The reason behind complex tax laws and government regulations is that complicating such rules makes it easier for politicians to trade favors for campaign contributions. A current example of rent seeking is the lobbying of state legislatures by automobile dealers to prevent Tesla Motors from selling cars directly to the public. Such behavior does not make the economy bigger rather, it reallocates the pie by making some richer at the expense of society at large. Economists refer to this activity as rent seeking. When facing crises or competition, businesses implore the government for handouts or for protection from the competitive forces that have made the free-enterprise system so productive. As Lewis correctly points out, however, these woes are often the result of private interests intruding into government policy making. There is a widely held belief that many of our economic woes are due to the intrusion of the government into the private sector. He is concerned that the United States is following the same path, with dire consequences in the offing.
Hunter Lewis, co-founder of the investment firm Cambridge Associates, begins Crony Capitalism in America: 2008–2012 with cautionary tales of how crony capitalism has decimated economic growth in such countries as Argentina, Zimbabwe, and Russia. The end result is a system in which the few are enriched at the expense of the many. To gain a competitive edge or to limit competition, business interests lobby the government to tilt - rather than level - the playing field by granting their particular companies special favors. Hunter Lewis.Īccording to this provocative book, the US economy is morphing into crony capitalism, a system in which business success is fostered by relationships between business and government.
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