Supporters of free markets seem to be increasingly vocal in their opposition to corporatism or crony capitalism. Whilst I wholly welcome this, I fear that the demand for a proper free market economy without cronyism or special favours is as unachievably utopian as the wildest leftist fantasy.
I say this because of the first premise of free market economics - that incentives matter. Politicians want money, business wants influence and favours. Both sides therefore have powerful incentives to trade - to give us cronyism.
Of course, this wouldn't be a problem if there were, as Sandel and Walzer have argued, moral limits upon markets - an agreement that there should be some things, such as political power, that money shouldn't buy.But this ethical demand runs into the fact pointed out by Marx - that the logic of capitalism is commodification, the extension of the cash nexus:
The bourgeoisie...has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment”...It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom — Free Trade.
There's another reason why crony capitalism will always exist. As Arnold Kling says, there will always seem to be a good argument for regulation. And thanks to regulatory capture, an inevitable by-product of this will be that regulation will favour big business; this fact is now so obvious that it even Liberal Conspiracy and a Very British Dude agree upon it. The only way to avoid cronyism is to avoid regulation - and nobody wants this.
There's a third point, which I think is under-appreciated. To survive - let alone thrive - in a proper market economy requires great entrepreneurial skill, to be flexible, efficient and genuinely "customer-focused". But these skills are very scarce. In a true market economy, therefore, not only would entire industries such as banks and arms companies not exist in their current forms, but nor would many firms, such as G4S, A4E or Atos. State support for business is necessary to sustain demand for the vast supply of incompetents and fraudsters.A free market economy would be one in which many people are unemployable.
Crony capitalism, then, is the only feasible form of capitalism.