Whatever Happened to Crony Capitalism?
Change the name, and the story is about you
I have other things I want to write about, but the latest installment in the water-drop torture of reporting about Clarence Thomas’s finances prompts me to talk about something I’ve been meaning to set down for a long time. If you haven’t read the story in the New York Times about how Clarence Thomas came to own his luxury recreational vehicle (spoiler: a rich friend bought it for him, in potential contravention of tax laws and ethics rules), then you probably ought to.
The post I’ve been meaning to write for a while is one about how American society has grown steadily and openly more—for lack of a better term—accepting of blatant corruption. In some sense, this is cyclical. American society once effectively tolerated the men who caused the Johnstown flood, after all, and it’s not like the Roaring Twenties were an apogee of probity. In another sense, it’s tiresome to dismiss any phenomenon by sagely observing that this has happened before. Insisting on bringing up precedent for wrongdoing can be enlightening in small doses, but as a reflexive move it is closer to endorsing malfeasance than explaining it.
In this case, the pendulum has swung so far that it is breathtaking. When I was a precociously annoying teenager competing in Foreign Extemporaneous speech exercises, one of the international crises I had to develop pseudo-expertise about was the collapse of the Indonesian economy. These days, the 1997 economic crisis is (in the Global North, at least) more or less forgotten, but in the longer sweep of the post-1989 reordering of global life it stands out as one of those financial crises that occasionally swamps life for massive societies and for which the West’s response is, mostly, suck it up, buttercup. The crises (to summarize it briefly) involved a series of currency crises that led to a series of debt defaults and market crashes throughout the developing world, including with particular force in Russia, Southeast Asia, South Korea, and Indonesia. (Like Putin? This is his real origin story.)
Indonesia’s big. Like, really big — the fourth-largest country by population then and now. It doesn’t get a lot of attention in the United States, which is ironic because the United States has played a big role in Indonesia’s history—including, notably, taking part in mass killings during the 1960s as part of Cold War anti-Communist strategies. I mean mass killings: possibly up to a million dead. The regime of President Suharto that the purges helped support endured until—you guessed it—1998, when economic crisis and political crisis came together in massive unrests that toppled the regime—a sort of Indonesian Spring.
One popular U.S. narrative had the fall of the Indonesian government as being the result of “crony capitalism”, a phrase which has stuck with me ever since. In crony capitalism, to synthesize a discourse, the problem is that there’s no societal checks and balances because the regime and the commanding heights of the economy are fully corrupt in a mutually reinforcing pact. You know, the sort of place where you could buy a legislator or a judge with some cash in an envelope or a very thinly disguised “gift”.
For a while, “crony capitalism” was everywhere. The phrase first emerged (I think) to describe the Philippines in the 1980s but Google N-Grams confirms my memory that Indonesia was really its coming-out party as an analytical tool.
The solution to crony capitalism was thus held to be a prescription of institutional reforms—not just dismantling social welfare programs (hey, it was the Nineties and that’s what the Washington Consensus said) but also trying to introduce competition and transparency into government. After all, widespread corruption was held to be a major problem and it would take root-and-branch reform to eliminate, or at least mitigate, it. More than anything, American (and European!) experts intoned, developing countries would have to emulate the sane, technocratic, nonpartisan, and uncorruptible institutions of, well, the United States and Europe. The opposite of crony capitalism was the Tom Friedman fable of globalization: go-getter executives optimizing productivity by ruthlessly following market trends, slapping us all with their invisible hands.
You can see where this is going.
Over the past few years, the United States has seen rather a lot of endemic fraud and systemic corruption. There’s economic frauds like Theranos, obviously, but also the allegations against academics like Marc Tessier-Lavigne, Marc Hauser, and Francesca Gino. In the military, there’s Fat Leonard. Religious scandals—not just Catholic ones!—are too numerous and depressing to list, as are athletic scandals (say, those involving the U.S. women’s gymnastics programs but also run of the mill scandals like those at Northwestern’s football program). And now there’s the boiling scandals involving the Supreme Court, as well as slower-moving allegations involving at least a couple of members of Congress. Plus, you know, Trump.
So whatever happened to “crony capitalism” as an explanation for this? Incredibly precise analogues for much of what happened under Marcos and Suharto that falls within that rubric are not hard to find. It may be that people have realized the disutility of such a blanket explanation for social ills—but it’s also pretty much special pleading that such an explanation (and associated prescriptions) would be popular when their system was corrupt but be subject to searching analysis when it’s our system being examined.
It’s also a scary thing to live through. Trust in institutions is collapsing, but it’s hard to say that this is entirely unjustified (see list of scandals above). If anything, it feels like this is a much-needed correction after decades of media and other institutions’ complicity in doing harm to the general public (exactly what were the Supreme Court reporters doing for the past thirty years???) Yet it’s also likely that societies like ours can’t really survive without a good deal of baseline trust. And the same conditions that produce crises like this are ones that make it harder to overcome their effects. After all, who are you going to trust to act in your interest—the Supreme Court justice in the luxury RV paid for by mysterious “friends”?