Corruption and cronyism are integral to capitalism; they are not a curable deviation.
The exposure of the Radia tapes has resurrected the term “crony capitalism” in India. It has been among the more favoured appellations to describe the political economy of
the massive corruption and decadence exposed by the Radia tapes. This term came to prominence in the 1990s when it was used to explain the Asian financial crisis. It referred to the nepotism and corruption which marked the Asian tiger economies. It was argued that the closed networks of business groups and their connections – filial, financial and structural – to political power in these countries had made self-correction by the market difficult and created a capitalism which was disfigured.
The exposure of the Radia tapes has resurrected the term “crony capitalism” in India. It has been among the more favoured appellations to describe the political economy of
the massive corruption and decadence exposed by the Radia tapes. This term came to prominence in the 1990s when it was used to explain the Asian financial crisis. It referred to the nepotism and corruption which marked the Asian tiger economies. It was argued that the closed networks of business groups and their connections – filial, financial and structural – to political power in these countries had made self-correction by the market difficult and created a capitalism which was disfigured.
These economies had been the star-fighters for post-second world war capitalism as they pursued an economic path much favoured by the Bretton Woods institutions. They had pushed the market and integrated their economies with global capitalism. Their rapid economic growth and ability to provide a basic level of well-being to their citizens, while brutally crushing any left wing political movement, was held up as the model for all to emulate as a success of capitalism. Thus, their economic crisis had to be explained in terms which would not implicate capitalism as such.
Hence, the use of the word “crony” to argue that while the market economy based on private property and profit-seeking had led to the economic miracle of south-east Asia, the existence of cronies (friends and relatives) between business and government led to a breakdown of checks and balances.
The “invisible hand” of the “free” market was shackled by cronyism which led to a lack of checks and balances that are inherent in the market economy, and which encouraged the growth of “inefficiencies” through political patronage and thence to an economic crisis. Or so argued the defenders of capitalism.
In this context it is telling that the recent global financial and economic crisis which emanated from the headquarters of capital – New York’s Wall Street – was not seen as linked to the prevalence of crony capitalism. This despite the easy flow of personnel between business and government and the old boy, golf club ties between business and political leaders which is so endemic to the United States and other developed countries. Clearly, “crony” is an adjective to be used for the developing world. Or perhaps it carries a racial code where non-white societies, even if with a successful capitalism as Japan has, were tarred with this disfigurement to show up their non-rational side.
While the use of the word “crony” can be explained by the need to defend capitalism as an idea and its selective deployment can perhaps illuminate a vein of racism, it is important to acknowledge that secretive ties and closed social networks have undermined not only economic life but democracy and political accountability too. One should remember that one of the promises of liberalisation of economic controls was that it will reduce corruption and
increase efficiencies in the economy. In India, in particular, it has intertwined with the demand for “merit” to build a political agenda which pushes for less public control of the economy while reducing government initiatives for redistribution of resources and opportunities. However, a plotting of the opening up and growth of the economy with the number and size of corruption cases would indicate a direct and positive correlation between the two. As
we have privatised, liberalised, globalised and grown in size to become a trillion dollar economy, so have the number of corruption cases while the amounts involved have grown exponentially.
Hence, the use of the word “crony” to argue that while the market economy based on private property and profit-seeking had led to the economic miracle of south-east Asia, the existence of cronies (friends and relatives) between business and government led to a breakdown of checks and balances.
The “invisible hand” of the “free” market was shackled by cronyism which led to a lack of checks and balances that are inherent in the market economy, and which encouraged the growth of “inefficiencies” through political patronage and thence to an economic crisis. Or so argued the defenders of capitalism.
In this context it is telling that the recent global financial and economic crisis which emanated from the headquarters of capital – New York’s Wall Street – was not seen as linked to the prevalence of crony capitalism. This despite the easy flow of personnel between business and government and the old boy, golf club ties between business and political leaders which is so endemic to the United States and other developed countries. Clearly, “crony” is an adjective to be used for the developing world. Or perhaps it carries a racial code where non-white societies, even if with a successful capitalism as Japan has, were tarred with this disfigurement to show up their non-rational side.
While the use of the word “crony” can be explained by the need to defend capitalism as an idea and its selective deployment can perhaps illuminate a vein of racism, it is important to acknowledge that secretive ties and closed social networks have undermined not only economic life but democracy and political accountability too. One should remember that one of the promises of liberalisation of economic controls was that it will reduce corruption and
increase efficiencies in the economy. In India, in particular, it has intertwined with the demand for “merit” to build a political agenda which pushes for less public control of the economy while reducing government initiatives for redistribution of resources and opportunities. However, a plotting of the opening up and growth of the economy with the number and size of corruption cases would indicate a direct and positive correlation between the two. As
we have privatised, liberalised, globalised and grown in size to become a trillion dollar economy, so have the number of corruption cases while the amounts involved have grown exponentially.
Compare the Rs 64 crore allegation for the Bofors gun deal with the (admittedly notional) Rs 1.76 lakh crore estimate for the 2G telecom scam to get a sense of how corruption has grown.
The example of India indicates that the loot of public money for private benefit and the use of public office for private gain are not inimical to economic growth and the deepening of capitalism. In fact, it can be argued, as has been done by various radical critics of capitalism, that there is an intrinsic link between the two.
The free market’s “efficiency” is based in part on its ability to draw on the labour and resources for which it does not pay, whether it is the unfree labour of women or bonded labour or the free gifts of nature. Capital has to continuously encroach on natural resources, push down the rates for labour power as well as break laws to keep its head above the swirling waters of the falling rate of profit.
If friend and family do not help it in this struggle for survival, who will? Historical experience suggests that as India continues to liberalise controls on capital and privatise its resources, there will be a corresponding increase in corruption and a further growth in the nexus between business and politics. To call it “crony” is to misread the very nature of capitalism and provide an alibi for its depredations, as if capitalism itself is not guilty of these transgressions.
Prime Minister Manmohan Singh warning about the dangers of “crony” capitalism is understandable, since he would need to defend the capitalism he is trying to build. However, when leftists and radicals start using this term, it may reflect an inability to understand the very nature of capitalism.
Prime Minister Manmohan Singh warning about the dangers of “crony” capitalism is understandable, since he would need to defend the capitalism he is trying to build. However, when leftists and radicals start using this term, it may reflect an inability to understand the very nature of capitalism.
