What Is Crony Capitalism?
Parliament witnessed sharp exchanges over the Adani-Hindenburg issue and the opposition is accusing it of crony capitalism and raising demands for a probe by a Joint Parliamentary Committee or a Chief Justice of India (CJI)-designated committee.
- Crony capitalism is a term used to describe a capitalist economic system in which individuals or businesses with close ties to political leaders and government officials use their political connections to gain an unfair advantage in the marketplace.
- In the Crony Capitalism Index 2021 published by The Economist; India was ranked at 7th position where crony sector wealth accounted for 8% of Gross Domestic Product (GDP) of the country.
- Crony capitalism can lead to corruption as businesses use their political connections to gain an unfair advantage in the marketplace, often by bribing government officials.
- This can undermine the rule of law and erode public trust in government institutions.
- When some businesses are given an unfair advantage through their political connections, it distorts market competition and makes it difficult for smaller businesses and entrepreneurs to succeed.
- This can lead to a concentration of wealth and power in the hands of a few individuals or corporations.
- The dominant position of large businesses often erodes competition and discourages them to further innovate or improvise their products/services.
- This can stifle innovation in the overall economy and lead to a decline in competitiveness.
- Widespread crony capitalism can lead to a loss of public trust in government institutions and the economic system.
- This can make it difficult for policymakers to implement reforms and for businesses to operate effectively.