Crony capitalism is a negative term used to refer to the business dealings carried out by the Government officers in a capitalist economy. As Warren Buffet opined “The crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favouritism in the distribution of legal permits, government grants special tax breaks or other forms”.

Nature: 

1. Favourites Political authorities: Crony capitalism is a system in which close associates of the people in power who enact and execute policies get favours that have large economic implications.

2. Cronies get capital and reward: Cronies are rewarded with the ability to charge higher prices for their output than would prevail in a competitive market, Punnelled to the enterprises of cronies through government controlled banks. 

3. Protection of assets: Crony capitalism allows government to guarantee a subset of asset holders that their property rights will be protected. As long as their assests are protected, these assest holders will continue to invest as if there were universal protection of property rights.

4. Share in the rents generated by the asset holders: The members of the government or members of their families, share the rents generated by the assest holders. This may take the form of jobs, co-investments, or even transfer of stock. Crony capitalism goes hand in hand with corruption.

5. The concentration of Economics Power: A few busines groups which are cronies, influence state policies and pool their assets in private corporate sectors. Such concentration gives birth to crony capitalism. Crony capitalism is an economic phenomenon with political consequences.

In crony capitalism, the government must be able to make deals in closed doors without public review and approval, Personal connections of particular assest holders and government actors continue so long as that particular government is in power. When the government is replaced, those personal connections vanish.