Crony Capitalism’s Achilles’ Heel

LFTIn 1956, the late political sociologist C. Wright Mills coined a new term and slapped it on the front of his latest book…

The title? The Power Elite.

Mills’ book was an instant hit. It struck a chord in America. Some loved it. Some hated it. But they were all talking about it. It was the first time a somewhat mainstream fellow had eloquently put into words the unseen forces that shaped the new American society. And it was one of a few critical looks at the American power structure.

Also, it didn’t hurt that it was around the same time that the word “politics” began to leave bad tastes in the mouths of many Americans.

Mills’ book begins thus:

“The powers of ordinary men are circumscribed by the everyday worlds in which they live, yet even in those rounds of job, family, and neighborhood they often seem driven by forces they can neither understand nor govern. ‘Great changes’ are beyond their control, but affect their conduct and outlook nonetheless. The very framework of modern society confines them to projects not their own, but from every side, such changes now press upon the men and women of the mass society, who accordingly feel that they are without purpose in an epoch in which they are without power.

“But not all men are in this sense ordinary. As the means of information and of power are centralized, some men come to occupy positions in American society from which they can look down upon, so to speak, and by their decisions mightily affect, the everyday worlds of ordinary men and women.

“What Jacob Burkhardt said of ‘great men,’ most Americans might well say of their elite: ‘They are all that we are not.’”

The term in Mills’ book — the “power elite” — described the relationships between leaders in three sections of society: political, economic (big business), and the military.

“This troika of authority,” Wendy McElroy writes in The Daily Bell, “shared a common vision and a common goal; they wanted to centralize power of society under their control.

“Basically, the troika consisted of:

  • a federal government that assumed the powers of the more decentralized states and authorities
  • “giant corporations” that worked to exclude small competitors and agrarian interests
  • a military that was once viewed with a “distrust fed by state militia,” but had become a “grim and clumsy … sprawling bureaucratic domain.”

These three superpowers, Mills posited, created a new face of America. The one we see today is a result of their slow stranglehold on the lives of ordinary men and women. And this elite gained their power and strength through cross-hierarchy relationships.

Through cronyism.

For evidence of this, simply take a look at the ease in which a leader from one hierarchy can pass into another and gain a prestigious position. It’s almost a daily occurrence. And as a result of these ongoing relations in the past, each hierarchy grew larger and quickly became more centralized — and their integration with one another became more pronounced. And the institutions and organizations that used to hold influence in America either fell by the wayside or were made useful by and for the power elite. Mills goes on:

“Within American society, major national power now resides in the economic, the political, and the military domains. Other institutions seem off to the side of modern history, and, on occasion, duly subordinated to these. No family is as directly powerful in national affairs as any major corporation; no church is as directly powerful in the external biographies of young men in America today as the military establishment; no college is as powerful in the shaping of momentous events as the National Security Council. Religious, educational, and family institutions are not autonomous centers of national power; on the contrary, these decentralized areas are increasingly shaped by the big three, in which developments of decisive and immediate consequence now occur.

“Families and churches and schools adapt to modern life; governments and armies and corporations shape it; and, as they do so, they turn these lesser institutions into means for their ends. Religious institutions provide chaplains to the armed forces where they are used as a means of increasing the effectiveness of its morale to kill. Schools select and train men for their jobs in corporations and their specialized tasks in the armed forces. The extended family has, of course, long been broken up by the industrial revolution, and now the son and the father are removed from the family, by compulsion if need be, whenever the army of the state sends out the call. And the symbols of all these lesser institutions are used to legitimate the power and the decisions of the big three.”

And now we’re here. Generations of cronyism has created an economy in which success in business largely depends on how many close relationships you have with government officials or corporate cronies. And we’re so embedded in it, many believe it’s “just business” or the way the economy is supposed to work.

Take a look, for example, at today’s “business as usual” practices in the venn diagrams below. Before you do, please note: the creator of these diagrams set out to expose “progressive corporatism.” It’s biased. Crony capitalism is beholden to no single party. So keep that in mind as you look…

Ven diagram 1

Ven diagram 2

Ven diagram 3

Ven diagram 4

Ven diagram 5

Ven diagram 6

Today, largely due to these cross-overs, our economy is overloaded with companies that are gifted monopoly status, favorable regulations, subsidies, bailouts, loan guarantees, targeted tax breaks, protection from competition, and many more tools that special interests use to suckle the government teet.

“Whatever its guise,” says Matthew Mitchell in his paper titled The Pathology of Privilege, “government-granted privilege is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.”

How far back in American history, we wonder, does this rampant cronyism go?

LFTHow far back in history does the state-cartel crony-capitalism go?

Some say it is the legacy of Alexander Hamilton. Thomas J. Dilorenzo, author of Hamilton’s Curse wrote as much in Mises Daily:

“It was Hamilton who coined the phrase “The American System” to describe his economic policy of corporate welfare, protectionist tariffs, central banking, and a large public debt, even though his political descendants, the Whig Party of Henry Clay, popularized the slogan. He was not well schooled in the economics of his day, as is argued by such writers as John Steele Gordon. Unlike Jefferson, who had read, understood, and supported the free-market economic ideas of Adam Smith, David Ricardo, John Baptiste Say (whom Jefferson invited to join the faculty of the University of Virginia), Richard Cantillon, and Turgot (a bust of whom still sits in the entrance to Monticello), Hamilton either ignored or was completely unaware of these ideas.

“Hamiltonian mercantilism is essentially the economic and political system that Americans have lived under for several generations now: a king-like president who rules through “executive orders” and disregards any and all constitutional constraints on his powers; state governments that are mere puppets of the central government; corporate welfare run amok, especially in light of the most recent outrage, the Wall Street Plutocrat Bailout Bill; a $10 trillion national debt ($70 trillion if one counts the government’s unfunded liabilities); a perpetual boom-and-bust cycle caused by the Wizard of Oz–like central planners at the Fed; constant military aggression around the world that only seems to benefit defense contractors and other beneficiaries of the warfare state; and more than half of the population bribed with subsidies of every kind imaginable to support the never-ending growth of the state. This is Hamilton’s curse on America — a curse that must be exorcised if there is to be any hope of resurrecting American freedom and prosperity.”

But how do we, as Dilorenzo suggests, exorcise “Hamilton’s curse”? The only lasting way to reduce or end cronyism, of course, is to reduce or end the government power.

But that would take millions of Americans waking up, refusing to be hypnotized by the bread and circuses, and pushing back. What we need really, then, is a consciousness shift. We need the masses to see just how destructive this “business as usual” cronyism is to the country. And how it relates to nearly every ill they experience in their day to day lives.

The Occupy Wall Street protests, as scattered and misguided as they were, did (kind of) get the conversation going. But now it’s time for a new approach.

What we need, dear LFT reader, is transparency. And since we won’t get it voluntarily from even the “most transparent,” we need forced transparency. More Wikileaks, more whistleblowers, more incorruptible journalists.

The problem, you see, comes down to one old idiom: out of sight, out of mind. It’s the lack of transparency, the ability of politicians to work in the comfort of the dark, that perpetuates the problem.

If more Americans knew what was actually happening behind the scenes, and were able to see, with hard, quantifiable data, how wasteful and destructive the current status quo really is — the case for reducing government power would build by the day.

One activist, Solomon Kahn, has an idea that’s a step in the right direction. Kahn, you see, is creating a tool that could pry open the mouth of Leviathan and force it to tell us its secrets.

LFTOne activist named Solomon Kahn has an idea to begin the dismantling of the corrupt system.

Kahn, by way of background, is known for creating a U.S. budget tool that allows anyone to see and immediately understand where our government is spending our money.

“The U.S. budget,” he writes on the tool’s website, “arguably the most important document for understanding what our government does, is completely inaccessible. This visualization fixes that.”

Check out the budget tool here.

Today, he’s setting his sights on crony capitalism — and exposing precisely how our politicians are being influenced.

“With every political issue — from the environment to education to mass surveillance — big money is corrupting our politicians,” Kahn says on his Kickstarter page.

“The problem is so widespread that investigative reporters can only keep up with a fraction of the corruption that goes on every single day in Washington. This is a problem where there is actually lots and lots of data, but there haven’t been enough tools to take that data and make it easy for people to understand it. Until now.”

Kahn, in his free time, has built a system that allows anyone to see campaign contributions laid out in a easy-to-understand visualization.


“You can look at any politician from the OpenSecrets data set, which includes data for over 24,000 federal politicians for the past 25 years.

“You can see how much they raised per election cycle, split out by the industries they raised money from. You can then see, within each industry, how much money came from various sectors.

“For example, if you were looking at the finance industry, you could dig in more to see how much came from commercial banks, real estate firms, or securities brokers.


“You can see all this data from either the total dollar amount raised, or by the percentage of total money raised.


“You can see this split up between individuals only, pacs only, or combined together. From within each sector or industry, you can see which companies and pacs combined to make up that total amount raised.


“You can finally look into those companies, and see every single individual who donated.”


Kahn believes this could be the way to fight back. By making it simple for anyone to see, in plain view, the rampant corruption happening on the Hill.

LFTAlso, Kahn plans to use the power of crowdsourcing to gather all data possible on politicians.

“Once we launch the site,” he writes, “we will set up a form so that people can submit interesting things they find about a politician. Then, we will list all those findings on the visualization page for that politician.

“This way, we can capture the interesting things you discover when browsing the site, and show them to journalists and voters who come to that politician’s visualization page.

“No single person or media organization could possibly investigate the funding sources of 24,000 federal politicians, but with the help of the internet, we might actually be able to hold every single politician accountable for how they raise money.”

His Kickstarter, upon writing, has 98 backers and is at about a third of its goal.

Kickstarter campaign

Visit his Kickstarter here

One partner in this venture, the Sunlight Foundation, writes: “Our overarching goal is to achieve changes in the law to require real-time, online transparency for all government information, with a special focus on the political money flow and who tries to influence government and how government responds. And our work focuses on the local, state, federal and international levels.”

Does it work? Apparently so.

“These efforts have produced real results,” the foundation goes on. “Our reporting is frequently cited by the world’s preeminent journalists. Our research has led to congressional hearings, and our tools have stripped problematic measures from bills. And we recently won a major victory when, at our urging, the federal government agreed to begin the process of releasing all datasets held by federal agencies.”

LFTThough not an end-all, we believe more forced transparency, as mentioned, is a step in the right direction…

And we’re not talking about Obama’s form of “transparency,” either.

For the majority of the population, much of what goes on in the political circus is far too abstract. Most would do something… anything… to change what’s happening — but have no idea what that action should be.

So they go to the occasional protest, go home, and go on with their lives.

Most people, we suspect, just aren’t given the proper information in a way that can be easily understood. If they were, they would be able to make more informed decisions, and understand the real root causes of America’s ills.

The truth, we say, will set them free. And with the help of technology, the truth can be accessed and understood by anyone. As it should be.

Until tomorrow,

Chris Campbell

Chris Campbell

Written By Chris Campbell

Chris Campbell is the Managing editor of Laissez Faire Today. Before joining Agora Financial, he was a researcher and contributor to