthy elite of large businesses who can pay an army of tax accountants to get out of paying their fair share of tax, who basically treat paying tax as an optional extra where you can pick and choose the taxes you pay’.‌16 Their interventions were part of a politically shrewd broadside against ‘crony capitalism’ that took in not just tax dodging but other scourges such as excessive boardroom pay. If their austerity programme was to carry public support, they needed to look like they were confronting greed at the top too. When it comes to taxation, the need for fairness is especially acute. If individuals and small businesses sense that the privileged are not paying their fair share, compliance with tax laws can fall dramatically, with economically ruinous consequences.


pages: 223 words: 10,010

The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

"Robert Solow", banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business cycle, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, Everybody Ought to Be Rich, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

The two Bush administrations from 2000-2008 were packed with former chief executives and financiers—more than any American government in modern history. George W Bush’s first cabinet—dubbed a ‘junta of major corporate interests’—had a combined wealth more than ten times that of the Clinton cabinet.256 Government was effectively captured by a group of cheerleaders for the further deregulation of finance. Thomas Hoenig, President of the Reserve Bank of Kansas City has called the American economic system ‘crony capitalism … who you know, how big your political donation is.’257 A similar if less direct process has been at work in the UK. Gradually an elite group of financiers came to exercise an increasingly monopolistic influence on Britain’s political leaders, out of all proportion to their real economic contribution. In his book, Britain’s Power Elites, Hywel Williams, a former adviser to the Conservative Party, wrote that ‘…at no previous time in British history have the financial and business elites been as dominant as they are today.’ 258 In 2010, just over a half of donations to the Conservative Party came from City donors—a mix of bankers, hedge fund managers and private equity financiers.


Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America by Matt Taibbi

addicted to oil, affirmative action, Affordable Care Act / Obamacare, Bernie Sanders, Bretton Woods, buy and hold, carried interest, clean water, collateralized debt obligation, collective bargaining, computerized trading, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, desegregation, diversification, diversified portfolio, Donald Trump, financial innovation, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, illegal immigration, interest rate swap, laissez-faire capitalism, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, medical malpractice, money market fund, moral hazard, mortgage debt, obamacare, passive investing, Ponzi scheme, prediction markets, quantitative easing, reserve currency, Ronald Reagan, Sergey Aleynikov, short selling, sovereign wealth fund, too big to fail, trickle-down economics, Y2K, Yom Kippur War

The government might let other players on the market die, but it simply would not allow Goldman Sachs to fail under any circumstances. Its implicit market advantage suddenly became an open declaration of supreme privilege. “It wasn’t even an implicit assumption anymore,” says Simon Johnson, an economics professor at MIT and former International Monetary Fund official who compared the bailouts to the crony capitalism he had seen in the underdeveloped world. “It became an explicit assumption that the government would always rescue Goldman.” All of this government aid belies the myth of Goldman as a collection of the smartest cats in the world. All of this stuff sounds complicated, but when you get right down to it, it isn’t. Ask yourself how hard it would be for you to make money if someone fronted you a billion free dollars a week, and you get a rough idea of how Goldman’s relationship to the government pays off.


pages: 209 words: 89,619

The Precariat: The New Dangerous Class by Guy Standing

8-hour work day, banking crisis, barriers to entry, basic income, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, mass immigration, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, old age dependency ratio, Panopticon Jeremy Bentham, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional

Instead he backed the International Monetary Fund, which had been a primary culprit in its hubris, bailed out the banks and appointed Larry Summers as his principal economic adviser, the man who devised the policy responsible for the sub-prime housing crisis. Obama never tried to reach out to the precariat, even though many in it had been hopeful that he would do so. The social democratic imagination could not empathise with real predicaments. In the United States and elsewhere, anger grew at some of the corrupt aspects of the globalisation era. Recall the systemic use of subsidies. Naomi Klein among others has called the globalisation era ‘crony capitalism’, revealing itself not as a huge ‘free market’ but as a system in which politicians hand over public wealth to private players in exchange for political support. Ironically, far-right groups captured the anti-corporatist backlash. If the state has been captured by cronyism, why should anyone support a ‘strong state’? Old-style social democrats are unable to respond with conviction because they accepted the neo-liberal construction and did nothing to support the precariat that grew in its shadow.


pages: 307 words: 90,634

Insane Mode: How Elon Musk's Tesla Sparked an Electric Revolution to End the Age of Oil by Hamish McKenzie

Airbnb, Albert Einstein, augmented reality, autonomous vehicles, barriers to entry, basic income, Bay Area Rapid Transit, Ben Horowitz, business climate, car-free, carbon footprint, Chris Urmson, Clayton Christensen, cleantech, Colonization of Mars, connected car, crony capitalism, Deng Xiaoping, disruptive innovation, Donald Trump, Elon Musk, Google Glasses, Hyperloop, Internet of things, Jeff Bezos, John Markoff, low earth orbit, Lyft, Marc Andreessen, margin call, Mark Zuckerberg, megacity, Menlo Park, Nikolai Kondratiev, oil shale / tar sands, paypal mafia, Peter Thiel, ride hailing / ride sharing, Ronald Reagan, self-driving car, Shenzhen was a fishing village, short selling, side project, Silicon Valley, Silicon Valley startup, Snapchat, South China Sea, special economic zone, stealth mode startup, Steve Jobs, Tesla Model S, Tim Cook: Apple, Uber and Lyft, uber lyft, universal basic income, urban planning, urban sprawl, Zipcar

The truth may startle you. The video proceeded to suggest that Musk has been using his “unprecedented access to the halls of power” to line the pockets of politicians in an effort to secure billions of dollars of subsidies for his ventures Tesla, SpaceX, and SolarCity—all at the expense of the unsuspecting American taxpayer. Below the video, the site linked to critical articles about Musk and his “crony capitalism,” including opinion pieces written by such people as Veronique de Rugy, a research fellow at the Koch-funded Mercatus Center at George Mason University, and Bruce Fein, formerly an adjunct scholar at the American Enterprise Institute, funded by the Koch-linked Donors Trust nonprofit group. In his piece, Fein even wondered if the Koch brothers should create “an annual Elon Musk Fleecing Government Award to stigmatize wealth begotten from the hijacking of government to obtain risk-free riches.”


pages: 307 words: 88,180

AI Superpowers: China, Silicon Valley, and the New World Order by Kai-Fu Lee

AI winter, Airbnb, Albert Einstein, algorithmic trading, artificial general intelligence, autonomous vehicles, barriers to entry, basic income, business cycle, cloud computing, commoditize, computer vision, corporate social responsibility, creative destruction, crony capitalism, Deng Xiaoping, deskilling, Donald Trump, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, full employment, future of work, gig economy, Google Chrome, happiness index / gross national happiness, if you build it, they will come, ImageNet competition, income inequality, informal economy, Internet of things, invention of the telegraph, Jeff Bezos, job automation, John Markoff, Kickstarter, knowledge worker, Lean Startup, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, Menlo Park, minimum viable product, natural language processing, new economy, pattern recognition, pirate software, profit maximization, QR code, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, risk tolerance, Robert Mercer, Rodney Brooks, Rubik’s Cube, Sam Altman, Second Machine Age, self-driving car, sentiment analysis, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, special economic zone, speech recognition, Stephen Hawking, Steve Jobs, strong AI, The Future of Employment, Travis Kalanick, Uber and Lyft, uber lyft, universal basic income, urban planning, Y Combinator

One of the recipients of those loan guarantees was Solyndra, a California solar panel company that initially looked promising but then went bankrupt in 2011. President Obama’s critics quickly turned that failure into one of the most potent political bludgeons of the 2012 presidential election. They hammered the president with millions of dollars in attack ads, criticizing the “wasteful” spending as a symptom of “crony capitalism” and “venture socialism.” Never mind that, on the whole, the loan guarantee program is projected to earn money for the federal government—one high-profile failure was enough to tar the entire enterprise of technological upgrading. Obama survived the negative onslaught to win another term, but the lessons for American politicians were clear: using government funding to invest in economic and technological upgrades is a risky business.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business cycle, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, disruptive innovation, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

During the postwar period especially, rapid, efficient growth brought not only more wealth, but better jobs and wages; more innovative, helpful products; and higher aspirations, which lifted society as a whole. Since the rise of the Impulse Society, however, that connection has faltered. In recent decades, we’ve demonstrated that it’s possible to have a roaring GDP and a failing society. It’s not simply that more and more of the growth is being rerouted to a smaller population of beneficiaries, via the efficiencies of financialization and crony capitalism. It’s also that, in a socioeconomic system whose values are set by the marketplace, economic “success” no longer necessarily coincides with social success. Indeed, it is part of the perverse nature of the self-centered economy that our social failures are often the source of our roaring GDP. In a corporate environment increasingly skewed toward quick wins, quarterly earnings, and share price, companies (and their managers) can succeed, and GDP can soar through strategies that are profoundly destabilizing for employees and society as a whole.


pages: 332 words: 89,668

Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein

Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, basic income, Bernie Sanders, big-box store, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, mass incarceration, minimum wage unemployment, moral hazard, moral panic, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, plutocrats, Plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Sam Peltzman, Scientific racism, Simon Kuznets, single-payer health, strikebreaker, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration

Social thinkers in both Britain and the United States in the 1880s promoted the notion that no one was a social atom, that people ought to be knit to each other with certain rights and responsibilities by virtue of being co-citizens, and that the state had a role to play in nurturing accomplishment and education to make this possible.55 The Social Gospel movement, which emerged simultaneously from the churches and from the grassroots, provided a religious grounding for such policies by emphasizing that the Bible promoted neighborly uplift and care for the poor.56 Some writers, such as muckraking journalist Henry Demarest Lloyd, identified monopolies and corruption as the enemies of society. In Wealth Against Commonwealth (1894), Lloyd despaired because Americans’ attempts to institute municipal services like streetcars and gasworks were “sung to sleep with the lullaby about government best, government least.”57 Lloyd painstakingly chronicled the emergence of crony capitalism, false corporate entities, differential pricing, and rebates in the railroad and oil industries, all presided over by a sham regulatory system. But in the end he did not blame the corporations but rather the men behind them. “The real actors are men; the real instrument, the control of their fellows by wealth, and the mainspring of the evil is the morals and economics which cipher that brothers produce wealth when they are only cheating each other out of their birthrights.”58 Corporate capitalism eroded American morality.59 Lloyd noted that the United States was a political, but not an economic, democracy.


pages: 372 words: 94,153

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next by Andrew McAfee

back-to-the-land, Bartolomé de las Casas, Berlin Wall, bitcoin, Branko Milanovic, British Empire, Buckminster Fuller, call centre, carbon footprint, clean water, cleantech, cloud computing, Corn Laws, creative destruction, crony capitalism, David Ricardo: comparative advantage, decarbonisation, dematerialisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, energy transition, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Haber-Bosch Process, Hans Rosling, humanitarian revolution, hydraulic fracturing, income inequality, indoor plumbing, intangible asset, James Watt: steam engine, Jeff Bezos, job automation, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Khan Academy, Landlord’s Game, Louis Pasteur, Lyft, Marc Andreessen, market fundamentalism, means of production, Mikhail Gorbachev, oil shale / tar sands, Paul Samuelson, peak oil, precision agriculture, profit maximization, profit motive, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, Scramble for Africa, Second Machine Age, Silicon Valley, Steve Jobs, Steven Pinker, Stewart Brand, telepresence, The Wealth of Nations by Adam Smith, Thomas Davenport, Thomas Malthus, Thorstein Veblen, total factor productivity, Uber and Lyft, uber lyft, Veblen good, War on Poverty, Whole Earth Catalog, World Values Survey

Another of his most famous observations is “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Smith saw that government had a role to play in making sure that competitors don’t become cronies—close friends who collude to all get rich together by simultaneously raising prices. Many of the complaints I hear about our current economic system aren’t complaints about capitalism. Instead, they’re complaints about perversions of it. Collusion and crony capitalism, as described by Smith in the paragraph above, are dangers. So is corporatism: favors done for large, established companies by the government. Smith also realized the danger of what is now called regulatory capture—where instead of acting in the best interests of the public, regulators or elected officials instead take care of incumbent companies. As he wrote, “The member of parliament who supports every proposal for strengthening [a] monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance.”


pages: 279 words: 90,888

The Lost Decade: 2010–2020, and What Lies Ahead for Britain by Polly Toynbee, David Walker

banking crisis, battle of ideas, Boris Johnson, call centre, car-free, centre right, collective bargaining, congestion charging, corporate governance, crony capitalism, David Attenborough, Dominic Cummings, Donald Trump, Downton Abbey, energy transition, Etonian, first-past-the-post, G4S, gender pay gap, gig economy, Gini coefficient, global village, high net worth, housing crisis, income inequality, industrial robot, Intergovernmental Panel on Climate Change (IPCC), James Dyson, manufacturing employment, mass immigration, moral panic, mortgage debt, North Sea oil, offshore financial centre, payday loans, pension reform, quantitative easing, Right to Buy, Saturday Night Live, selection bias, smart meter, Uber for X, urban renewal, working-age population

Nonetheless, 60 per cent went on saying it was the government’s duty to reduce differences between people with high and low incomes, the same as in Sweden and Germany, and substantially higher than in the US. Levels of mutual trust were similar to in Germany and higher than in France, as measured before the gilets jaunes started rampaging. ‘We’re all in it together,’ George Osborne mocked, as he tugged policy in the opposite direction. Unfairness was in your face as crony capitalism was displayed in the form of vast and undeserved salary packages and bonuses. Greedy company directors proved immune to public shaming: a day’s embarrassment once a year from a few bolshie shareholders at the general meeting was well worth the millions. For their staff, low pay became endemic. Shame presupposed at least some degree of social solidarity, but it was lacking. We decreasingly knew either who we were in a collective sense or what we owed in terms of obligations of care and concern for ‘others’, whether they were the poor, minorities, the frail – or, indeed, elites, southerners, Londoners, leavers or any other non-members of our tribe.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, business cycle, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

See https://www.gov.uk/government/groups/uktistrategic-relations-team#supporting-the-uks-top-76-investors-and-exporters (accessed 22 October 2015). 13 Ibid. 14 R. H. Bork, The Antitrust Paradox: A Policy at War with Itself, New York, Free Press, 1993, 1st edn 1978; R. A. Posner, Antitrust Law, 2nd edn, Chicago, University of Chicago Press, 2001. 15 T. Cave and A. Rowell, A Quiet Word: Lobbying, Crony Capitalism and Broken Politics in Britain, London, Bodley Head, 2014. 16 Davis, Lister and Wrigley, NHS for Sale. 17 A helpful discussion of the various issues arising from the TTIP can be found in Queries, no. 6, Spring 2015, pp. 32–83, http://www.queries-feps.eu/PDF%20Complet%20-%20Queries%206.pdf (accessed 22 October 2015). 18 The most impressive example of this was R. A. Dahl’s Polyarchy, Participation and Opposition, New Haven, CT, Yale University Press, 1971.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

"Robert Solow", accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

In Indonesia, the Philippines, and Thailand, ten rich families control half of the corporate assets. The concentration of ownership in a few hands reflects the absence of formal shareholder protections. Outsiders’ justifiable fears that the company will be run in the interests of the controlling family dissuade them from investing in it. The members of the clique often have special links to the government, and such crony capitalism adds to outside shareholders’ defenselessness. In Russia, there is little regulatory oversight and lawsuits are difficult to mount. Investors are told little about the state of firms, and what little they are told is unreliable. Sometimes they are even locked out of annual meetings. Managers often sell off subsidiaries and pocket the proceeds. The value of shares is routinely diluted; occasionally shares are expropriated outright.


pages: 371 words: 98,534

Red Flags: Why Xi's China Is in Jeopardy by George Magnus

3D printing, 9 dash line, Admiral Zheng, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bretton Woods, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, Gini coefficient, global reserve currency, high net worth, hiring and firing, Hyman Minsky, income inequality, industrial robot, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, Washington Consensus, women in the workforce, working-age population, zero-sum game

, John Wiley & Sons, 2011 Marshall, Tim, Prisoners of Geography: Ten Maps that Tell You Everything You Need to Know about Global Politics, Elliott & Thompson, 2015 Mercator Institute for Chinese Studies, ‘China’s Core Executive’, June 2016 Mitter, Rana, China’s War with Japan, 1937–1945: The Struggle for Survival, Allen Lane, 2013 Morris, Ian, Why the West Rules – For Now, Profile Books, 2010 Naughton, Barry, The Chinese Economy: Transitions and Growth, MIT Press, 2007 Nolan, Peter, Re-Balancing China, Anthem Press, 2015 OECD, ‘The People’s Republic of China: Avoiding the Middle-Income Trap’, September 2013 OECD, ‘Economic Survey, China’, 2017 Pei, Minxin, China’s Crony Capitalism, Harvard University Press, 2016 Pettis, Michael, ‘China Financial Markets: Will China’s New “Supply-Side” Reforms Help China?’, <http://blog.mpettis.com>, 2016 Pieke, Frank N., Knowing China: A Twenty-First Century Guide, Cambridge University Press, 2016 Ringen, Stein, The Perfect Dictatorship: China in the 21st Century, Hong Kong University Press, 2016 Shambaugh, David, ed., Deng Xiaoping: Portrait of a Chinese Statesman, Oxford University Press, 1995 Shih, Victor, ‘Financial Instability in China: Possible Pathways and their Likelihood’, Mercator Institute for China Studies, 20 October 2017 ‘Silk Road Bottom Up: Regional Perspectives on the Belt and Road Initiative’, ed.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game

Confessions of the Pricing Man: How Price Affects Everything (Springer International Publishing, 2015). Kindle Edition. 23. Ibid. 24. http://antitrustconnect.com/2017/08/07/rejection-of-containerboard-conspiracy-claims-shows-difficulty-of-getting-an-antitrust-case-to-a-jury/. 25. https://www.healthaffairs.org/do/10.1377/hblog20170905.061802/full/. 26. Steven G. Calabresi, “The Right to Buy Health Insurance across State Lines: Crony Capitalism and the Supreme Court,” 81 U. Cin. L. Rev. (2013).” Available at: https://scholarship.law.uc.edu/uclr/vol81/iss4/5; “Focus on Health Reform: How Competitive are State Insurance Markets?” The Henry J. Kaiser Family Foundation (October 2011), http://www.kff.org/healthreform/upload/8242.pdf; and Bob Cook, “AMA: Health Plan Market Dominance Causes ‘Competitive Harm,’ ” American Medical News (December 10, 2012), http://www.ama-assn.org/amednews/2012/12/10/bisb1210.htm. 27.


pages: 350 words: 109,220

In FED We Trust: Ben Bernanke's War on the Great Panic by David Wessel

Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, Black Swan, break the buck, business cycle, central bank independence, credit crunch, Credit Default Swap, crony capitalism, debt deflation, Fall of the Berlin Wall, financial innovation, financial intermediation, fixed income, full employment, George Akerlof, housing crisis, inflation targeting, information asymmetry, London Interbank Offered Rate, Long Term Capital Management, market bubble, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, price stability, quantitative easing, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, savings glut, Socratic dialogue, too big to fail

He said his continued presence there was an unwelcome distraction for the Fed, and insisted unapologetically that his actions had been “mischaracterized” and above reproach. Directors of regional Fed banks didn’t vote to approve Fed loans like the one Bear Stearns was seeking; the loans went to the Fed board in Washington, where all the power was with government employees like Bernanke. And directors weren’t supposed to participate in formal conversations about their own institutions. But the incestuousness was obvious, the kind of crony capitalism that the U.S. government criticized in Indonesia and other developing countries. Geithner was hired by bankers he was supposed to supervise and, now, was being asked to bail out. The arrangement underscored the New York Fed’s peculiar relationship with Wall Street. It was supposed to be a regulator and guardian of the public interest, but sometimes was seen — by banks, by other factions inside the Fed, and by the public — as Wall Street’s advocate, rather than its overseer.


pages: 565 words: 122,605