Crony capitalism is a perversion of the free-market economy, in which the creation of wealth through competitive innovation is replaced by abuse of political influence.  This essay looks at the institutionalised nexus between state and privately owned companies, which is a system of legal permits and government grants, and tax concessions to insiders. The assignment evaluates the impact of this symbiotic relationship on the erosion of democratic institutions, stagnation of entrepreneurship, and economic inequality through a historical prism and with a contemporary case of the U.S. economy. The paper is concluded with recommendations on institutional changes that can be made to reestablish market integrity and transparency.

INTRODUCTION
Crony capitalism is a type of economy whereby businesses do not succeed due to their risks, merit, and productivity, but because they are linked to the political class, termed as a nexus. Profit is a reward in a healthy capitalistic system, which is the delivery of value to the
consumers. Profit in crony capitalism is a rent based on political favoritism.

This government-business nexus is commonly disguised by the term of public-private partnerships or national interest, and its mechanics is two-fold, politicians get money, votes, or power, and business magnates get monopolies, tariffs, or access to natural resources. This compromises the level playing field which is needed in the economic growth and the trust of the people.

HISTORICAL BACKGROUND
Crony capitalism has its origins as early as structured trade, although it emerged as an economic criticism in the late 20th century.

It was historically the practice of monarchs to award charters (such as the East India Company) to preferred merchants as a share in the spoils on the condition that they would, in exchange, retain a monopoly on trade.

• The Gilded Age (USA): Before the late 19th century, massive bribes and lobbying of politicians by rail and steel barons granted them land and competed with others by crushing competition.

• The Asian Financial Crisis of 1997: This marked the turning point of the so-called crony capitalism. The economy in such countries as Indonesia (under Suharto) and Philippines (under Marcos) was controlled by the family members and friends of the ruling elites. When the bubble burst, it was evident that the banks loaned money to these cronies in consideration of political ties and not the viability of their business models.

• Post-Soviet Russia: The Oligarchs emerged in the 1990s, when the owners of state-owned property were given the opportunity to purchase their assets at a fraction of the value due to the close connection with the Kremlin when the market economy was being introduced.

RELATED CASE STUDIES
A. The South Korean Chaebols (A Success and a Warning)

The industrialization boom in South Korea was founded on Chaebols, which were big family- owned corporations such as Samsung and Hyundai. As they contributed to growth, the close nexus resulted in huge scandals.

The Nexus: The government offered subsidized credit and defense against international competition; Chaebols, in turn, coordinated their production with the state policies.

The Fallout: This resulted in the impeachment of President Park Geun-hye in 2016, with charges of bribery and extortion of top Chaebol officials.

B. The 2G Spectrum Scam (India)
The 21st-century example of cronyism that is widely mentioned.

The Nexus: Government officials are said to have circumvented open auctioning procedures to sell frequency licenses to preferred telecom firms at 2001 rates in 2008.

The Advantage: The state exchequer suffered a presumptive loss of about $30 billion, whereas the assets of the private firms were worth billions of dollars, at a pittance.

C. The 2008 Global Financial Crisis (The Too Big To Fail Nexus)

Cronyism in the West is commonly practiced via the revolving door between the Wall Street and Washington.

The Nexus: Deregulation was lobbied by large financial institutions. The government bail out their risky bets when they could not as a result of the argument, they were too big to fail as a result of the use of taxpayer money. This brought moral hazard where companies receive the profits and the people receive losses.

CRITICAL ANALYSIS
The nexus between business and government forms a vicious cycle that affects the society in three levels:

Economic Impact: As resources are distributed according to the relationship, the most efficient firms will be sent out. This kills innovation. Why can you create a superior product when you can just lobby to have a law that would prohibit your competitor?

Political Impact: Cronyism causes the so-called Regulatory Capture, whereby the regulatory agencies that are supposed to check on the industries are dominated by the industries themselves. This transforms the government into a means of individual wealth as opposed to
serving the people.

Social Impact: Crony capitalism is one of the main causes of the wealth gap. It forms an exclusive club of elites and upward mobility becomes almost impossible to small business owners and the working population creating a social unrest and populism.

CONCLUSION AND SUGGESTIONS
The opposite of a free market is Crony capitalism. It is a predatory association which robs an economy of its life-blood to make the few rich. To break the nexus, the “rules of the game” must be changed.

Suggestions:
1. Political Financing: Adopt strict political funding: either state financing of elections, or disclosure of all corporate contributions to avoid pay-to-play politics.

2. Tougher Anti-Trust Laws: Dissolve monopolies and no single entity should be too big to fall or too big to jail.

3. Independent Regulatory Bodies: Make sure that heads of regulatory agencies (such as Telecom or Environment boards) have determinate tenures and are not politicized.

4. Digitization of Tenders: Transfer all government procurement and resource distribution (coal, spectrum, land) to open, blockchain-based, or transparent digital auctions to remove backroom deals.

5. Cooling-off Periods: Require a cooling-off period of 3-to-5 years before a government official can become a board member of a private company that he/she previously regulated.

Moving towards a rule-based economy by replacing a relationship-based economy, countries can make sure that the success is defined by value that a society gets, rather than by the closeness to power.