Faculty Publications - Crony Capitalism

In the essay, Crony Capitalism: Right Here, Right Now, Professor Jonathan R. Macey argues that crony capitalism is on the rise in our society today. Macey defines crony capitalism as an economic and political environment where pursuing government favors is not only normal, but also necessary for succeeding in business. Macey gives examples such as the $78 million tax write-off for NASCAR drivers, and the appointment of John Mack as CEO of Morgan Stanley despite rumors of insider trading. Macey states that as economic regulation increases and competition decreases, crony capitalism grows–regulated institutions such as Morgan Stanley or Goldman Sachs demand legislative favors, and bureaucrats and elected officials will supply them. In order to get rid of crony capitalism, Macey suggests, one must create a strong competitive environment where the costs of seeking special favors are higher than the payoffs. This requires a free market system that forces business to compete among price, service, and quality in the marketplace, rather than behind closed doors. 

Further Reading:

Robert M. Ireland, The Problem of Local, Private, and Special Legislation in the Nineteenth-Century United States, 46 AM. J. LEGAL HIST. 271 (2004).

John Joseph Wallis, The Concept of Systematic Corruption in American History, in Corruption and Reform: Lessons from America’s Economic History (Edward L. Glaeser & Claudia Goldin eds., 2006).

Professor Macey’s papers in Yale Law School’s Legal Scholarship Repository, and working papers on SSRN.