Vaccine Passports are Cronyism

For years, I’ve used the term crony capitalist to describe businesspeople who choose to earn profits by lobbying for subsidies and government regulations suppressing competition. My critics pointed out that crony capitalists are not capitalists. 

My critics are right, and the distinction matters. Crony capitalism has no resemblance to real capitalism.

Conflating the two words gives capitalism a bad name. No wonder “70% of millennials say they’d vote for a socialist.”

In his book, The Meaning Revolution, economist Fred Kofman provides a clear definition of cronyism:

“Cronyism is a political and economic system in which the government is controlled by corporations and intervenes in the market using its coercive power on their behalf. Crony businesspeople thrive not because they serve their stakeholders but because they exploit the power of the state, circumventing the discipline of the free market.”

Crony businesspeople partner with politicians. “While capitalism channels personal ambition into the service of others, cronyism channels personal greed into abuse.” Kofman explains how:

“Crony politicians crush competition by handing out special permits, government grants, and tax breaks to those whom they favor, and by imposing tariffs and restrictions on their competitors and consumers. Crony corporations take inordinate risks fearlessly, knowing that if they win, their earnings will be privatized, but if they lose, their losses will be covered through bailouts and special aid packages.” 

Cronies have no skin in the game; their losses are covered. Nasim Taleb points out “The largest fragilizer of society is a lack of skin in the game.” Cronies pursue coercive policies that make markets more fragile, less able to learn from trial and error, and less able to cope with unexpected events. Taleb adds, “I want the entrepreneur to be respected, not the CEO of a company who has all the upsides and none of the downsides.” 

The result of cronyism, Kofman explains, is the destruction of economic value: “Crony businesses make money not by profiting in the economic market through their value-adding services, but by profiteering in the political market through value-destroying takings.” 

Cronies operate from a win-lose mindset; entrepreneurs have a win-win mindset. When cronies win, someone else must lose. When an entrepreneur gains, so can others.

Cronies seek to increase their wealth at the expense of others; entrepreneurs seek to increase their wealth by serving others.

Read the rest of my latest AIER essay which explains why proposed vaccine passports are cronyism: https://www.aier.org/article/vaccine-passports-are-cronyism/

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