Crony capitalism

Crony capitalism describes a system in which businesses prosper through political connections, favors and special treatment from government, such as subsidies, tax breaks, protective regulations, loans or contracts, rather than through open competition. The term became common after the 1990s to describe such arrangements, which writers have cited in places such as Southeast Asia and Russia.

In American politics, examples cited include targeted subsidies, the Export-Import Bank, bailouts of firms deemed "too big to fail," ethanol mandates and regulations that favor incumbents, a form of regulatory capture. Economists call the pursuit of such privileges "rent-seeking," a core theme of public choice theory.

The criticism is made across the spectrum. Free-market conservatives and libertarians argue that it distorts markets and rewards political skill over productivity, and they propose cutting subsidies and simplifying regulation. Populists and progressives criticize it as evidence that government serves the powerful and propose reforms to lobbying and campaign finance. Defenders of particular policies argue they serve strategic goals, such as industrial policy or support for key industries. The line between legitimate policy and favoritism is contested, and each side often accuses the other of cronyism. See also deregulation.