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Cronyism in economic system

Sankar Ray

There is no denying that the Indian economic system gravitates towards crony capitalism. But India is not alone. Even the US economy is deeply infected with cronyism. Austrian political economist Samuel Gregg whose D.phil dissertation at the Oxford University was on moral philosophy observed  during the poll campaign of  Donald Trump for presidential contest ‘the problem of crony capitalism—or, more simply, cronyism’ was already afloat as an issue alongside wage stagnation and immigration policy. Trump began thinking that neo-liberation was bound to flop and strongly suggested redesigning of American nationalism, an allotropic form of great nation chauvinism.

However, agreeing with the suspicion that Trump would implant crony capitalism covertly, Gregg, lamented that ‘cronyism’ for many Americans (including conservatives)  ‘ is a way of life’ .Despite the tall  claims of valuing economic liberty, cronyism has already inflicted a considerable damage to Western democracies that confront significant political challenges as its sequel.

The global emergence cronyism in national economic structure is in evidence in China which alike Russia is deeply afflicted by crony capitalism. Chinese President and chairman of the Communist of China Xi Ping admitted the incision of cronyism albeit without naming it in October 2014, ‘Corruption in regions and sectors is interwoven; cases of corruption through collusion are increasing; abuse of personnel authority and abuse of executive authority overlap; the exchange of power for power, power for money, and power for sex is frequent; collusion between officials and businessmen and collusion between superiors and subordinates have become intertwined; the methods of transferring benefits to each other are concealed and various’(China’s Crony Capitalism: The Dynamics of Regime Decay - Minxin Pei, Harvard University Press 2016).

Take Russia.  Ten years ago, Gulnaz Sharafutdinova in a paper ‘Crony Capitalism and Democracy: Paradoxes of Electoral Competition in Russia’s Regions’ inferred  the emergence of a crony capitalist system as a part of the post-communist transformation in Russia -“a distinct institutional order characterized by the domination of informal elite groups” or ‘economic-political elite networks (EPNs)’ that came up during the  Gorbachev regime that promoted “spontaneous privatisation” Alike  other economies , crony capitalism  in Russia too  benefited select economic elites  who have been thriving on  preferential treatment and privileges,  “thus making support from the state rather than market forces a crucial factor for maintaining and accruing wealth”. Crony capitalism, Dr Sharafutdinova noted, having significant implications for both the political and economic spheres, is “neither solely political nor solely economic”.

Crony capitalism is no new as cronyism, asserts Gregg, was woven into  the mercantilist economic system of the West between the 1500s and 1700s when  letters-patent by the state used to be granted to  “specific merchants with close ties to ministers at court”. Along with “tax privileges for particular businesses, efforts to restrict competition through quotas and tariffs, monarchs directly subsidizing particular industries, and guilds working with governments to restrict entry into trades and suppress technological development. ” Today’s crony capitalism, he thinks “is not outright corruption, though it often verges on or morphs into illegal activity… It first emerged in 1980 to describe how the Philippines’ economy functioned under the Marcos regime” (Crony Capitalism: Inefficient, Unjust, and Corrupting by Samuel Gregg Public Discourse, 7 March 2016).

In India, crony capitalism as an emerging (to dominate the economy) phenomenon arose around the same time. (The Polyester Prince: The Rise of Dhirubhai Ambani- Harmish McDonald, banned in India). Or it’s mutating further towards a hegemonistic pattern? We submit that under the present regime in Delhi has a symptomatic manifestation of it very clearly.

India today in distinctively different from the first four decades of post-independent years.

Marxist economist Samir Amin appreciated the Congress governments’ implementation of  ‘a national plan that, typical of its time, was influenced by the victories of the national liberation movements of Asia and Africa after the Second World War. The parties (political forces that were mobilised during this fight for independence, modernization, and development) henceforth in power enjoyed undeniable legitimacy, but the plans they put into effect were undermined by the ambiguities that characterized the liberation movements themselves. These plans were anti-imperialist inasmuch as they fully understood that modernization and development required national liberation first of all.” (Samir Amin:India, A Great Power, Monthly Review, February 2005).

 Sudipta Kaviraj in his ph.d. thesis called it ‘innovative capitalism’.- a capitalist path of development to  terminate colonial linkage and disempower feudalism, but  heavily tilted towards development of public sector in the core sector. In contrast, post-colonial development in Africa and Latin America was of dependent nature due to domination of foreign capital. But the powers-that-be has a different legacy, built by ‘the Hindu comprador right’ (Amin).   

However, Amin was far from the new menace of crony capitalism as he remained obsessed with the hackneyed concept of comprador capitalism which was an incision from the Maoist camp of political economy. Academia ( of economic sciences) never took comprador capitalism as a discipline to research. It was loosely formulated at the Communist International in 1925. Crony capitalists are unlike comprador bourgeoise not cretins of imperialism or remnants of neo-colonialism.

Crony capitalism flourishes in western India, especially Gujarat and obviously skewed and asymmetric to help select few nouveau riche grow almost exponentially. However, scholarship in crony capitalism remains conspicuous by its absence, especially in India, where political culture is mostly based on sycophancy and loyalty.

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Sep 22, 2019


Sankar Ray [email protected]

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