ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Capitalism, Cronyism, Corruption

Corruption and cronyism are integral to capitalism; they are not a curable deviation.

The exposure of the Radia tapes has resurrected the term “crony capitalism” in India. It has been among the more favoured appellations to describe the political economy of the massive corruption and decadence exposed by the Radia tapes. This term came to prominence in the 1990s when it was used to explain the Asian financial crisis. It referred to the nepotism and corruption which marked the Asian tiger economies. It was argued that the closed networks of business groups and their connections – filial, financial and structural – to political power in these countries had made self-correction by the market difficult and created a capitalism which was disfigured.

These economies had been the star-fighters for post-second world war capitalism as they pursued an economic path much favoured by the Bretton Woods institutions. They had pushed the market and integrated their economies with global capitalism. Their rapid economic growth and ability to provide a basic level of well-being to their citizens, while brutally crushing any left wing political movement, was held up as the model for all to emulate as a success of capitalism. Thus, their economic crisis had to be explained in terms which would not implicate capitalism as such. Hence, the use of the word “crony” to argue that while the market economy based on private property and profit-seeking had led to the economic miracle of south-east Asia, the existence of cronies (friends and relatives) between business and government led to a breakdown of checks and balances. The “invisible hand” of the “free” market was shackled by cronyism which led to a lack of checks and balances that are inherent in the market economy, and which encouraged the growth of “inefficiencies” through political patronage and thence to an economic crisis. Or so argued the defenders of capitalism.

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