Crony Capitalism: Macro-Parasitism under Industrialization
13 May 2011
Recently I was reading the Macroeconomic Resilience blog (which I recommend) and noticed one of the author’s tweets, which ran: “Just another example of our descent into crony capitalist hell.” This includes a link to a Rolling Stone story, The Real Housewives of Wall Street: Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?. The story was predictably depressing, but it also set me to thinking.
I guess I’ve thought of crony capitalism as an economic illness that besets other people’s economic systems, but was not a problem of the industrialized Western nation-states. The Rolling Stone article, and Ashwin Parameswaran’s comment upon it, seem to recognize crony capitalism as a fait accompli of the most advanced industrialized economies.
In an earlier post I wrote about what may be called the existential condition of the ratepayer. We need only shift this analysis by an increment to note that almost everything that I wrote about ratepayers also applies (perhaps especially applies) to taxpayers.
“An oft-quoted line from the travel writer Paul Theroux is this: “The Japanese have perfected good manners and made them indistinguishable from rudeness.” (This is from The Great Railway Bazaar, Chapter 28, p. 290) In parallel to this, I would say that Americans have perfected good governance and made it indistinguishable from corruption.”
Our good governance has not prevented the emergence of institutions that are virtually indistinguishable from some of the most abusive crony capitalist regimes in the world.
In his deservedly famous book Plagues and Peoples, William H. McNeill makes a distinction between micro-parasites and macro-parasites. Micro-parasites are the familiar infectious diseases that live off us, and when they begin to kill off their host population we say that they are “epidemic.” Macro-parasites also live off us, but instead of being invisible microbes, they are the animals that formerly ate us outright, but most it is others of our own species that live off us.
The examples that McNeill gives of macro-parasitism are mostly taken from agricultural civilization. These are the most familiar examples — emperors, kings, nobles and all the peerage who exploit the mass of the peasantry whose mean lives can never amount to much with the obscene wealth of royalty extracted from their toil. Certainly this is what macro-parasitism was. But, as I have pointed out repeatedly in this forum, profound social changes have followed from industrialization, and it should also be expected that relations of macro-parasitism should also change.
Whereas I once thought of crony capitalism as an arrested form of the development of a fully industrialized commercial economy, a condition that might ameliorated if not transcended by measures expressly undertaken to remove a crony capitalist elite from power, from the perspective of the economic ecology of McNeill, it could be claimed that crony capitalism is in fact the mature form that industrialized economies will take.
Crony capitalism, with its entrenched plutocracy, is a stable and iterable socio-economic structure that may promise a social paradigm for the longue durée — something that I have argued has been lacking from industrialized civilization (cf. Social Consensus in Industrialized Society) — much like the thousand years of the Roman Empire in classical antiquity or the thousand year of medieval feudalism. These latter two examples are instances of a stable macro-parasitic socio-economic system under the agricultural paradigm; crony capitalism may be the stable macro-parasitical socio-economic system under the industrial paradigm.
Whether we call it macro-parasitism, corruption, rent-seeking, or tax farming it all comes to pretty much the same thing.
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