by Ken MacVey
There are many causes of Trump’s double ascent as president, including, perhaps just randomness, such as Comey’s re-opening of the FBI investigation of Hillary Clinton 11 days before the 2016 election supposedly based on a belatedly discovered laptop. But it can be argued there were a number of background features in our economic, legal, and political landscape that would still have made some version of Trumpism more likely with or without Donald Trump as its specific exemplar.
Here we will review how the stage was set for the establishment of America’s version of crony capitalism even if Donald Trump had been sent back by the voters to The Apprentice instead of the White House. The focus will be on two factors: the “corporate greed is good” ethos that Milton Friedman helped promote and Supreme Court decisions, such as Citizens United, that radically transformed how election campaigns are funded. The two in fact go hand in hand in fueling crony capitalism that ironically runs over the vision of capitalism Friedman promoted and the rule of law upon which the Supreme Court’s authority rests. We will then see how Trump 2.0 has taken full advantage of this stage setting.
What Is Crony Capitalism?
The phrase “crony capitalism” refers to reciprocal relationships between elite groups of monied businesses and individuals on one hand and political officials on the other within a backdrop of private and public sectors. By these relationships each side economically and politically prospers by the exchange of money and government favors on a transactional basis. This seemingly populist phrase apparently was coined in the 1980s by Time magazine’s business editor. Yet the phrase in recent years has been ascendant, used both by leftist anti-capitalists and right-wing conservatives and libertarians to disparage government and business relationships they disfavor. The specific phrase has even gained attention in some academic circles as a designated field of study. These studies focus on dealmaking between financially well to do elite businesses and key public officials by which “scratch my back and I’ll scratch yours” dealings they hope to prosper. These studies have focused on countries in East Asia and Latin America and particularly India and Russia. So far, the United States not so much.
Stanford political scientist Stephen Haber, in an essay on “The Political Economy of Crony Capitalism,” argues that these relationships flourish when the rule of law and governance institutions such as an independent legislature or judiciary are weak or lacking. He hypothesizes that because businesses cannot rely on conventions and institutions to provide a stable framework to protect property rights businesses have to resort to financial incentives to get political officials to provide an alternative form of stability. Businesses recognize dictatorial or capricious governments have the power to take away their property and thus these businesses are willing to shell out money as an insurance policy against political caprice. At the same time, public officials can enhance their power and wealth by explicitly or implicitly granting political favors, such as by granting government contracts, licenses, and project approvals or refraining from blocking businesses or by doing the opposite, like threatening and blocking businesses or seizing their assets. The Economist magazine in 2014 started ranking countries by their degree of crony capitalism. In these studies and rankings, the United States generally has been cited as an example where independent institutions and the rule of law limit crony capitalism. As will be discussed, that assessment needs revision.
So what’s so bad about all this? The problem with crony capitalism is that businesses and public officials prosper at the expense of everyone else. Government contracts and approvals and disapprovals aren’t based on merit but on reciprocal favors. It can be a reverse of Darwin’s “survival of the fittest”– instead a “thriving of the un-fittest.” It can also go beyond that, leading to a national and cultural malaise of cynicism and hopelessness.
Some economists disdain the phrase and concept of “crony capitalism” as vague and unoriginal. “Crony capitalism” they suggest is just a slogan for what economists call “rent seeking.” This is not to be confused with rent as in apartments. Roughly, economic rent refers to increasing a return on an asset without putting it to any extra economically productive use. Seeking to be a monopolist in order to charge more is an example of rent seeking. Such monopoly seeking can be done by private means or by government regulation. The point is that business enterprises can get economic advantages by obtaining a private or political ranking over everyone else. The problem with rent seeking is it doesn’t generate wealth for society. Instead wealth is burned up to take wealth from someone else. It’s like someone expending energy to shove others aside to grab the biggest slice of a birthday cake or to cut in front of the line at the movie theater.
Government provides many opportunities for rent seeking, such as lobbying to receive special government subsidies, get exclusive government contracts, or set regulations that exclude competitors. Bribes to get a government contract award are a classic example of illegal rent seeking. Crony capitalism likewise is about getting an exclusionary positional economic advantage over others through government fiat. Society’s wealth is used up in competing for these positional goods without being economically productive to anyone else while potentially kicking out more meritorious alternatives. But the one thing the idea of crony capitalism gets that economists’ idea of rent seeking doesn’t necessarily capture, crony capitalism is always intended to be reciprocally beneficial to the transactional parties. Both businesses and government officials get to protect or increase their wealth and influence even if it means it’s at the expense of everyone else.
Milton Friedman’s Contradiction: How He Promoted Crony Capitalism Contrary to His Vision of What Capitalism is Supposed to Be
In 1962 Milton Friedman published his book Capitalism and Freedom. In that book he outlined his vision of what capitalism should be. It was essentially a libertarian vision of largely unbridled and unregulated markets with a few twists such as school vouchers. As a manifesto, the book is widely seen to have shaped conservative public policy. But in some ways maybe even more influential was Friedman’s NY Times 1970 op ed piece titled “The Social Responsibility of Business Is to Increase Its Profits.” In that piece he sneered at “businessmen” who believed that businesses should not be “merely” concerned with profit but should also have a “social conscience” about such things as “eliminating discrimination, avoiding pollution and whatever else may be catchwords of the contemporary crop of reformers.” He labeled these businessmen as preachers of “unadulterated socialism” and “unwitting puppets of the intellectual forces that have been undermining the basis of a free society.” He concluded by quoting himself from his book Capitalism and Freedom: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as its stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.”
The New York Times in 2020 celebrated the 50th anniversary of the column with a special forum discussion by business leaders and economists. They agreed the column was world changing in promoting a profits-all-the-way-down mentality in business schools and on Wall Street. (The influence is understandable. After all, there is nothing more liberating than being able to tell yourself that serving greed is not only permissible, but morally compulsory.) Many commentators in the NY Times discussion, including Noble Prize-winning economists, lamented the social and economic impact of Friedman’s column.
But what Friedman, and most of his critics missed, is that his moral imperative to trashcan morality was logically shaky. He talked about the vague duty to follow “the rules of the game” without meaningfully describing what these rules were, who sets them, or why they should be followed. And why is it called just a game? Interestingly, while he expressed disgust at corporate leaders who wanted to eliminate discrimination or avoid pollution, he neglected to mention that at the time of the column there were already laws against racial discrimination and various levels and kinds of pollution. Why weren’t they part of the “rules of the game?” “Open and free competition, without deception or fraud” is both hopelessly vague and troubling. Is profitably selling gas chamber equipment for use in concentration camps okay if within “open and free competition, without deception or fraud?”
There is an even more fundamental practical problem with Friedman’s dictum that the one and only social responsibility of business is to increase profits. Nowhere did Friedman say the rules of the game exclude lobbying or cutting deals with government, which after all, is all within the scope of the First Amendment. If the one and only driver for businesses is to increase profits and to do so means lobbying for government regulations that exclude your competitors, then by all means go for it. If it means lobbying to grab government subsidies, then go for it. If it means urging tariffs on competitors, not only is it okay to do so, it may be a business’s “social responsibility” to do so. Rent seeking is after all solely motivated by the desire to increase profits. And it is really nice for business to know that not only is it permissible, it’s obligatory.
It’s hard to see how Friedman’s libertarian vision of government-free markets could survive his dictum that the only and sole responsibility of businesses is to increase profits. It will always remain the case that one of the most effective ways to increase profits is to secure a helping hand or fist from government unless otherwise checked. Friedman offered no checks.
Friedman claimed his argument was driven by rigor. But his argument for a moral imperative not to be moral was anything but rigorous. It’s a small wonder that Friedman’s sense of righteous rigor did not stop him from being an economic advisor to one of Latin America’s most brutal dictators, General Augusto Pincochet of Chile. Pinochet terrorized a nation and used his power as a dictator to enrich himself. He was a poster child for crony capitalism.
Technically, Friedman’s contradiction—the fact that he promoted policies that were self-defeating—is not a logical contradiction as philosophers and logicians talk about contradictions. But Friedman taught businesses it’s their duty to maximize profits constrained only by de minimis rules. It’s their duty to put aside childish things like social responsibility in strict dutiful service to profit. All of which is a master recipe for crony capitalism. And crony capitalism and Friedman’s libertarian vision of what capitalism should truly, really be are absolutely irreconcilable.
Unfortunately, Friedman helped set the stage for crony capitalism in America without recognizing the unintended consequences of his argument.
In May 2025, billionaire Charles Koch, in accepting an award from the Cato Institute named after Friedman, spoke negatively of the current state of affairs and about past subsidies and protectionism. He urged libertarians to embrace their principles. But Koch too did not recognize that this state of affairs was made possible with the help of the man the award Koch received was named after.
The Supreme Court’s Contradiction: Its Decisions Have Paved the Way for Crony Capitalism in a Way that Undercuts the Rule of Law
Friedman’s imperative against business social responsibility goes hand in hand with a number of Supreme Court decisions that further set the stage for crony capitalism in the US. In 2010 in a 5 to 4 decision the Supreme Court in Citizens United v. Federal Election Commission went out of its way to rule that over a century of campaign funding restrictions on corporations were unconstitutional. The decision determined that corporations and unions under the First Amendment should be treated the same as individual persons. It also essentially determined that spending money can be a form of speech. By this decision and its progeny, corporations and wealthy individuals were no longer restricted in the amount that could be expended in elections. True, monetary restrictions on direct funding of candidates were not found to be unconstitutional. But in practice the outcome was the dawn of Super PACs, which allowed businesses and wealthy individuals to spend money in elections with no monetary limits and without public disclosure (so called “dark money”) in coordination with candidates and their campaigns.
On the one hand, we have Milton Friedman espousing that the one and only social responsibility of businesses is to increase profits. On the other, we have the Supreme Court paving the way for businesses spending unconstrained amounts in elections even in secret as a form of constitutionally protected expression. The Supreme Court in its decisions has blessed economic elites to engage in massive elections expenditures in order to garner massive post-election political influence. Putting the two together, it comes as no surprise that the reported percent of financial contributions by billionaires in federal elections expenditures, according to Americans for Tax Fairness, went from.3% in 2008 (pre-Citizens United) to about one sixth in 2024. Undoubtedly, these contributions fall in line with Friedman’s directive to businesses to focus only on increasing profits.
The Supreme Court over the years has also issued a number of decisions that water down federal bribery and anticorruption laws. The most recent example is the 2024 Supreme Court 6 to 3 decision Snyder v. United States. That decision concerned the former mayor of Portage, Indiana, who was convicted of taking a bribe. As mayor he allegedly bypassed city staff to ensure that a $1.1 million contract for city garbage trucks would be awarded to a particular bidder on the contract. The mayor then allegedly thereafter showed up at the offices of the winning bidder and demanded money. Three weeks after the contract award, he received a $13,000 dollar check from the company that won the contract. The United States contended that the $13,000 check was a bribe. The Supreme Court threw out the conviction and held that the $13,000 was not a bribe but merely a gratuity because it was given after the fact of the contract award. Justice Jackson in her dissent joined by Justices Sotomayor and Kagan began: “Officials who use their public positions for private gain threaten the integrity of our most important institutions. Greed makes governments—at every level—less responsive, less efficient, and less trustworthy from the perspective of the communities they serve.” This is a powerful critique of crony capitalism—unfortunately unheeded by the majority of the Supreme Court.
And then there is the Supreme Court’s 2024 decision in United States v. Trump. In that decision the Court clothed presidents with an unprecedented expansion of presidential immunity from criminal prosecution. Justice Sotomayor in a stirring dissent commented on the impact of the majority opinion: “Let the President violate the law, let him exploit the trappings of his office for personal gain, let him use his official power for evil ends. Because if he knew that he may one day face liability for breaking the law, he might not be as bold and fearless as we would like him to be. That is the majority’s message today.”
What the Supreme Court has accomplished in several of its decisions is to make it legally much easier for businesses to pay for political favors and for presidents to play for economic and personal favors in return. In the name of law, the Supreme Court unintentionally helped undermine the rule of law upon which the Court’s authority ultimately must rest. Coupled with Friedman’s duty of business to increase profits if within “rules of the game,” and the Supreme Court’s loosening of those rules, the stage for crony capitalism was set. Next, we will look at how Trump 2.0 has played it out on that stage.
Trumpocracy : A Master Class in Crony Capitalism
Crony capitalism is about favors exchanged between wealthy or influential parties and elites on one hand and political officials on the other to their mutual benefit and usually to the detriment or exclusion of others. It would literally take a book to go through how Trump and his family and associates have cashed in on Trump’s politics and his power as president.
A prime example is how Elon Musk and Trump nurtured their bromance during the 2024 campaign when Musk reportedly spent over $270 million in support of Trump’s presidential campaign, which was made possible by the Supreme Court’s Citizens United decision. Musk already had taken full advantage of government contracts and subsidies to build his fortune. This included tax credits and subsidies that helped launch Tesla, federal contracts for Space X and its subsidiary Skylink, prospective government contracts with the Boring Company, and much more. Musk’s largesse was initially rewarded by having daily access with Trump after the election when planning for the incoming Trump administration. Once the second Trump administration was in place, Musk became a “special government employee” with unprecedented access through the newly formed Department of Government Efficiency to confidential and sensitive personnel information for a full spectrum of federal government entities —including those that had several federal investigations underway of Musk or his businesses. It remains unknown how much Musk profited in the long run after the bromance broke up over Musk’s public disapproval of Trump’s proposed tariffs that threatened Tesla’s operations in China. But Trump’s retaliatory threats to terminate federal contracts with Musk or to even deport Musk illustrate the bully side of crony capitalism. The message is: “Play ball with me or I will take your ball away no matter who you are.” Trump’s shakedowns of Big Law firms and universities also display this power.
Trump has not been subtle about his solicitations either. Three days before his second inauguration Trump announced the launch of $TRUMP as a private investment opportunity which could enrich Trump and his cohorts without public disclosure. Chinese crypto entrepreneur Justin Sun was widely reported to have purchased $30 million in crypto tokens in another Trump supported crypto venture that was reported to have netted Trump millions. Subsequently it was announced that a SEC prosecution against Sun was being suspended.
Others have not been subtle about offering up economic favors. Qatar’s gift of a $400,000,000 luxury jet to be upgraded to Air Force One status and ultimately transferred to a Trump foundation received intense public scrutiny and criticism (except from Republicans in Congress) but was completed in record time. Sometimes the gift giving is symbolic but telling, such as Tim Cook’s presentation to Trump of a glass sculpture with a 24 K gold base that was coupled with an announcement that Apple was to make a $100 billion investment in US manufacturing facilities.
Trump’s proposed global “Liberation Day” tariffs were also positioned to serve a crony capitalist agenda. The publicly announced backdrop of the proposed tariffs was for countries to negotiate a deal that the Trump administration likes. Another recent example of crony capitalist dealing is Intel’s deal to give the US government 10 percent of Intel’s stock in exchange for federal government financial favors.
Trump has done well personally. According to the New York Times in July before the 2024 election all of Trump’s cash and liquid assets were at risk but since resuming the presidency things have turned around. In August, The New Yorker did a detailed blow by blow count of the increase in Trump’s wealth as president. It came up with an estimated total increase of $3.4 billion.
We are only eight months in the second Trump administration. It remains to be seen how the remaining three plus years will play out.
But one thing for sure, Donald Trump should feel very grateful to the likes of Milton Friedman and the Supreme Court for what he has attained so far.