Indian Libertarians

Kejriwal and Crony Capitalism

smehra Sunday March 30, 2014

‘Crony Capitalism’ is a slippery term, perhaps even more so than the term ‘Capitalism’. If Capitalism can be used to define a free market production of capital goods, it can also be used to define a symbiotic relation between big business and government. Similarly Crony Capitalism can imply Government’s favoritism to certain businesses (in the form of legal monopolies) or it can simply mean the state breaking its own rules to protect certain businesses (what is commonly called corruption). Anarcho-Capitalists tend to use ‘Crony Capitalism’ in the first sense, Arvind Kejriwal (and other politicians) uses it in the second.

The first meaning implies government’s interference in the free market, ie, any form of government favoritism to certain businesses, legal or otherwise, that hinders competition and creates unintended consequences. The second meaning simply implies subjective usage without any logical base. Where the first meaning incites you to question the coercive nature of the state, the second meaning spreads the wrong message - that ‘Capitalism’ works as long as everyone follows the rules laid down by the state.

While it is true that the state regularly breaks its own rules to practice ‘Crony Capitalism’ or ‘corruption’, but that said ‘corruption’ is just the tip of the iceberg. The legal plunder and real upward redistribution that goes on behind the scenes is hardly ever talked about in the mainstream. Hardly does anyone hear “honest” politicians talk about how the state steals land away from its owners, causes inflation in the money supply and legally favors businesses over individuals.

Kejriwal in his recent speech at CII has proclaimed that he is not against Capitalism, but against ‘Crony Capitalism’. What is that supposed to mean? Does he define Capitalism as a ‘competitive’ system where every man has to play by the rules of the state? In that case, such a system is by its very nature ‘Crony’. Let us not forget that many large corporate empires like Tata have set themselves up by following the rules of the state. Legally, there is no corruption in the case of Tata acquiring land to build their nano cars - and this only hit the mainstream news because it was turned into a political ruckus. However land acquisition is hardly an element of the free market. Free market would imply the right of the individual to sell his justly acquired land to whomever he likes at whatever cost he likes.

People talk about how Land acquisition has become a racket in India. To them I ask, when was it not a racket? Was it not unethical when it was imposed upon us by the Britishers in 1894? Or was it not unethical under Nehru’s regime, when he used it to construct his “state socialist” empire killing the local private enterprises? Or was it not unethical when the nobles were given titles to vast amounts of land stolen from peasants under the rule of the kings? Land Acquisition has always been a racket.

Kejriwal too has spoken against Land Acquisition, but not in the same sense. He speaks of corruption in land acquisition - that the governments have acquired land at under “market value”. But he is yet to make a firm stand against land acquisition. "Market Value" of land under Land Acquisition bill is a clever ploy to fool people into thinking that the the transaction was just. How can it be a market value when there are laws forbidding sale of land to other parties? When there are laws forcing you to give up the land no matter what? How can one even determine market value in such a situation?

The way Kejriwal appears to define ‘Capitalism’ implies that he supports all of this, as long as the state (and everyone else) followed the rules written by the state in a book of fairy tales called the constitution. His wrong headed crusade against “corruption” ignores much of what is wrong with the state - placing state’s laws on a pedestal to create a standard of honesty.

How Kejriwal defines Capitalism will probably never be clear and looking at his actions in Delhi I doubt he supports freedom. His pro-business rhetoric (not pro-market by any standard) can be attributed to the fact he was giving a speech at CII. Put him a room full of union leaders and you would probably hear him support labour paternalism.

This actually reminded me of this scene from Austin Powers