December 03, 2016

Is “crony capitalism” the right term for what’s going on? Crony statism seems a much more precise label.

Sir, you write correctly: “If political whim means companies are to be blocked, bullied or bribed out of investing where they see fit, a natural part of the functioning of the global economy will be subverted…. The idea of a world in which capital is allowed to flow freely to its most productive location is increasingly under threat… When the capital development of a country becomes the by-product of a game of political bargaining, the job is likely to be ill done.” “Politicizing investment makes the world poorer” December 3.

Indeed most of us dislike any special favoring arrangements between some private sector agents and some public sector representatives, but Sir, let me ask you two questions:

Why do you keep silence when, with their risk weighted capital requirements for banks, regulators do not allow credit to flow freely to its most productive location, just in order to have these flow to where in their petty minds banks can, at least in the very short term be more safe?

And when you know regulators set the risk weight for the sovereign at 0%, while We the People, like SMEs and entrepreneurs, are hit with one of 100%; which translates directly as regulators helping government bureaucracy to have easier access to bank credit than that of the private sector, instead of crony capitalism, is that not really more a case of outlandish crony statism?

PS. Ask the Greeks if the low capital requirements for their government that allowed it to take on so much debt made them any richer?

@PerKurowski