DEFINITION: “Capitalism” is a set of social and economic institutions that support the exercise of independent economic actors on the free market.
Such arrangements provide for the ability of those independent actors to own property and accumulate wealth without limit.
“Crony capitalism” is a form of capitalism in which some or many large corporations cooperate closely with the state in return for favorable tax and regulatory treatment by the state.
ETYMOLOGY: For the word “capitalism,” see the entry on “capitalism.”
The colloquial word “crony” derives from the ancient Greek adjective chronios, meaning “long lasting,” which is connected with the noun chronos, meaning “time.”
The connection is that a “crony” is a friend of long standing. The word is first attested in English in 1665.
USAGE: There are several varieties of crony capitalism, some of which overlap with state capitalism.
The main distinction depends upon whether the cooperation of privately owned corporations with the state is voluntary or compulsory.
The classic case of crony capitalism is the voluntary one. In this scenario, the owners and managers of large corporations choose to do the government’s bidding because the government makes it worth their while.
In the compulsory case, also known as “corporatism,” the state applies strong political pressure on corporations to conform to its wishes, particularly with respect to long-term production goals, planning, targets, and the like.
In the compulsory case, there may still be no direct ownership of the means of production by the state.
Therefore, from a definitional point of view, it remains a case of “crony capitalism.”
Perhaps we need to make a further distinction between “crony-capitalism-of-the-carrot” and “crony-capitalism-of-the-stick.”
However, even in the latter case, one eventually reaches a point where the line between state management and control of a private company and state ownership of the same company becomes virtually invisible.
From a definitional point of view, as the state begins to take over companies entirely, crony capitalism shades into state capitalism (or socialism—see the Glossary entry for “communism”).