Creation of Crony Capitalism in Developing Economies
In its worst form, crony capitalism can devolve into simple corruption, where any pretense of a free market is dispensed with. Bribes to government officials are considered de rigueur and tax evasion is common; this is seen in many parts of Africa, for instance. This is sometimes called plutocracy (rule by wealth) or kleptocracy (rule by theft).
Corrupt governments may favor one set of business owners who have close ties to the government over others. This may also be done with racial, religious, or ethnic favoritism; for instance, Alawites in Syria have a disproportionate share of power in the government and business there. (President Assad is an Alawite.) This can be explained by considering personal relationships as a social network. As government and business leaders try to accomplish various things, they naturally turn to other powerful people for support in their endeavors. These people form hubs in the network. In a developing country those hubs may be very few, thus concentrating economic and political power in a small interlocking group.
Normally, this will be untenable to maintain in business; new entrants will affect the market. However, if business and government are entwined, then the government can maintain the small-hub network.
Read more about this topic: Crony Capitalism
Famous quotes containing the words creation of, creation, capitalism and/or developing:
“Creation of something out of nothing is the most primitive of human passions and the most optimistic.”
—Christina Stead (1902–1983)
“Some collaboration has to take place in the mind between the woman and the man before the art of creation can be accomplished. Some marriage of opposites has to be consummated. The whole of the mind must lie wide open if we are to get the sense that the writer is communicating his experience with perfect fullness.”
—Virginia Woolf (1882–1941)
“The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practicised. The manners of capitalism improve. The morals may not.”
—John Kenneth Galbraith (b. 1908)
“... the big courageous acts of life are those one never hears of and only suspects from having been through like experience. It takes real courage to do battle in the unspectacular task. We always listen for the applause of our co-workers. He is courageous who plods on, unlettered and unknown.... In the last analysis it is this courage, developing between man and his limitations, that brings success.”
—Alice Foote MacDougall (1867–1945)