n. Crony capitalism is a colloquial term describing a "market economy" in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism to connected businesses in the distribution of legal permits, government grants, special tax breaks, and so forth. This favoritism is rewarded by campaign contributions or outright kickbacks to politicians or their supporters. As such, it creates an oxymoron of sorts, in that success of a business in a free market (capitalism) does not depend on free-market forces. It is also a obvious source of corruption of both business and government.
In the United States, Fannie Mae and Freddie Mac are examples of Crony Capitalism. Government backing let Fannie and Freddie dominate mortgage underwriting. The politicians created the mortgage giants, which then returned some of the profits to the politicians - sometimes directly, as campaign funds; sometimes as "contributions" to favored constituents.
by Dan Weyandt October 05, 2011
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