Crony capitalism is an economic system based on the interest relationship between businessmen and politicians in influencing public and market policies. The practice of crony capitalism is often associated with corruption, oligarchy and economic injustice. This system has been in the spotlight in many countries, including Indonesia, which has experienced its direct impact.
The origins of crony capitalism stem from the practice of patronage or patronage in the past. At that time, the ruler or king provided protection and support to loyal businessmen, in return for financial contributions or political support. This practice later developed into a more complicated relationship of interests between modern businessmen and politicians, which influenced the economic policies of countries and enriched certain elite groups.
In this article, we will discuss more about the characteristics of crony capitalism, its impact on the economy, and solutions to overcome this practice.
Characteristics of Crony Capitalism
Crony capitalism has special characteristics that set it apart from other economic systems. Here are some of the main characteristics of crony capitalism:
1. The relationship between businessmen and politicians
Crony capitalism is based on the interest relationship between businessmen and politicians. Businessmen take advantage of politicians’ positions to gain business advantage, while politicians use their power to enrich themselves or win political support. This can lead to corruption and economic injustice.
2. The dominant role of the state
Crony capitalism often involves the dominant role of the state in regulating economic and market policies. Governments can provide incentives or policy arrangements that benefit certain elite groups, such as tax exemptions or exclusive licenses. This can strengthen the position of elite groups and exclude small competitors from the market.
3. Oligarchy
Crony capitalism can produce oligarchy or economic domination by a small group of entrepreneurs who have access to political power. This can produce monopolies in the market and increase economic inequality, because profits are concentrated in a small group of entrepreneurs who engage in crony capitalism.
4. Personal gain comes first
Crony capitalism encourages private gain to take precedence over public interest. This can lead to a loss of focus on societal well-being and exacerbate economic injustice.
The Impact of Crony Capitalism on the Economy
Crony capitalism can have a significant negative impact on a country’s economy. Here are some of the main impacts of the practice of crony capitalism:
a. Increasing corruption
Crony capitalism is often associated with corruption, because personal interests and business profits take priority over public interests. This can lead to abuse of power, extortion and bribery. Corruption can hinder economic growth and exacerbate social injustice.
b. Lower investment quality
Crony capitalism can affect the quality of investments and lead to less quality or inefficient investments. Investment can become concentrated in sectors that benefit from the practice of crony capitalism, while sectors that are important for economic growth do not receive sufficient attention. This can hinder long-term economic growth.
c. Increasing economic injustice
Crony capitalism can increase economic inequality, because profits and wealth are concentrated in a small group of entrepreneurs who engage in this practice. Meanwhile, small competitors or the general public may not have equal access to favorable markets or policies. This can exacerbate social and economic disparities.
d. Worsening corporate governance
Crony capitalism can worsen corporate governance, because entrepreneurs may focus more on earning profits than running a business with good ethics and proper governance. This can result in bad business decisions and pose risks to the company and employees.
These negative impacts can worsen a country’s economic growth and social stability. Therefore, it is important to take action to tackle the practice of crony capitalism.
How to Overcome Crony Capitalism
Overcoming crony capitalism can be a complex challenge, as it involves policy changes and a strong political culture. However, some actions that can be taken to overcome the practice of crony capitalism include:
1. Increase transparency
Increasing transparency and accountability can help reduce corruption and crony capitalism. This could include increasing public access to financial and policy information, as well as tightening regulation of conflicts of interest.
2. Strengthen institutions and regulations
Developing strong, independent institutions and regulations can help prevent power from being concentrated in the hands of a small group of businessmen or politicians. This could include strengthening supervisory authorities, law enforcement and judicial institutions.
3. Encouraging competition and innovation
Encouraging competition and innovation can help reduce monopolies and improve the quality of investments. This could include promoting market competition, developing policies to support startups and small and medium enterprises, and increasing investment in research and development.
4. Strengthening democracy and public participation
Strengthening democracy and public participation can help prevent crony capitalism by strengthening the power of civil society and expanding public participation in decision-making processes. This could include increasing access to information, expanding access to independent media, and promoting participation in electoral processes.
5. Strengthening public education and awareness
Increasing public education and awareness can help change the political and economic culture that supports the practice of crony capitalism. This could include increasing relevant economics education and skills, as well as promoting awareness of the importance of business ethics and good governance.
6. Overcoming the practice of crony capitalism requires continuous and multidimensional efforts from various parties, including the government, civil society, and the private sector. However, with the right actions, it can make it possible to strengthen economic justice and democracy around the world.
Examples of Crony Capitalism Practices in Various Countries
The practice of crony capitalism has occurred in many countries around the world, both in developing and developed countries. Some examples of well-known crony capitalism practices include:
a. Russia
In Russia, the practice of crony capitalism has flourished since the collapse of the Soviet Union in 1991. Some wealthy businessmen have been closely linked to politicians and government officials, which provides them with access to natural resources and significant business advantages. The practice of crony capitalism in Russia has resulted in economic injustice and has encouraged public distrust of the government.
b. Indonesia
In Indonesia, the practice of crony capitalism has occurred since the New Order government in 1966 until the reformation in 1998. During this period, a group of businessmen were closely related to the Suharto family, the then president of Indonesia, and gained access to strategic sectors, such as oil. , gases, and properties. The practice of crony capitalism in Indonesia has resulted in economic injustice, corruption and failure in sustainable economic development.
c. United States of America
In the United States, the practice of crony capitalism is related to the influence of money in politics. Several large corporations and wealthy individuals have exploited the political system to gain significant political advantage and influence. The practice of crony capitalism in the United States has resulted in economic injustice and concerns about the integrity of the political system and democracy.
d. Malaysia
In Malaysia, the practice of crony capitalism has existed for decades, especially during the reign of former Prime Minister Mahathir Mohamad. Some entrepreneurs are closely linked to the government and gain access to strategic sectors, such as energy, infrastructure and telecommunications. The practice of crony capitalism in Malaysia has resulted in economic injustice and a lack of competition in certain sectors.
Conclusion
Crony capitalism is a practice that is detrimental to economic justice and democracy. This practice has occurred in many countries around the world, and has resulted in injustice, corruption and public distrust of government. To overcome the practice of crony capitalism, continuous and multidimensional efforts are needed from various parties, including the government, civil society, and the private sector. With the right actions, it can make it possible to strengthen economic justice and democracy around the world.