The toxicity of crony capitalism: “Instead of extracting wealth, we need cities to focus on building wealth within their neighborhoods.”

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Crony capitalism? Let’s leave the Reisz-Stag out of it.

Rather, it’s another interesting take from the founder of Strong Towns. Marohn begins by noting that cronyism is human nature, which in his view isn’t itself as harmful as the mutant “capitalism” now part of the equation.

And remember: he’s a conservative. This isn’t a “libtard” critique.

Crony Capitalism, by Charles Marohn

 … So, my problem with “crony capitalism” is less about the crony than it is about American capitalism. I tried to make this point delicately because I am a supporter of capitalism—the free market allocating capital based on the profit motive—but question whether we can honestly call our system capitalist.

Fundamentally, a capitalist system requires savings and investment, the balance of which is regulated by interest rates. When there is a glut of savings or reduced demand for investment, interest rates fall. When there is a lack of savings or an increase in investment demand, interest rates should rise. Since most of my adult life has been spent with low to negative savings rates and extremely high levels of borrowing in all aspects of our economy, it’s hard to grasp how this can be called capitalism.

When a company like Walt Disney, which had $25 billion in gross profits last year, can demand—and receive—decades of tax amnesty from a city like Anaheim, a city with a $1.7 billion budget that is struggling to pay pensions, maintain streets and provide basic services, something is broken.

If it’s not the cronyism that’s broken, then is it the capitalism? I think so.

The notion that Disney should be responsive first and foremost to shareholders, that it has an obligation to maximize shareholder value, casually ignores how the centralization of our entire economy has changed social relationships within a profit-seeking economy. This goes back to Adam Smith and his observations in the Theory of Moral Sentiments on the human dimension of economic transactions …

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