Fraud and Cronyism Under Neoliberalism – A Feature, Not a Bug

Repost from the old site.

In the comments section, Uncle Milton suggests that the massive fraud perpetuated under the Bush regime (I would add under Reagan too) was antithetical to a free market system. A true free market system is supposed to make fraud illegal.

By any definition of classical economics, what happened to the real estate market was fraud on a massive scale. PS No bid contracts in Iraq as you might guess as nothing to do with free market economics. Crony capitalism and corruption are in conflict with free market economics. If you take a turd, paint it white, and call it beautiful.. it’s still a turd.


By your definition, Unc, free market economics hardly occurs anywhere. This seems to be the problem. Once these neoliberal systems are put in, they are very prone to corruption and crony capitalism. Extremely prone! Everyone wails about it, but it seems to be almost an inherent part of the system. A feature, not a bug.

And the proponents of the free market tend to be very tolerant of massive fraud to the point of not even tolerating it. The more free market the system, it seems the more fraud and cronyism.

As more socialist leaning groups come in, they tend to reign in the fraud to some extent. Europe has very low levels of fraud (it’s considered to be a safe place to do business), and it has high levels of socialism in its system.

China moving from socialism to capitalism was followed by massive fraud and cronyism. Same with Russia and to a much lesser extent Eastern Europe. The neoliberal revolution in Latin America coincided with a tremendous amount of crony capitalism and fraud as state enterprises were sold off to friends of the state in a cronyist fashion for pennies on the dollar.

The way to reduce fraud and cronyism in a capitalist system is to empower the state more (social democracy). Culture also plays a role though.

As an aside, I would point out that the free market ideologists spreading the gospel of neoliberalism had almost nothing to say about the massive cronyism, fraud, graft and out and out theft associated with their neoliberal revolution.

While the billionaires looted Russia bare and bled the country dry, the Jeffrey Sachs’ (the mastermind of the plan and yes, he is Jewish) of the world said nothing. The corporate media mostly just cheered.

The Friedmanites out of the Chicago School have for the most part been fashioning a free market vision in which fraud, graft, cheating, lying and even out of out theft seems to be legal when done by big capitalists wearing suits under a legalistic veneer. There were few persecutions for the massive fraud that occurred under Reagan and now under Bush.

If, as Unc notes above, the financial crash was predicated on massive amounts of out and out crime, it should be clear to us in the next year or so that almost no one is going to go to jail over it.

The FBI looked into investigating the financial crash and seems to have decided that there were far too many criminals committing far too many crimes for the FBI to even begin to get involved at current staff levels, especially with the needs of the War on Terror, so it looks like most of the criminals are just going to get away with it.

As I note above, increasingly, it seems as if mass cronyism, fraud and financial crime in general under neoliberalism is more of a feature than a bug.

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5 thoughts on “Fraud and Cronyism Under Neoliberalism – A Feature, Not a Bug”

  1. i read mencius moldbug. i read him because he advocates something nearly like a return to monarchy. it is mind-blowing politics. democracy is not magical. it is obviously flawed in it’s pure state, so we were given a republic and it was a wise choice.

    in a pure democracy, the most-beautiful 51% could vote for the death of the less beautiful 49%. the only real value is aggregating votes. a single vote is actually worthless.

    money exhibits a lot of the same characteristics. it is easily divisible and atomized. but money is even more powerful than a vote.

    i swear…the only way out of this clusterfuck is a king/dictator/executive who can pound a stake in the heart of the money interests, who sell us all out to fatten their pockets.

    i have more faith in the goodness of a single person than i do in any group of individuals.

    1. Sometimes I wonder if you are right.

      Communist dictatorships typically had extremely low levels of corruption. Rightwingers argue that this is because there is nothing to steal, but that’s not really the case, honestly. The whole thing about the Communist Party guys living like Kings while everyone else wallowed in poverty is a big fat lies. However, Kim Jong Il and his buddies supposedly live very well, and I think that sucks. In Cuba, there is very little corruption.

      When China went capitalist, that’s when the corruption went through the ceiling and right now the CP is up to their necks in corruption. Race realists may be interested to note that the European countries, especially the Northern European countries, have the lowest corruption levels on Earth. Southern Europe has always been pretty corrupt. Italy is a modern country, but it’s corrupt as fuck all.

      Even when they came to the US, the North Europeans have not been very corrupt. The least corrupt states are in the Northern Midwest where all those Germans and Scandinavians are. Also these same people hardly formed any organized crime gangs in the US, even back in the old days. Organized crime was always Jews, Italians, etc.

      OTOH, Russians are Northern European peoples and right now Russia is one of the most corrupt places on Earth. So is most of Eastern Europe, especially the Baltic states like Lithuania, Latvia and Estonia. I don’t really get it. There must be something more than race going on here. Corruption went insane in the Baltics once again when they switched from socialism to capitalism.

      It’s true that there is a Black market in Communist countries, but that’s not really serious corruption or organized crime. It’s just people getting by. In general, no ones getting rich off that.

      I think corruption has gone nuts in Vietnam too as they have moved towards a more capitalist model.

  2. i hear ya…trying to listen…i sort of hate commies, i am a child of the 80s and watched all the Rocky movies. but maybe you’re right. maybe something that’s on either end of the extremes would be better than what we have now.

    mao was 100% cynical about communism and he did take control of a huge portion of the national resources for his own sick agenda…and i don’t know about the USSR. maybe Leninist USSR was an honest, egalitarian regime, but it seems like most of their history was totally corrupt and cronyist. if that’s even a word.

  3. Every single JEW run communist country was and is corrupt to the core. America is a jew run communist country 2oo9.

    80 percent in congress and senate and Obama NoBody are rutten corrupt jew-whores.

    You are SOOOOOOO out of touch Robert.

  4. i am coming from a libertarian point of view, but with a lean towards the left given the totally out of control wealth disparity and Russian-scale corruption of our politicians.

    but i won’t bother to vote because it really is pissing in the wind. i would vote libertarian and then anti-incumbant. we need a law to call out the incumbants on the ballots i think. it’s the only tiny point of hope i can see in our current mess.

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