Why Crony Capitalism Hurts Us All

Cronyism tips playing fields, derails innovation and—ultimately—breeds cynicism and downright outrage among the American public. But what’s to be done about it?

Crony-Key-TakeawaysThe problem is hardly limited to Ex-Im. Concerns about giveaways to connected corporations have reached a boiling point, generating more and more controversy and outcry on both sides of the political divide. Conservatives point to examples like Ex-Im and Solyndra, the California-based solar company that went bankrupt after receiving $535 million in federal loan guarantees, while progressives point to special subsidies, tax loopholes and powerful lobbying by wealthy  companies, such as Boeing and General Electric as evidence that the relationship between government and business has crossed the line well beyond benign partnership.

“The whole notion of meritocracy has come under attack and has been displaced by notions of cronyism or kleptocracy or something similar.”

Meanwhile, the average citizen, soured by declining real personal income, has become increasingly cynical about what he views as neo-mercantilism or crony capitalism that appears to benefit the elites at the expense of ordinary people. According to a new global survey, the CNBC/Burson-Marsteller Corporate Perception Indicator, the U.S. public is divided on whether corporations are a source of “hope” (36 percent) or “fear” (37 percent), while in China, 84 percent say corporations are a source of “hope.” More than half of the U.S. public said “strong and influential” corporations are “bad,” even if they are promoting innovation and growth, while in China, 74 percent embrace strong corporations as “good.”

Some of those feelings may be due to cultural differences, but not all. And perceptions, even flawed ones, can have unfortunate consequences for business, even those whose commercial interests have little connection to government.

A Pervasive Problem
Cronyism, hardly a recent invention, has ebbed and flowed over the decades, but it appears to be on the rise today. “The whole notion of meritocracy has come under attack and has been displaced by notions of cronyism or kleptocracy or something similar,” says Jonathan Macey, Sam Harris Professor of corporate law, corporate finance and securities law at Yale Law School. Examples of corporate welfare abound—from energy tax breaks and fast food subsidies to endless patent protection for big pharma and bailouts of behemoths pulled back from the brink by Uncle Sam’s long and generous arm. The Cato Institute estimates that federal subsidies to corporations cost taxpayers almost $100 billion every year.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.