Religion & Liberty Online

Adam Smith on the causes—and cures—of crony capitalism

“For Adam Smith, crony capitalism fails on two grounds,” says Lauren Brubaker. “It is unjust, favoring a few at the expense of the many, and it is destructive of the desired end of political economy—economic growth.” Brubaker says Smith’s writings can help us properly frame the problems of crony capitalism, understand the causes, and formulate solutions for preventing or mitigating the corruption of free markets:

For Smith, the tendencies to cronyism, which are anchored in human nature, can be tempered by: (1) limiting government to a few essential powers (defense, administration of impartial justice, and certain limited public works and institutions); and (2) educating the public concerning the “folly” of attempts to direct the economy by legislators. These approaches offer the best chance to limit crony capitalism, its corruption of natural liberty, and its consequent undermining of benefits of free markets.

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Joe Carter

Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).