Dear reader,
Ricardo Manapat. Does the name ring a bell? For most, it does not. Jose Ricardo de Leon Manapat was a multifaceted Filipino writer, activist, and researcher who played a significant role in exposing the corrupt capitalist practices of his country in the 1970s and 1980s. He died in 2008. Manapat is remembered by some of us who study corruption in politics and governance for having coined or making popular a term often used to describe Indian politics and governance today: crony capitalism.
A vocal critic of the regime of Ferdinand Marcos in the Philippines and its enrichment through crony capitalism, Manapat, in 1979, wrote a pamphlet that went on to attain cult status among scholars and activists: Some Are Smarter Than Others: The History of Marcos’ Crony Capitalism. As you probably know, Marcos and his associates used their political power to amass vast wealth, often at the expense of the Filipino people.
An editor in the small magazine Smart File, the then-young scholar Manapat championed education as a tool against corruption and exposed economic scams of the era. More or less during the same time, George M. Taber, a Time magazine business editor, started using the term “crony capitalism”, starting with an article in 1980 (also about corruption in the Philippines). Jaime Ongpin, a Filipino businessman-turned-activist who later became the country’s Finance Minister, used the term extensively in his writings and is sometimes credited with coining it.
Make no mistake. Only the term became popular in the 1980s, but crony capitalism, which roughly means the unholy alliance between business and politics, isn’t a new invention, nor was it limited to the Philippines. It’s a story as old as civilization itself, where those in power have used their influence to enrich themselves and their allies. One of the earliest examples comes from Mesopotamia around 2000 BC. Merchants, with the backing of powerful rulers, could secure preferential trade deals and even influence laws to stifle competition. This cosy relationship ensured their wealth and the ruler’s continued support. Fast forward to ancient Rome. The rise of wealthy families like the Medici was powered in part by their close ties to the Catholic Church. The Church, with its vast influence, awarded lucrative contracts and monopolies to these families, solidifying their power and economic dominance.
In feudal Europe, cronyism took on a new guise, with lords and vassals exploiting their positions for personal gain. Land grants and tax exemptions were doled out to loyalists, while peasants toiled under the weight of oppression and exploitation. It was a system defined by nepotism and feudal obligations, where loyalty to one’s lord often came at the expense of justice and fairness.
The concept continued well into the colonial era. European powers like Britain and France used their administrations to favour companies owned by their own citizens. These companies received exclusive access to resources and markets, hindering the economic development of the colonised nations, and the favours were returned in kind. European powers vied for control of lucrative trade routes and colonial territories. Monopolistic trading companies like the Dutch East India Company and the British East India Company were backed by royal charters and government subsidies and in turn propped up governments and thrones.
From the robber barons of America’s Gilded Age to the railroad tycoons of Europe, wealthy industrialists have always leveraged their wealth to manipulate markets, crush competition, and influence government policy. Backroom deals and sweetheart contracts soon became the norm, as politicians and businessmen colluded to consolidate power and wealth.
In the modern era, crony capitalism is a global phenomenon, fuelled by deregulation, globalisation, and the rise of multinational corporations. Lobbyists and special interest groups exert unprecedented influence over lawmakers, shaping legislation to serve their own interests at the expense of the public good. From tax breaks for the wealthy to corporate bailouts and subsidies, the lines between business and politics have become increasingly blurred, creating a system where the rich get richer and the rest are left to fend for themselves.
This has brought with it its own share of risks. A specific example is the 1997 Asian financial meltdown, which highlights the dangers of crony capitalism. In countries like South Korea and Indonesia, where a few politically connected businesses dominated the market, the lack of competition and transparency led to reckless financial decisions that contributed to the crisis.
The pace with which crony capitalism has spread seems to be quite alarming these days, especially in developed economies like India. Powerful lobbying groups influence legislation to benefit specific industries, and campaign contributions create a sense of obligation between politicians and businesses. And it isn’t just about enrichment; it stifles innovation and economic growth. When competition is limited, there’s less incentive for businesses to improve their products or services.
It is in this context that we must place the ongoing debate about the bond that was licensed to kill off all other simpler forms of corruption in India—the Electoral Bond. The EB scheme, which was declared constitutionally void by the Supreme Court, literally gave crony capitalism a new and innovative avatar. Even though the apex court made it illegal, it is interesting that no one was held responsible for the scheme, which arguably initiated one of the biggest scams in modern times. It is legitimate to ask: who is supposed to go to jail for this? What was the motive behind introducing it?
In our latest cover, we ask all these questions and more, where experts such as Paranjoy Guha Thakurta, Abir Dasgupta, Meghnad S, and Mitali Mukherjee dissect the EB saga and its impacts for our readers. The general consensus they arrive at is something quite alarming, and something that takes us back to the Philippines under Ferdinand Marcos. If you remember, there was a term for Marcos’ notorious version of governance: “Constitutional authoritarianism”.
Now, does that sound familiar?
Wishing you a meaningful week ahead,
For Team Frontline,
Jinoy Jose P.
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