Ten years ago, finance experts called it relationship banking, and thought it might help to minimize “problems of asymmetric information and incentive incompatibility;” today we call it “crony capitalism”…
the rules of economics turn out to apply to East Asia similarly to elsewhere.
I then attempt to recast the concept of cronyism within its historical and cultural context, dispensing with neoclassical ideas of ‘correct’ economic practice and notions that crony capitalism itself represents either an explanation or a necessary outcome.
In other words, this essay is not so much concerned with the extent to which such practices did or did not contribute both to the high growth rates in the region and later to the 1997 crisis; rather it asks we should view cronyism – as a deviation from the ‘natural’ workings of the market system, or as somehow constitutive of particular variants of capitalist practice?
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Of Mice And Men Essay Prompts - Crony Capitalism Essay
The main problem in East Asia was not macroeconomic, but structural. They include excessive leverage, and a banking system based excessively on directed lending, connected lending and other collusive personal relationships.This methodology rejects more orthodox notions of universally applicable models through which to interpret state and market behaviour; insisting that political economy is inseparable from the social institutions in which it is embedded.It challenges not only the state/market dichotomy, but also the separation of culture, belief, legitimisation and ideology from the study of political economic processes.They also discuss ways to prevent the descent into cronyism and speculate on their own blind spots.Crony capitalism is an extension of the generic concept of cronyism as it applies to businesses and firms in a nation or society.From this perspective ‘crony capitalism’, a term used to describe a variety of practices including nepotism, , or more generally “forms of trust violation that can occur whenever a state tries to manipulate incentives or, in other ways, alter market outcomes” (Johnson 194), is perceived to be a deviation from liberal or neoclassical standards like transparency, regulatory frameworks, and competition policy.The state represents not an alternative model of political economic conduct, but a failure to institutionalise these universally applicable norms (Hughes 1999).From this perspective cronyism must be viewed not as deviant behaviour from some established pattern, but rather as the crystallisation of different institutions, structures and practices which are continually interacting and synthesising (Clark and Chan 1998).(see for example Silberman 1993; Teschke 2003).And in fact the economic/political separation itself is highly dubious, since much recent historical materialist scholarship details how what is taken to be a natural or universal phenomenon is in fact a socially constructed distinction which serves to obscure the inherently political or power-based nature of economic or market transactions (Wood 1995; Rosenberg 1994).A politicized or rigged economic system is dubbed crony capitalist to distinguish it from a system of free markets and limited government.It is the deliberate, systematic use of public policy to rig markets in ways that benefit politically connected actors.