On February 9th, NCID was honored to host a seminar from Alex Chafuen, President of the Atlas Network, as well as a functionary with various funds and research groups. His seminar was based around a forthcoming project of his, titled "Crony Capitalism as an Obstacle to Development".
As one of the leading researchers on the role of cronyism in government Dr. Chafuen provided many insights into identifying and contextualizing this important concept. Speaking on one of the chief measures of government performance—non-natural inequality— Chafuen offered the insight that “unjust inequalities are a concept of an unjust distribution of economic freedom.”
He continued to explain that legal systems, even when democratic, require rule of law to generate equitable outcomes. He drew on previous research to show that cronyism has a very close relationship to rule of law, which he points out is essential to any discussion of inequality, capitalism, or democracy. “How can we speak about the morality of the distribution of wealth, where in three-quarters of the world there is no rule of law? When the police are there to enforce bribes? When they are there as an intelligence service, not to enforce a contract.”
“It is grat to help the people we know over time, but there is a great temptation to put my friend above other people.” This basic model directly intersects with market efficiency, Chafuen argues, as “we are looking at individuals or institutions seeking gains through government, not the market.” Beyond market effects, cronyism has a significant indirect effect on the forces civil society, “it leads to cynicism, hypocrisy, and fatalism. Many people believe that the powerful just rule the world.”