Are Crony Capitalism and Communism two sides of Same coin?

Today, Capitalism in US has been transformed from a free market enterprise of 1950s to a crony monopoly enterprise system in its search for producing commodities at lowest cost and for selling them at a highest price. To produce commodities cheaply, US based MNCs followed a centralized supply chain to achieve efficient transportation, cheap raw materials, cheap labor, cheap energy, adequate water supply, etc. This kind of centralized supply chain has distorted US manufacturing supply chain. It is to be noted that this centralization of supply chain has been made possible only with the help of Wall Street. Wall Street investors have pressurized CEOs of American businesses to ship high paying manufacturing jobs from US to Low Labor-cost Countries (LLCs) to ensure a good return on investments for the outside investors.

It should be noted that in case of Soviet communism, the state or government controlled industries in a centralized manner. Communism centralizes production and other economic functions through state-controlled industries, rather than through private ownership. Thus in case of Communism, as well, control of the economy lays in the hands of a few government officials.

Now, It needs to be pointed out that capitalism in US transformed from a free market enterprise to crony capitalism because of control of US economy in the hands of a few Wall Street investors. These wealthy Wall Street investors used speculative trading and unethical policies in transformation of US economy from a free market enterprise system increasing the disparity in economy to its‚ unacceptable‚ standards. As disparity started to grow further in America, the control of economy also started to move in hands a few wall street investors. This is why today just 1% Americans are able to control more than 95% of wealth in America. This has unfortunately also transferred the control of US political democracy in hands of a few because of their influence of money in US democratic elections.

If you compare the similarities between crony capitalism and soviet communism, one thing can be observed in that in both systems, the economic control is in the hands of a very few people and the rest majority lose their control over the economy. It is true that on grounds of personal liberties, Crony capitalism is different than communism. However, both systems appear to be internally similar in terms of putting the control of economy in hands of a very few. Today, Crony Capitalism is the cause of unsustainable trade deficits and also behind the unsustainable budget deficits in US economy. The FED has followed its monetary policy since 1970s which has enabled crony capitalism to thrive in America.

Fruits of the same variety may have different color skins, but their seeds are the same. I would say that crony capitalism and communism are fruits of the same variety but different seeds.Thus crony capitalism and communism are two sides of same coin.‚ It is therefore critical for US to reform its economy to a free market enterprise system so that not only the growing disparity is kept under control but also to ensure that the economy preserves the incentive for hard work and growth. In a free market enterprise system, wages keep track with productivity. During the decades of 1950-70, wages kept track with productivity in US ensuring a free market economy. As a result of free market capitalism, there was a 4% year over year growth in US GDP making the decade of 1950-70 a golden era of “FREE MARKET CAPITALISM“ in US.

Now, It should be noted that during the 1950s, tax structure in America was such that highest earners paid maximum tax of 92%. Now, In order to bring back free market capitalism back to US, either tax structure has to go back to that of 1950s or there should be an alternative approach to achieve a free market enterprise system so that wages can keep track with productivity with low taxes on individuals. From the point of view of‚ entrepreneurship, it should be ensured that in such a free market enterprise system, the size of government and its intervention in economy should be minimal. To understand how to achieve that goal of having a free market enterprise system with a smaller size of government, you should consider reading my upcoming book titled “Mass Capitalism : A Blueprint for Economic Revival“, I consider such a free market enterprise system to be ‘Mass Capitalism’ because it is Capitalism that would work for 100%‚ Americans. Such an economic system would also increase global investments in transition to 450 mm diameter semiconductor wafers leading global semiconductor industry to its next levels of innovation and financial success.

It would usher in an era of high growth, high investments, increased motivation and enhanced personal fulfillment of employees and steady growth in corporate profits pleasing the CEOs and CFOs of american corporations. Most importantly, it will take out any uncertainty and unpredictability that is prevalent in present US and global economy. Once this new kind of an economic system based on Mass capitalism has been established, government intervention in economy would be, and should be, minimal. In fact, this system would truly materialize all the ideals that are cherished by most macroeconomic theories.

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