Cronyism puts democracies and markets at risk

Workers remove logo from Dexia headquarters in Brussels after the Franco-Belgian bank required a bailout
Feb. 27, 2012: Workers remove logo from Dexia headquarters in Brussels after the Franco-Belgian bank’s local unit was nationalized following a government bailout (source: dpa)
  • Spectacular examples of revolving doors show cronyism is alive and well in Europe
  • Crony capitalism undermines basic accountability of democracies and markets
  • Trend toward centralized “big government” only fosters such practices
  • Social media – at least in theory ­­– may foster cultural resistance to cronyism

In October 2008, when United States Secretary of the Treasury Henry Paulson bailed out several large financial companies, including his former employer Goldman Sachs, with taxpayers’ money, many raised their eyebrows and spoke of crony capitalism. There have been many such instances in recent years.

Cronyism is not straightforward corruption – although it can easily slip into it. It can be defined as the private use of personal connections to obtain favors from politicians and powerful officials, who receive benefits in return and become cronies. The incestuous relationship between economic and political power is made of “revolving doors” and favors exchanged between the private and public sectors.

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