The System We’re Living In Is Crony Capitalism. Not Capitalism.

Jeff Booth
6 min readJan 23, 2020


A hot topic coming out of the World Economic Forum is Capitalism. According to the 2020 Edelman Trust Barometer launched by CEO Richard Edelman in Davos, more than half of the 34,000 people surveyed believe that capitalism does more harm than good and that fears have eclipsed hope. The fears include downward economic mobility and a loss of social status. 83% said they are afraid of losing their jobs in the next decade from automation, globalization, and immigrants. There is a real sense of unfairness. The mass class divide is the largest we’ve ever seen, and it’s in countries where it’s never been seen before like Canada. Edelman says “these are all signals that the system isn’t working.”

Marc Benioff, Salesforce CEO, who wrote the popular New York Times Opinion piece “We Need a New Capitalism” is speaking out again at Davos that Capitalism as we know it: is Dead. “This obsession that we have with maximising profits for shareholders alone has led to incredible inequality and a planetary emergency,” he says.

This topic is making headlines in every top tier media out from The Wall Street Journal’s Capitalism Draws Fire, Despite Strong Global Economy to CNBC’s Most people think capitalism does more harm than good, survey shows.

But it’s not capitalism that is wrong, it’s crony capitalism. And that’s the system we’re currently living in.

Crony capitalism as defined by Wikipedia is an economic system in which businesses thrive not as a result of risk, but rather as a return on money amassed through a nexus between a business class and the political class. This is often achieved by using state power rather than competition in managing permits, government grants, tax breaks, or other forms of state intervention over resources where the state exercises monopolist control over public goods, for example, mining concessions for primary commodities or contracts for public works. Money is then made not merely by making a profit in the market, but through profiteering by rent-seeking using this monopoly or oligopoly. Entrepreneurship and innovative practices which seek to reward risk are stifled since the value-added is little by crony businesses, as hardly anything of significant value is created by them, with transactions taking the form of trading. Crony capitalism spills over into the government, the politics, and the media, when this nexus distorts the economy and affects society to an extent it corrupts public-serving economic, political, and social ideals.

Let’s imagine for a moment a world where the central bankers decided to let the banks fail, something that many say should have been the right course — capitalism actually calls for such a cleansing. At the end of 2008, there are no bailouts. No quantitative easing. It’s not a difficult thought experiment.

Asset prices collapse. Loans on those assets become non-performing. Most of the banking system collapses. Only the best loans can be repaid. Many people are wiped out as the collapse destroys all who took unnecessary risks. Some of those are you and me and pensioners, people who misunderstood the risk we were taking with some of the exotic investments that we were told were safe. As well, many more are wiped out because of the lack of liquidity in the system, meaning that some investments deemed safe also fail. This result might produce a depression so severe it would make the Great Depression look like a walk in the park. But in that environment, hard dollars would explode in value and those who had savings and cash would pick up extremely low-priced assets and mispriced deals and make their fortunes.

Imagine how different your life could look. Real estate would not be priced anywhere near where it is today. Stocks would likely still be near historic lows. Our politicians would look different — in fact, some of them wouldn’t be our politicians, because they would have been wiped out with their debt and the asset price collapse.

Monetary easing and artificially low interest rates have been a grand experiment played out on the world stage without full consideration of the downstream effects. For the wealthy and those with assets that have been artificially boosted, that experiment has played out well. If we’re being honest with ourselves, much of the wealth and privilege that we enjoy is not from our ingenuity or hard work, but because the governments of the world decided to print money. Our assets, including real estate and stocks, were the beneficiaries, having run up in value far beyond what they would have been without the printing.

Meanwhile, those without assets find themselves on a treadmill that is moving ever faster — and unable to keep up. It’s like we’re living in Bizarro World where everything is backwards. Bizarro — a comic created by Dan Piraro — takes place not on a spherical Earth but on a cube-shaped Htrae (Earth spelled backwards). In one Bizarro strip from April 1961, a salesman is doing a brisk trade selling Bizarro bonds that are “guaranteed to lose money for you.” That’s not even a joke today. In many parts of the world, banks have negative rates: money retains more value stored under your mattress than in a bank.

So, as the market celebrates ever more stimulation from governments and stocks and housing continue to rise higher, the market should also “celebrate” the dislocation of our societies.

As Paul Volcker, former chairman of the Federal Reserve, said in 2018, “The central issue is we’re developing into a plutocracy. We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive.”

I grew up in a world where I believed anything was possible, and that hard work and ingenuity were rewarded. I still believe that. I also believe in capitalism, where risk is rewarded and punished, and where the free market is the ultimate referee of your value. That is why it pains me so much to see it breaking down. A market where government reaches in to decide who wins or loses is nothing more than crony capitalism, where wealth is not created by the value you create and the risks you take to get there but by a political system that rewards its insiders.

And for every person on the winning side of that decision, there are many others on the losing side. Their costs of food, shelter, gas, and healthcare are rising because their cash and wages are less valuable. Assets that they don’t yet own are running away in price. They are feeling the squeeze of an unjust system.

Just like you, they might be unaware of how much was given to you in this exchange, and just like you, they are equally unaware of how much was taken from them. But they do know that something doesn’t feel right — and they are fed up.

The world order, largely intact since the end of the World War II, seems to be breaking down. Capitalism, and its relentless march towards progress, allowed many to win. Although no system is perfect, the rules by which capitalism operated were well regarded and understood. You could expect that if you made a big bet and were wrong, you would be wiped out — but if you were right, your hard work, ingenuity, or risk taking would be rewarded. In game theory, we could call this a dominant cooperative strategy, and it dominated for the better part of the twentieth century. The rise of fiat currencies that could be manipulated domestically and the bailout in 2008 changed that strategy to one where the players whose bad bets caused

the crisis, instead of being wiped out, were rewarded handsomely. Capitalism’s long-dominant cooperative strategy was replaced by a non-dominant strategy, crony capitalism, where the cheaters won.

Perhaps, because it seems that there is a bias for cooperation most of the time, we will find a way to bring harmony to our world over time. With the will of the many, and the right incentive structures, societies might just be able to find a way to limit their exposure to the negative effects of non-cooperation. But in any event, we need a new set of rules.


The above is an excerpt from my new book entitled The Price of Tomorrow, Why Deflation is Key to an Abundant Future. I dive deeper into this situation: how we got here, where we’re set to go from here, and what we can do about it. Prepare to be challenged.

Available now on and



Jeff Booth

Entrepreneur, Technology Leader, Author of The Price of Tomorrow — Why Deflation Is the Key to an Abundant Future (