Years ago, I decided to make it a minor side mission of mine to move sensible thinkers away from the term ‘crony capitalism’ and encourage them to use ‘crony corporatism’ instead.

Crony corporatism is a much more precise term that zeros in on the offence and the offenders, rather than apportioning undeserved blame to free markets and what is generally considered ‘free-market capitalism’ (shorthand for the unhindered exchange of goods, services and ideas, where price is established and agreed between the exchanging parties). Suffice to say, I still have much work to do on this side mission, but you can possibly help. Let me explain why we need to stick a pin, or preferably a knife, into crony corporatism and cut it out from our economies wherever it is encountered.

Crony corporatism is committed most often by large and ‘established’ corporate entities that have long since lost touch with the energy and innovation of entrepreneurial culture. Indeed, you will generally find that the corporate cultures of such entities recoil at entrepreneurial impulses and appetite for risk, snuffing it out internally wherever it raises its alien and risk-prone head. The dinosaurs that practise crony corporatism have all come to the conclusion that the most effective way to run a steady corporate ship is to build a moat and wall around what they have: the revenues and the customers that produce those revenues.

The old-fashioned way to build a competitive moat was to make a product so good that your customers did not want to leave and your competitors could not match it. But the crony corporatist found an easier way: these large and tired corporations spend resources not on innovation, but instead channel them into lobbying and ‘capture’ of the tools and institutions of the regulatory state. Those regulations are then turned against any threat, be it an up-and-coming domestic start-up with a better idea, product or business model, or ‘foreign’ threats that pose a similar risk. The crony corporatists in turn reward the regulatory state by support and donations, direct or indirect, to the legislators they need to pass supportive laws, and revolving-door jobs and consultancy contracts for the regulators themselves. There are, of course, plenty of individual exceptions to this type of practice, but that does not take away from the fact that, far too often, this is how it is done.

Beyond the economic inefficiency, there is a deeper social cost. When innovation is stifled and opportunity constrained, it is not merely economic growth that suffers but broader human flourishing. Younger and smaller entrants with the instinct for innovation are locked out, talent is discouraged and consumers – often those least able to bear it – pay more for less. Crony corporatism undermines not only markets but the wider social fabric that depends upon fairness, dynamism and trust.

Over years and decades, economies and societies lose out. They get stuck with systems and services that are obsolescent and expensive, and do not get the lift that would come with a faster introduction of new and disruptive products and services made available on less burdensome terms.

My own industry, the wireless and mobile data communications sector, is a striking example of this. The cost to economies has been whole percentage points of GDP growth, all to prop up an oligarchy of price-setters who do not invent anything and rent-seek off the backs of consumers. It would not be fair of me to single out the wireless industry alone; it is simply the one I know best.

The disease of crony corporatism is widespread and has worsened over the past 25 years or so. The only thing that will break this economic drag is the political will to take it on and dismantle it. The resolve to do that is uncommon. Crony corporatism is a deeply embedded parasite and will mount a powerful fight to destroy anything that threatens its feeding stations. Hopefully suitable talent will rise to the challenge. For our economic and, ultimately, societal wellbeing, it is essential that we cast out the cronies and restore capitalism’s good name.

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