Guest Post: Crony Capitalism And The Expansive Central State
by Charles Hugh Smith
Crony Capitalism flourishes in an economy dominated and controlled by a Central State.
Crony capitalism arises when an expansive Central State dominates the economy. The Central State can then protect crony-capitalist perquisites, cartels, quasi-monopolies and financialization skimming operations of the sort which now dominate the U.S. economy’s primary profit centers.
If we step back, the larger context is the purpose and role of establishing a State to protect its citizens from foreign and domestic predation and exploition.
The Central State is granted the sole power of coercion by its membership (citizenry) to protect the membership from the predation of individuals, concentrations of wealth and other subgroups seeking monopoly. They grant the State this extraordinary power to insure that no subgroup or individual can gain enough power to dominate the entire membership for their private gain and to protect freedom of faith, movement, expression, enterprise and association.
Granting this power to the State creates a risk that the State itself may become predatory, supplanting the parasitic elements it was designed to limit. To counter this potential, the State has self-limiting mechanisms such as an independent judiciary, armed forces under civilian control, etc., a separation of powers such that no one institution or agency can dominate the State and thus the nation. The goal is to create a stable but flexible equilibrium between comparably powerful institutions, all of which are tasked with enabling and defending the members’ freedom of movement, expression, enterprise and association against the encroachment of powerful subgroups.