# Crony Capitalism: The Force Destroying Western Civilisation

The state picks winners through access to capital, regulation and Federal Reserve facilities, and calls it the free market. The result favours the rich and the big companies and oppresses everyone from the upper middle class down.

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Last modified: 2026-11-06

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By Shayne Heffernan · 2026-11-06
Tags: $BLK, $STT, Crony capitalism, Federal Reserve, Wealth inequality, Middle class, Small business, Community banks, Lobbying, Campaign finance, Immigration, BlackRock, Vanguard, State Street, Consolidation, Western civilisation
Signed: ML-DSA-87, anchored on Armature L1.
Nothing in this article is investment advice.

Western civilisation is not being torn down by its enemies. It is being dismantled from the top by the people who were supposed to lead it. The mechanism is crony capitalism: capitalism's branding with the competition stripped out. The state picks winners through access to capital, regulation and Federal Reserve (Fed) facilities, and calls it the free market. The result is a society that favours the rich, favours the big companies, and oppresses everyone from the upper middle class down.

The Federal Reserve's own accounts show the shift. In the second quarter of 2026 the top 1% of US households [held 32.5% of household net worth](https://www.federalreserve.gov/releases/z1/dataviz/download/dfa-networth-shares.csv), against [22.9% in 1990](https://www.federalreserve.gov/releases/z1/dataviz/download/dfa-networth-shares.csv). Over the same years the share held by households between the 50th and 90th percentiles, the middle and upper middle class, fell from 36.1% to 28.8%, and the bottom half's share fell from 3.4% to 2.3%.

![Exhibit 1. Share of US household net worth by wealth group, second quarter of 1990 and second quarter of 2026.](https://livetradingnews-media.nyc3.digitaloceanspaces.com/media/2026/11/06/cmpgg3-57b7ad6ec7df0168.svg)

## Capital goes to the biggest firms first

Start with capital. Large firms reach capital markets at scale: [$2.2 trillion of corporate bonds were sold in the US market in 2025](https://www.sifma.org/news/blog/2026-capital-markets-fact-book-key-findings). Banks and dealers, not ordinary companies, deal directly with the Fed, the largest of them as primary dealers. The New York Fed [trades with 25 primary dealers](https://www.newyorkfed.org/markets/primarydealers) and with [47 more approved counterparties](https://www.newyorkfed.org/markets/standing-repo-counterparties), almost all banks, in its daily standing repo operations.

When markets seized in 2020, the Fed stood behind the bond market that large firms use. It sized its two corporate bond facilities [at up to $750 billion](https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm), and New York Fed research found that [conditions for new bond issues improved once they were announced](https://www.newyorkfed.org/research/staff_reports/sr935.html), and that in the secondary market eligible bonds responded more than others. In the end [no company used the direct facility](https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-nonlf-noelf-01-11-21.pdf), and the Fed held about $14 billion of bonds and bond funds. Its [Main Street Lending Program](https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2021/cpp20210319.pdf) for small and mid-sized firms had made 1,830 loans worth $17.5 billion, by the Boston Fed's count of 19 March 2021, against a capacity of close to $600 billion.

Many banks, for their part, find smaller customers less attractive. The Fed says the cost of evaluating and monitoring a small business loan [is high relative to its size](https://www.federalreserve.gov/publications/2022-october-availability-of-credit-to-small-businesses.htm). From 2008, small business lending by the four largest banks [fell sharply relative to other banks](https://www.nber.org/papers/w23843) and stayed depressed through 2014. Compliance costs add to the burden, and they fall hardest on the small banks for which this lending matters most. In 2014 compliance [cost 8.7% of non-interest expenses at banks under $100 million](https://www.stlouisfed.org/~/media/publications/regional-economist/2016/july/scale_matters.pdf) in assets, against 2.9% at banks of $1 billion to $10 billion. In 2021 banks with $1 billion or less in assets [held over 13% of their assets in small business loans](https://www.federalreserve.gov/publications/2022-october-availability-of-credit-to-small-businesses.htm), against about 6% at banks above $10 billion.

In the Fed's 2025 Small Business Credit Survey, only [42% of applicants received the full amount they sought](https://www.fedsmallbusiness.org/reports/survey/2026/2026-report-on-employer-firms), and older and larger firms [were more likely to be fully approved](https://www.fedsmallbusiness.org/-/media/project/clevelandfedtenant/fsbsite/reports/2026/2026-report-on-employer-firms/2026-report-on-employer-firms.pdf).

The banks that served small customers are disappearing too. The number of federally insured banks and thrifts [fell from 17,901 in 1984](https://www.fdic.gov/regulations/resources/cbi/report/cbi-full.pdf) to [4,238 at 30 June 2026](https://www.fdic.gov/quarterly-banking-profile/quarterly-banking-profile-second-quarter-2026.pdf). Banks with more than $10 billion in assets [held 27% of industry assets in 1984](https://www.fdic.gov/regulations/resources/cbi/report/cbi-full.pdf); by mid-2026 the 158 institutions above that line, which is not adjusted for inflation, [held 86.6%](https://www.fdic.gov/quarterly-banking-profile/quarterly-banking-profile-second-quarter-2026.pdf), and the 18 largest held 63.7% on their own. The 3,818 community banks [held 10.5%](https://www.fdic.gov/quarterly-banking-profile/quarterly-banking-profile-second-quarter-2026.pdf).

![Exhibit 2. Small-business loans as a share of bank assets (2021), compliance cost by bank size (2014), and the share of assets held by banks above $10 billion, 1984 and 2026.](https://livetradingnews-media.nyc3.digitaloceanspaces.com/media/2026/11/06/cmpgg3-b9be066e98865459.svg)

So the ladder that once let a competent entrepreneur climb from nothing to something has been pulled up behind the incumbents. New firms [were 13.7% of US employer firms in 1978](https://www2.census.gov/programs-surveys/bds/tables/time-series/2023/bds2023_fa.csv) and 9.1% in 2023. The number of US-listed domestic companies [fell from 8,090 in 1996 to 3,908 in 2025](https://api.worldbank.org/v2/country/US/indicator/CM.MKT.LDOM.NO?format=json&per_page=100), and research on the listing gap finds that [an unusually high rate of acquisitions](https://www.nber.org/papers/w21181) of listed firms explains the high rate of delistings.

## The upper middle class is squeezed from both ends

The upper middle class, people with savings, skills and mortgages but not enough wealth to matter to a private bank, gets squeezed from both ends. By the Pew Research Center's measure, middle-income households' share of aggregate US household income [fell from 62% in 1970 to 43% in 2022](https://www.pewresearch.org/race-and-ethnicity/2024/05/31/the-state-of-the-american-middle-class/), while upper-income households' share rose from 29% to 48%.

Their wages stagnate while their cost of living rises. After inflation, the median full-time worker's weekly pay [was the same in the first quarter of 2014 as in the first quarter of 1979](https://data.bls.gov/timeseries/LES1252881600?years_option=all_years&output_view=data&include_graphs=false), and by the third quarter of 2026 it was only 10.4% above that 1979 level. From 1967 to 2025, real household income [rose about 56% at the median and about 121% at the 90th percentile](https://www.census.gov/library/stories/2026/09/median-household-income.html). The average premium for employer family health cover [reached $28,303 in 2026](https://www.kff.org/health-costs/2026-employer-health-benefits-survey/), up 55% in ten years against 50.1% for wages. US home prices [have risen 54% since 2020](https://www.floordaily.net/?p=83145), according to Harvard's Joint Center for Housing Studies, and in 2025 the median existing single-family home cost nearly five times the median household income.

Their children's path to ownership narrows. By the National Association of Realtors' count, the median first-time home buyer [is now 40 years old, against 30 in 2010](https://www.nar.realtor/news/economists-outlook/top-10-takeaways-from-nars-2026-profile-of-home-buyers-and-sellers). In the third quarter of 2026 only [36.6% of householders under 35 owned their home](https://www.census.gov/housing/hvs/files/currenthvspress.pdf), against 65.5% of all households.

Their political voice gets drowned out by donors who can write cheques the size of a small town's budget. A New York Times analysis found that 300 billionaires and their families [gave 19% of all contributions in the 2024 federal elections](https://electionlawblog.org/?p=154675), against 0.3% five presidential elections earlier, before the Supreme Court's 2010 ruling that lifted many campaign finance limits. In the 2026 midterm cycle the 50 largest donors and organisations [had given $2.77 billion](https://www.aljazeera.com/news/2026/10/27/tracking-the-money-the-biggest-donors-in-the-2026-us-midterm-elections) by late October, and Elon Musk alone $446 million. The legal limit on an individual's gift to a federal candidate is $3,500 per election.

![Exhibit 3. The squeeze: middle-income share of US household income, median age of first-time home buyers, and billionaires' share of federal campaign contributions.](https://livetradingnews-media.nyc3.digitaloceanspaces.com/media/2026/11/06/cmpgg3-dbd74c130943349a.svg)

## A size story, made worse by policy

This is a size story rather than a left-right story, and it predates any current administration. But it has been made worse by deliberate policy choices at the elite level.

Mass immigration, pushed by business interests that want cheap labour and by political interests that want future voters, floods the bottom of the labour market and depresses wages for the people least able to absorb the shock. The Congressional Budget Office estimated in early 2024 that net immigration [reached 2.6 million in 2022 and 3.3 million in 2023](https://eyeonhousing.org/2024/02/new-cbo-population-estimates-additional-8-9-million-people-in-2053/), against about 900,000 a year in the 2010s. Its January 2025 outlook put 2024 at [about 2.7 million](https://www.gjopen.com/questions/4271-in-its-first-demographic-outlook-released-in-fy2026-what-will-the-congressional-budget-office-cbo-estimate-us-net-immigration-to-be-in-calendar-year-2025), and its January 2026 outlook put 2025 at [410,000](https://www.inquirer.com/news/nation-world/population-growth-trump-cbo-congressional-budget-office-20260107.html). In 2021 the US Chamber of Commerce [called for doubling the cap on employment-based visas](https://www.uschamber.com/economy/us-chamber-launches-nationwide-initiative-address-national-worker-shortage-crisis-and) and the quotas for H-1B and H-2B visas. In October 2025 it [sued to block a $100,000 fee on H-1B visas](https://www.adn.com/nation-world/2025/10/16/us-chamber-of-commerce-sues-trump-to-block-100000-fee-for-h-1b-visas), its policy chief saying the economy "will require more workers, not fewer."

Economists disagree on how large the wage effect is, and the evidence points to where it falls. The National Academies of Sciences [found in 2016](https://www.nationalacademies.org/news/2016/09/new-report-assesses-the-economic-and-fiscal-consequences-of-immigration) that the effect on native-born wages overall is very small over ten years or more, and that any harm falls mostly on earlier immigrants and on native-born workers who did not finish high school. George Borjas [estimated that a 10% rise in the supply of workers](https://www.nber.org/papers/w9755) in a skill group cuts their wages by 3% to 4%. Michael Clemens and Jennifer Hunt [found the impact on average native-born workers small](https://www.nber.org/papers/w23433).

The woke agenda, identity politics dressed up as compassion, divides the majority against itself while the actual power structure goes unexamined. Minority agendas are amplified not because they serve justice but because they serve distraction. Every culture-war fight is a fight the crony class does not have to have.

## The incentives at the top

The very top of Western society, the leadership that should be building Western civilisation, is in fact destroying it. Not through malice in most cases, but through incentives. When your wealth depends on regulatory moats, you lobby for thicker moats. Federal lobbying spending [passed $5 billion for the first time in 2025](https://web.archive.org/web/2026/https://www.opensecrets.org/news/2026/01/lobbying-firms-took-in-a-record-5-billion-in-2025/), a record, and [reached $1.4 billion in the first quarter of 2026](https://web.archive.org/web/20260514075043/https://www.opensecrets.org/news/2026/04/lobbying-spending-hits-highest-first-quarter-total-on-record/), the highest first-quarter total since quarterly reporting began in 2008. The economists Germán Gutiérrez and Thomas Philippon found that [regulations drive down the entry and growth of small firms](https://www.nber.org/papers/w26001) relative to large ones, particularly in industries with high lobbying spending. A study for the National Association of Manufacturers estimates that federal regulation [cost small manufacturers $50,100 per employee in 2022](https://web.archive.org/web/2024id_/https://nam.org/wp-content/uploads/2023/11/NAM-3731-Crains-Study-R3-V2-FIN.pdf), against $24,800 for large ones.

When your status depends on appearing compassionate, you promote policies that signal compassion while transferring wealth upward. When your power depends on a divided electorate, you fund the division.

## How the Soviet elite ended its own system

The Soviet Union was not brought down by attack from outside. The historian Stephen Kotkin [rejects the idea that Western ideological and military pressure brought it down](https://benjaminschwarz.org/2002/01/01/armageddon-averted/). It collapsed from within, as its own elite stopped believing in it and started looting it. David Kotz and Fred Weir argue that [the party-state elite itself moved to dismantle the old system](https://www.routledge.com/products/9780203350928), and Kotz writes that most senior party and state officials [saw an opportunity for personal enrichment](https://accuracy.org/release/gorbachevs-contested-legacy-the-soviet-state-did-not-collapse/). The political scientist Steven Solnick documents how [officials seized the assets they were supposed to manage](https://www.hup.harvard.edu/books/9780674836808), which he calls the organisational equivalent of a colossal bank run. Historians also weigh [the fall in oil prices that Yegor Gaidar emphasises](https://www.brookings.edu/books/collapse-of-an-empire/) and the politics of Gorbachev's reforms, which Chris Miller, working from the Politburo archives, [argues was the ultimate cause](https://muse.jhu.edu/book/48711).

The West is not there yet, but the pattern is recognisable. A ruling class that extracts rather than builds. A middle class that pays rather than owns. A majority that votes rather than decides.

## What consolidation took from the productive core

Crony capitalism is the economic engine of that decay. It hollows out the productive core: the small manufacturers, the small family farms, the community banks, the local newspapers. It replaces them with consolidated platforms whose largest shareholders are a handful of asset managers. It turns citizens into consumers and consumers into data. It makes the word freedom mean whatever the largest donor needs it to mean on any given Tuesday.

US manufacturing employment [peaked at 19.6 million in June 1979](https://www.bls.gov/opub/btn/volume-9/pdf/forty-years-of-falling-manufacturing-employment.pdf) and [was 12.7 million in September 2026](https://api.bls.gov/publicAPI/v2/timeseries/data/CES3000000001?startyear=2025&endyear=2026), 35% lower. The number of manufacturing firms with fewer than 20 employees [fell from 212,339 in 1990 to 161,177 in 2023](https://www2.census.gov/programs-surveys/bds/tables/time-series/2023/bds2023_sec_fzc.csv). The number of US farms [peaked at 6.8 million in 1935](https://www.ers.usda.gov/data-products/charts-of-note/106385), and the 2022 census counted [1,900,487](https://www.ers.usda.gov/data-products/charts-of-note/108629), 7% fewer than in 2017. In 2024 large-scale family farms, those with $1 million or more of gross cash farm income, were [5% of farms but produced 50% of the value of production](https://www.ers.usda.gov/media/20834/eib-299.pdf). Small family farms were 86% of farms and produced 17%.

In its report of 20 October 2025, Northwestern University's Medill journalism school counted close to 3,500 US newspapers that had [stopped printing since 2005](https://localnewsinitiative.northwestern.edu/projects/state-of-local-news/2025/report/), almost 40% of all local papers. Its report of 13 October 2026 found that [170 more closed or merged](https://localnewsinitiative.northwestern.edu/projects/state-of-local-news/2026/report/) in the latest year, nearly three a week. The number of newspaper owners [fell from 3,995 in 2005 to just under 1,900](https://localnewsinitiative.northwestern.edu/projects/state-of-local-news/2025/report/), and [ten companies now own more than half of all dailies](https://localnewsinitiative.northwestern.edu/projects/state-of-local-news/2026/report/).

The three largest index managers sit on top of what is left. BlackRock, Vanguard and State Street [held an average combined stake of 20.5% in S&P 500 companies in 2017](https://www.nber.org/system/files/working_papers/w25914/w25914.pdf), up from 5.2% in 1998, mostly through index funds for their clients, and cast about 25% of the votes in director elections. In 2015 data, taken together they were [the largest shareholder in 438 of the 500 companies](https://www.cambridge.org/core/services/aop-cambridge-core/content/view/30AD689509AAD62F5B677E916C28C4B6/S1469356917000064a.pdf/hidden_power_of_the_big_three_passive_index_funds_reconcentration_of_corporate_ownership_and_new_financial_risk.pdf). They manage [$15.5 trillion](https://www.blackrock.com/corporate/newsroom/media/press-releases/blackrock-reports-third-quarter-2026), [$13.3 trillion](https://www.bnnbloomberg.ca/press-releases/2026/09/23/vanguard-announces-cash-distributions-for-the-vanguard-etfs/) and [$6.3 trillion](https://s203.q4cdn.com/888565246/files/content_files/STT-3Q26-Earnings-Press-Release-vFinal.pdf) respectively.

![Exhibit 4. How far the productive core has shrunk: the fall in each count from its stated starting point.](https://livetradingnews-media.nyc3.digitaloceanspaces.com/media/2026/11/06/cmpgg3-c3cca68e5017c79e.svg)

![Exhibit 5. The three largest index managers' combined stake in the average S&P 500 company, 1998 and 2017, and their share of votes and of first places on the share register.](https://livetradingnews-media.nyc3.digitaloceanspaces.com/media/2026/11/06/cmpgg3-56f04ee41b0711b5.svg)

## Ideas priced out of reach

Western civilisation was built on a few stubborn ideas: that work should be rewarded, that property should be protected, that law should apply equally, that a man's word and a woman's labour meant something. Crony capitalism does not argue against those ideas. It simply prices them out of reach.

You cannot have a free society where entry to the economy is gated by connections. You cannot have a just society where the rules are written by the people they are meant to restrain. You cannot have a civilisation where the majority funds the minority's lifestyle and is told to be grateful for the privilege.

## The fix is openness

The fix is not more regulation. More regulation is just more moat for the people who can afford lobbyists. The fix is radical transparency and radical openness: capital markets that small firms can actually reach, a Fed that does not function as a private club, immigration policy set by the interests of citizens rather than employers, and a political culture that treats the upper middle class as the backbone of the nation instead of a revenue source.

The structure behind that charge is on the record. Commercial banks that join the Federal Reserve System [hold stock in their district's Reserve Bank](https://www.federalreserve.gov/faqs/about_14986.htm) as a condition of membership and [receive a dividend of up to 6%](https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2025.pdf), which came to $1.688 billion in 2025. Member banks [elect six of each Reserve Bank's nine directors](https://www.federalreserve.gov/aboutthefed/directors/about.htm), although the bankers' own directors [take no part in appointing the Reserve Bank's president](https://www.federalreserve.gov/aboutthefed/section4.htm).

Western civilisation has survived worse than crony capitalism. It has survived plagues, wars, and ideologies that promised utopia and delivered mass graves. But it has never survived a ruling class that stopped believing in the thing it was ruling. That is the test now.

Stocks mentioned: $BLK (NYSE) and $STT (NYSE).

Shayne Heffernan, Ph.D., Editor-in-Chief of Live Trading News, is the founder of the KnightsBridge Group ([shayneheffernan.com](https://www.shayneheffernan.com)).

*This article reflects the opinion of the author and Live Trading News, with each sourced figure linked. It is provided for informational purposes and does not constitute investment advice.*

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