Capitalism Works; Crony Capitalism Does Not
Economic theory begins with scarcity. If a good is scarce relative to the demand for it, people are willing to give up something else to obtain it, whether through money, barter, or some other form of exchange. A price is therefore a signal reflecting both the relative scarcity of a good and the demand for it.
In a competitive market economy, prices emerge from the interaction of buyers and sellers and convey information about both consumers' willingness to pay and producers' costs of supplying additional units. Under the usual assumptions of competitive-market theory, this process tends toward an efficient allocation of resources.
Inefficiencies can arise when that information is distorted or when the incentives facing buyers and sellers diverge from the underlying social costs and benefits. Price controls and quantity restrictions can suppress or distort price signals. Market power, externalities, asymmetric information, and poorly designed regulations can produce similar problems. Intermediaries can also introduce distortions when they possess market power or impede price discovery, although intermediaries often improve market efficiency by reducing transaction costs and transmitting information.
Efficient allocation of resources means that waste is minimized, and resources are directed toward their highest-valued uses. Goods tend to be produced in quantities for which consumers’ willingness to pay reflects the cost of producing additional units, avoiding both excessive production and shortages relative to what consumers are willing to purchase at market prices. Competition also gives producers incentives to reduce costs, improve production methods, make better use of raw materials, and exploit economies of scale where they exist.
In short, free-market capitalism can lead to more choice, better prices, and less waste. Government intervention can introduce inefficiencies by distorting price signals, restricting competition, and changing the incentives that guide production and consumption.
Public Perception of Capitalism and its Limits
For some time, however, public attitudes toward capitalism have been weakening. In 2016, 60% of respondents in a Gallup poll said they had a positive view of capitalism. By 2025, that number had fallen to 54%, the lowest level Gallup has recorded since it began asking the question in 2010. This should not simply be interpreted as an ideological turn toward socialism. Only 39% of Americans viewed socialism positively in the same 2025 survey, while 81% viewed free enterprise positively. Gallup's 2026 follow-up provides some indication of what is driving the distinction: 23% of Americans identified inequality or the disproportionate benefits accruing to the wealthy as a drawback of capitalism, 24% cited greed, profit-seeking, or related ethical concerns, and 21% cited corporate power, monopolies, or market abuse.
The first problem is the widening gap between rich and poor. The World Bank reports a Gini coefficient of 41.8 for the United States in both 2023 and 2024, on a scale in which 0 represents perfect equality and 100 perfect inequality. Using its separately harmonized measure of disposable household income, the OECD likewise places the United States among the most unequal developed economies. Since 1979, median real hourly wages in the United States have grown by only 29%, or roughly 0.6% per year. By contrast, average real annual wages for the top 1% of earners grew by approximately 182% between 1979 and 2023, or roughly 2.4% annually. The share of all wage income going to the top 1% consequently rose from 7.3% in 1979 to 12.4% in 2023. At the very top of the wealth distribution, the numbers are even more remarkable. UBS estimates that the United States has almost 24 million dollar millionaires, approximately 40% of the world's total, while Forbes counted a record 989 American billionaires worth a combined $8.4 trillion in 2026, more billionaires than any other country.
Having a high number of millionaires and billionaires is not in itself a negative, and reflects in part America's extraordinary capacity to create and accumulate wealth. The problem is that wealth is also unusually concentrated in the United States relative to most other OECD countries. According to the OECD, the wealthiest 10% of American households hold approximately 79% of total household wealth, compared with an OECD average of about 52%.
The second problem is the perception of corporate greed, malfeasance, and a system in which gains remain private while catastrophic losses are sometimes socialized. Enron and WorldCom became symbols of corporate fraud at the beginning of the century; WorldCom’s reported income was ultimately found to have been overstated by at least \$11 billion. The financial crisis added an enormously more consequential example. Lehman Brothers collapsed, AIG required emergency government support, and Congress initially authorized \$700 billion for the Troubled Asset Relief Program. Approximately \$250 billion was committed to stabilizing banking institutions and another \$82 billion to stabilizing the automobile industry, including General Motors and Chrysler. Theranos subsequently provided a Silicon Valley version of the same problem: according to the SEC, Elizabeth Holmes and Sunny Balwani raised more than $700 million from investors through years of false and misleading representations about the company's technology and performance.
No one is arguing that talented corporate executives should not be appropriately compensated and compensated more than the individual worker as corporate leaders also have far more responsibility. But excessive executive compensation reinforces the perception that the rewards of corporate capitalism have become increasingly concentrated at the top. In 2024, realized compensation for CEOs of the 350 largest publicly traded American corporations averaged almost \$23 million, or 281 times the compensation of a typical worker. In 1965 the ratio was approximately 21 to 1. Between 1978 and 2024, inflation-adjusted CEO compensation increased by 1,094%, while compensation for a typical worker increased by only 26%. Nor is concern about corporate political influence entirely impressionistic. OpenSecrets calculates that reported federal lobbying expenditures reached a record \$4.4 billion in 2024, up from \$3.2 billion in 2015, with nearly \$37 billion spent over that decade. Against that background, Gallup's finding that 21% of Americans spontaneously identify corporate power, monopolies, or market abuse as a drawback of capitalism is hardly surprising.
The third problem is the perception that large corporations can remain indifferent to the welfare of workers and to environmental damage when the financial incentives point in that direction. Gallup found that 12% of Americans spontaneously identified exploitation of workers or consumers as a drawback of capitalism, while younger Americans were especially likely to cite environmental or broader social harms. These concerns have substantial real-world examples behind them. The U.S. Department of Labor continues to document goods entering global supply chains that are associated with child or forced labor; its 2024 report identified numerous Chinese products linked to forced labor and added cotton garments from Vietnam produced with inputs connected to forced labor in China. The ILO has separately documented allegations of low wages, excessive overtime, and poor working conditions in Vietnam's garment industry. Environmental disasters have provided equally vivid examples. The Exxon Valdez spilled more than 11 million gallons of crude oil into Prince William Sound in 1989. The Deepwater Horizon disaster killed 11 workers and discharged approximately 3.19 million barrels of oil into the Gulf over 87 days; a federal court found gross negligence and willful misconduct, and BP ultimately agreed to a \$20.8 billion civil settlement with federal, state, and local governments.
Other issues include externalities and market limitations. Externalities are costs or benefits imposed on third parties that are not reflected in market prices. Pollution is an example. A healthy environment benefits everyone, but polluters do not necessarily bear the full cost of the damage they cause. Regulations or other incentives, such as pollution taxes, are necessary to bring those costs into their decisions.
The market alone is also unable to guarantee affordable healthcare to the entire population. Patients often cannot postpone treatment or shop around, lack the expertise to assess what providers recommend, and face a supply of providers constrained by long training periods and barriers to entry. Most fundamentally, the need for healthcare does not imply the ability to pay for it. Even an efficient market cannot guarantee that everyone receives the care they need.
Other limitations concern law enforcement, military, and fire services. You should not have to pay a monthly subscription fee to receive police or fire protection. These services protect the wider community, and access should not depend on an individual’s ability to pay. The same principle applies to access to justice and impartial courts. National defense similarly benefits the population as a whole. The military should remain under public command and control because the incentives of private corporations motivated by profit may not align with national security objectives. The state must retain authority over, and accountability for, the use of force.
The Power of Capitalism
A more nuanced view of these issues brings several points to light. Over roughly the same period, Americans have experienced substantial improvements in material living standards. Life expectancy increased from 73.9 years in 1979 to 79.0 years in 2024. More importantly for material consumption, real personal consumption expenditures per person increased by approximately 145% between 1979 and the second quarter of 2026. Americans therefore consume vastly more goods and services per person than they did four decades ago, while technological improvements and declining quality-adjusted prices have made many products substantially more affordable.
Technological progress has also improved the quality and availability of goods and services in ways that conventional measures of wages cannot fully capture. We take it for granted that a few clicks can purchase goods from across the country, government services are available online, movies and television can be streamed to a phone, and ordinary cars contain safety and convenience features that were once expensive luxuries or did not exist at all. In 2024, 96.6% of American households had at least one computing device and 93.3% had an internet subscription. Household appliances that were once expensive consumer goods are now commonplace.
These gains arise through several reinforcing mechanisms. Investment increases the amount and quality of capital available to workers, allowing each worker to produce more. Specialization and trade permit individuals and firms to concentrate on activities in which they are relatively more productive, while purchasing other goods and services from those who can produce them more efficiently. Competition creates pressure to reduce costs, improve quality, and develop better products, while the prospect of profit provides an incentive to invest in new technologies and production methods. Successful innovations can then be replicated across firms and industries, while economies of scale allow fixed costs to be spread across larger quantities of output. The result, when these mechanisms function well, is rising productivity: more or better output can be produced from the same quantity of labor and other resources.
We live longer, consume substantially more with far greater efficiency in the use of labor and resources than even twenty years ago (nonfarm business labor productivity has increased by approximately 37% over the past twenty years), and have access to goods and technologies that previous generations could scarcely have imagined.
Crony Capitalism
Nevertheless, the concerns raised earlier are real, and reforms are needed. This essay will not address every issue, as doing so would require a much more involved analysis. The exact boundaries between regulation and the market are also subject to extensive policy debate. However, one clearly harmful problem is elite capture, which can prevent the market from working efficiently.
The free market works; crony capitalism does not. Crony capitalism occurs when economic power can be converted into political power and then used to obtain advantages unavailable through ordinary competition. Lobbying, campaign contributions, regulatory influence, preferential taxation, subsidies, and barriers to entry can allow established businesses to shape the rules under which their competitors must operate.
This can distort markets in ways that disproportionately benefit large corporations. Regulatory and tax complexity provide a simple example. A \$100,000 legal or compliance expense can be enormous for a small business while barely registering for a multinational corporation with permanent legal, tax, government-relations, and compliance departments. Regulations that impose large fixed costs can therefore raise barriers to entry even when they formally apply equally to every company. Large businesses already possess significant advantages in recruiting, financing, purchasing, and economies of scale; government should be particularly cautious about adding artificial advantages through laws that incumbent firms are uniquely capable of navigating.
The political system compounds the problem. Federal lobbying expenditures reached approximately \$4.4 billion in 2024. Lobbying itself is both legitimate and necessary in a representative system: businesses, unions, environmental organizations, civil-rights groups, and ordinary citizens must be able to tell legislators how proposed laws will affect them. The problem arises when immense concentrations of wealth produce immense disparities in political access and influence.
The modern campaign-finance system has made that problem considerably worse. In Citizens United v. Federal Election Commission, the Supreme Court held that corporations could not be prohibited from using treasury funds to make independent political expenditures. The decision left the prohibition on direct corporate contributions to federal candidates intact, but removed restrictions on independent corporate spending. Shortly afterward, SpeechNow.org v. FEC held that contributions to organizations making only independent expenditures could not constitutionally be limited on the theory that genuinely independent expenditures could neither corrupt candidates nor create the appearance of corruption. Together these decisions supplied the constitutional foundation for Super PACs capable of raising and spending extraordinary sums of money.
Ordinary legislation is unlikely to solve this problem because the principal restrictions I would impose run directly against the constitutional doctrines established in those cases. Congress cannot simply reenact a prohibition on corporate independent expenditures or impose conventional contribution limits on independent-expenditure committees and assume that the courts will sustain them. The underlying constitutional rule therefore needs to be changed.
A constitutional amendment should expressly establish that artificial legal entities do not possess an independent constitutional right to make expenditures for the purpose of influencing elections. Corporations would continue to possess the legal protections necessary to function as economic organizations, including the ability to own property, enter and enforce contracts, protect intellectual property, sue and be sued, and receive appropriate procedural protections. Those rights can be explicitly preserved without granting a corporation the same political-speech rights possessed by a natural person. The amendment should also authorize Congress and the states to regulate or prohibit political expenditures and contributions by corporations and other artificial legal entities, and to impose reasonable limits on the amount of money that natural persons may contribute or spend for the purpose of influencing elections. This latter provision is essential because restricting corporations alone would leave SpeechNow substantially intact and permit extremely wealthy individuals to channel unlimited sums through independent-expenditure organizations. Freedom of the press should be explicitly protected so that newspapers, broadcasters, publishers, and other bona fide journalistic organizations cannot be suppressed merely because they operate through corporations.
Once ratified, the amendment would provide the constitutional authority for implementing legislation. Congress could prohibit corporations from financing candidate advertisements or contributing to Super PACs from corporate treasury funds; impose contribution limits on independent-expenditure committees; restrict the amount that a single individual can spend independently to promote or defeat a candidate; require prompt disclosure of the natural persons who ultimately finance political expenditures; prohibit the use of shell corporations and intermediary organizations to conceal donors; strengthen rules defining coordination between campaigns and nominally independent organizations; and impose stronger revolving-door and conflict-of-interest restrictions on government officials and lobbyists. States could adopt equivalent rules for their own elections.
Such an amendment would supersede Citizens United, SpeechNow, and any other precedent inconsistent with its provisions. That is the principal advantage of addressing the problem constitutionally. Rather than attempting to construct increasingly elaborate campaign-finance laws around Supreme Court decisions that treat extensive restrictions on political spending as violations of the First Amendment, the Constitution itself would establish that democratic government has a legitimate interest in preventing concentrated economic wealth from becoming concentrated electoral power.
The amendment process is deliberately difficult. Under Article V, an amendment proposed by Congress requires approval by two-thirds of both the House and Senate and ratification by three-fourths of the states. Alternatively, two-thirds of state legislatures can require Congress to call a convention for proposing amendments, after which any proposed amendment must still be ratified by three-fourths of the states. The political obstacles would therefore be formidable, particularly because many of the institutions and individuals benefiting from the present system would have strong incentives to oppose the change. Difficulty, however, is not an argument against reform when the constitutional rule itself is the source of the problem.
Conclusion
The objective should be straightforward: economic success should translate into the ability to build larger companies, purchase better homes, invest, consume, innovate, and accumulate wealth. It should not translate without meaningful limit into greater control over the political system. A billionaire will inevitably possess more social and political influence than an ordinary citizen, just as the chief executive of a major corporation will have greater access to policymakers than the owner of a neighborhood store. Absolute equality of influence is impossible. The law can nevertheless prevent disparities in private wealth from being converted almost without limit into disparities in electoral power.
The free market works when businesses compete for customers. It becomes corrupted when businesses can use accumulated economic power to alter the political rules governing that competition. Ending crony capitalism will not eliminate inequality, nor will it resolve every legitimate criticism of capitalism. It would, however, go a long way toward restoring the perception that economic outcomes are determined by competition rather than political access, and that government represents citizens rather than those with the greatest ability to finance the political process. Restoring that confidence is critical to the future legitimacy of American capitalism.
