66-630: The J. K. Organisation is an Indian industrial conglomerate , with headquarters in Delhi , Kanpur and Mumbai . It is run by the Singhania family , which rose to prominence in Kanpur , India, under Lala Kamlapat Singhania . The name JK is derived from the initials of Kamlapat and his father Seth Juggilal (1857–1922), who belonged to the family associated with the Marwari firm Sevaram Ramrikhdas of Mirzapur . The JK Group
132-557: A crony-capitalism index calculated via how much economic activity occurs in industries prone to cronyism. Its 2014 Crony Capitalism Index ranking listed Hong Kong, Russia and Malaysia in the top three spots. Crony capitalism in finance was found in the Second Bank of the United States . It was a private company, but its largest stockholder was the federal government which owned 20%. It was an early bank regulator and grew to be one being
198-429: A market inefficiency , which undervalues the true strength of these stocks. In her 1999 book No Logo , Naomi Klein provides several examples of mergers and acquisitions between media companies designed to create conglomerates to create synergy between them: A relatively new development, Internet conglomerates, such as Alphabet , Google's parent company belong to the modern media conglomerate group and play
264-505: A broader liberal critique of economic dirigisme . The term has also been applied to the system of oligarchs in Russia. Other states to which the term has been applied include India, in particular the system after the 1990s liberalization , whereby land and other resources were given at throwaway prices in the name of public private partnerships, the more recent coal-gate scam and cheap allocation of land and resources to Adani SEZ under
330-432: A business provides an incentive to stay in the good graces of political officials. Troublesome rivals who have overstepped their bounds can have these laws suddenly enforced against them, leading to fines or even jail time. Even in high-income democracies with well-established legal systems and freedom of the press in place, a larger state is generally associated with increased political corruption. The term crony capitalism
396-480: A disorienting and demoralizing experience for executives at acquired companies—those who were not immediately laid off found themselves at the mercy of the conglomerate's executives in some other distant city. Most conglomerates' headquarters were located on the West Coast or East Coast , while many of their acquisitions were located in the country's interior. Many interior cities were devastated by repeatedly losing
462-540: A focus in Asia.) In Japan, a different model of conglomerate, the keiretsu , evolved. Whereas the Western model of conglomerate consists of a single corporation with multiple subsidiaries controlled by that corporation, the companies in a keiretsu are linked by interlocking shareholdings and a central role of a bank. Mitsui , Mitsubishi , Sumitomo are some of Japan's best-known keiretsu, reaching from automobile manufacturing to
528-488: A free market is dispensed with, bribes to government officials are considered de rigueur and tax evasion is common. This is seen in many parts of Africa and is sometimes called plutocracy (rule by wealth) or kleptocracy (rule by theft). Kenyan economist David Ndii has repeatedly brought to light how this system has manifested over time, occasioned by the reign of Uhuru Kenyatta as president. Corrupt governments may favor one set of business owners who have close ties to
594-638: A global presence and a diversified portfolio of products and services. Conglomerates can be formed by merger and acquisitions , spin-offs , or joint ventures . Conglomerates are common in many countries and sectors, such as media , banking , energy , mining , manufacturing , retail , defense , and transportation . This type of organization aims to achieve economies of scale , market power, risk diversification , and financial synergy. However, they also face challenges such as complexity, bureaucracy , agency problems, and regulation . The popularity of conglomerates has varied over time and across regions. In
660-521: A major role within various industries, such as brand management . In most cases, Internet conglomerates consist of corporations that own several medium-sized online or hybrid online-offline projects. In many cases, newly joined corporations get higher returns on investment , access to business contacts, and better rates on loans from various banks. Similar to other industries many companies can be termed as conglomerates. Crony capitalism Crony capitalism , sometimes also called simply cronyism ,
726-625: A small slice of many companies in a fund rather than owning shares in a conglomerate. Another example of a successful conglomerate is Warren Buffett 's Berkshire Hathaway , a holding company which used surplus capital from its insurance subsidiaries to invest in businesses across a variety of industries. The end of the First World War caused a brief economic crisis in Weimar Germany , permitting entrepreneurs to buy businesses at rock-bottom prices. The most successful, Hugo Stinnes , established
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#1732877324866792-705: A toxic combination of corporations and government officials running sectors of the economy. For instance, the Financial Times observed that, in Vietnam during the 2010s, the primary beneficiaries of cronyism were Communist party officials, noting also the "common practice of employing only party members and their family members and associates to government jobs or to jobs in state-owned enterprises." Conservative commentator Ben Shapiro prefers to equate this problem with terms such as corporatocracy or corporatism , considered "a modern form of mercantilism ", to emphasize that
858-498: A unified front (sometimes called a trade association or industry trade group ) to the government in requesting subsidies or aid or regulation. For instance, newcomers to a market then need to surmount significant barriers to entry in seeking loans, acquiring shelf space, or receiving official sanction. Some such systems are very formalized, such as sports leagues and the Medallion System of the taxicabs of New York City , but often
924-407: Is a pejorative term used in political discourse to describe a situation in which businesses profit from a close relationship with state power, either through an anti-competitive regulatory environment , direct government largesse, and/or corruption . Examples given for crony capitalism include obtainment of permits, government grants, tax breaks , or other undue influence from businesses over
990-402: Is a type of multi-industry company that consists of several different and unrelated business entities that operate in various industries. A conglomerate usually has a parent company that owns and controls many subsidiaries , which are legally independent but financially and strategically dependent on the parent company. Conglomerates are often large and multinational corporations that have
1056-472: Is currently China's largest civilian-run conglomerate by revenue. In South Korea , the chaebol is a type of conglomerate owned and operated by a family. A chaebol is also inheritable, as most of the current presidents of chaebols succeeded their fathers or grandfathers. Some of the largest and most well-known Korean chaebols are Samsung , LG , Hyundai Kia and SK . In India, family-owned enterprises became some of Asia's largest conglomerates, such as
1122-638: Is currently divided into three main groups headed by Dr. Gaur Hari Singhania based in Kanpur, Shri Hari Shankar Singhania based in Delhi and Shri Vijaypat Singhania based in Mumbai . The three men are cousins who now run independent businesses, which are technically and legally separate entities and have no cross-holdings or common directors and employees, sharing only the family history. Industrial conglomerate A conglomerate ( / k ə ŋ ˈ ɡ l ɒ m ə r ə t / )
1188-412: Is not a product of crony capitalism, but because India is no longer under the influence of crony socialism. While the problem is generally accepted across the political spectrum, ideology shades the view of the problem's causes and therefore its solutions. Political views mostly fall into two camps which might be called the socialist and capitalist critique. The socialist position is that crony capitalism
1254-407: Is simply the inevitable result of any strictly capitalist system. Jane Jacobs described it as a natural consequence of collusion between those managing power and trade while Noam Chomsky has argued that the word crony is superfluous when describing capitalism. Since businesses make money and money leads to political power, business will inevitably use their power to influence governments. Much of
1320-458: Is the inevitable result of any strictly capitalist system and thus broadly democratic government must regulate economic, or wealthy, interests to restrict monopoly. The capitalist position is that natural monopolies are rare, therefore governmental regulations generally abet established wealthy interests by restricting competition. Critics of crony capitalism including socialists and anti-capitalists often assert that so-called crony capitalism
1386-399: Is used largely interchangeably with the related term corporate welfare , although the latter is by definition specific to corporations . Crony capitalism exists along a continuum. In its lightest form, crony capitalism consists of collusion among market players which is officially tolerated or encouraged by the government. While perhaps lightly competing against each other, they will present
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#17328773248661452-555: The Aditya Birla Group , Tata Group , Emami , Kirloskar Group , Larsen & Toubro , Mahindra Group , Bajaj Group , ITC Limited , Essar Group , Reliance Industries , Adani Group and the Bharti Enterprises . In Brazil the most important conglomerates are J&F Investimentos , Odebrecht , Itaúsa , Camargo Corrêa , Votorantim Group , Andrade Gutierrez , and Queiroz Galvão. In New Zealand, Fletcher Challenge
1518-676: The Bush administration . Gerald P. O'Driscoll, former vice president at the Federal Reserve Bank of Dallas , stated that Fannie Mae and Freddie Mac became examples of crony capitalism as government backing let Fannie and Freddie dominate mortgage underwriting , saying. "The politicians created the mortgage giants, which then returned some of the profits to the pols—sometimes directly, as campaign funds; sometimes as "contributions" to favored constituents". In its worst form, crony capitalism can devolve into simple corruption where any pretense of
1584-509: The Congress and BJP governments. Similar references to crony capitalism have been made to other countries such as Argentina and Greece. Wu Jinglian , one of China's leading economists and a longtime advocate of its transition to free markets, says that it faces two starkly contrasting futures, namely a market economy under the rule of law or crony capitalism. A dozen years later, prominent political scientist Pei Minxin had concluded that
1650-605: The Industrial Revolution began in Great Britain because they were the first to successfully limit the power of veto groups (typically cronies of those with power in government) to block innovations, writing: "Unlike most other national environments, the British environment of the early 19th century contained relatively few threats to those who improved and applied existing inventions, whether from business competitors, labor, or
1716-529: The Reserve Bank of India , has said: "One of the greatest dangers to the growth of developing countries is the middle income trap , where crony capitalism creates oligarchies that slow down growth. If the debate during the elections is any pointer, this is a very real concern of the public in India today". Tavleen Singh , columnist for The Indian Express , has disagreed. According to Singh, India's corporate success
1782-641: The United States , conglomerates became popular in the 1960s as a form of economic bubble driven by low interest rates and leveraged buyouts. However, many of them collapsed or were broken up in the 1980s due to poor performance, accounting scandals, and antitrust regulation. In contrast, conglomerates have remained prevalent in Asia, especially in China , Japan , South Korea , and India . In mainland China , many state-affiliated enterprises have gone through high value mergers and acquisitions , resulting in some of
1848-516: The highest value business transactions of all time. These conglomerates have strong ties with the government and preferential policies and access to capital. During the 1960s, the United States was caught up in a "conglomerate fad " which turned out to be a form of an economic bubble . Due to a combination of low interest rates and a repeating bear-bull market , conglomerates were able to buy smaller companies in leveraged buyouts (sometimes at temporarily deflated values). Famous examples from
1914-440: The 1960s include Gulf and Western Industries , Ling-Temco-Vought , ITT Corporation , Litton Industries , Textron , and Teledyne . The trick was to look for acquisition targets with solid earnings and much lower price–earnings ratios than the acquirer. The conglomerate would make a tender offer to the target's shareholders at a princely premium to the target's current stock price. Upon obtaining shareholder approval,
1980-618: The 1980s, General Electric also moved into financing and financial services , which in 2005 accounted for about 45% of the company's net earnings. GE formerly owned a minority interest in NBCUniversal , which owns the NBC television network and several other cable networks . United Technologies was also a successful conglomerate until it was dismantled in the late 2010s. With the spread of mutual funds (especially index funds since 1976), investors could more easily obtain diversification by owning
2046-534: The Supreme Court's establishment of Congressional supremacy over commerce, the Interstate Commerce Commission was established in 1887 with the intent of regulating railroad robber barons . President Grover Cleveland appointed Thomas M. Cooley , a railroad ally, as its first chairman and a permit system was used to deny access to new entrants and legalize price fixing . The defense industry in
J. K. Organisation - Misplaced Pages Continue
2112-816: The United States is often described as an example of crony capitalism in an industry. Connections with the Pentagon and lobbyists in Washington are described by critics as more important than actual competition due to the political and secretive nature of defense contracts. In the Airbus-Boeing WTO dispute , Airbus (which receives outright subsidies from European governments) has stated Boeing receives similar subsidies which are hidden as inefficient defense contracts. Other American defense companies were put under scrutiny for no-bid contracts for Iraq War and Hurricane Katrina related contracts purportedly due to having cronies in
2178-598: The United States, some of the examples are The Walt Disney Company , Warner Bros. Discovery and The Trump Organization (see below). In Canada, one of the examples is Hudson's Bay Company . Another such conglomerate is J.D. Irving, Limited , which controls a large portion of the economic activities as well as media in the Province of New Brunswick . Some cite the decreased cost of conglomerate stock (a phenomenon known as conglomerate discount ) as evidential of these disadvantages, while other traders believe this tendency to be
2244-455: The conglomerate usually settled the transaction in something other than cash, like debentures , bonds , warrants or convertible debentures (issuing the latter two would effectively dilute its shareholders down the road, but many shareholders at the time were not thinking that far ahead). The conglomerate would then add the target's earnings to its earnings, thereby increasing the conglomerate's overall earnings per share . In finance jargon,
2310-462: The end came in January 1968, when Litton shocked Wall Street by announcing a quarterly profit of only 21 cents per share, versus 63 cents for the previous year's quarter. This was "just a decline in earnings of about 19 percent", not an actual loss or a corporate scandal, and "yet the stock was crushed, plummeting from $ 90 to $ 53". It would take two more years before it was clear that the conglomerate fad
2376-751: The examples are Adamjee Group , Dawood Hercules , House of Habib , Lakson Group and Nishat Group . In the Philippines , the largest conglomerate of the country is the Ayala Corporation which focuses on malls , bank , real estate development , and telecommunications . The other big conglomerates in the Philippines included JG Summit Holdings , Lopez Holdings Corporation , ABS-CBN Corporation , GMA Network, Inc. , MediaQuest Holdings , TV5 Network, Inc. , SM Investments Corporation , Metro Pacific Investments Corporation , and San Miguel Corporation . In
2442-435: The government agencies in charge of regulating an industry come to be controlled by that industry. Governments will often establish in good faith government agencies to regulate an industry . However, the members of an industry have a very strong interest in the actions of that regulatory body while the rest of the citizenry are only lightly affected. As a result, it is not uncommon for current industry players to gain control of
2508-523: The government itself. In other European countries, by contrast, the merchant guilds ... were a pervasive source of veto for many centuries. This power was typically bestowed upon them by government." Vermon further stated that "a steam powered horseless carriage produced in France in 1769 was officially suppressed." James Watt began experimenting with steam in 1763, got a patent in 1769 and began commercial production in 1775. Raghuram Rajan , former governor of
2574-545: The government over others. This may also be done with, religious, or ethnic favoritism. For instance, Alawites in Syria have a disproportionate share of power in the government and business there ( President Assad himself is an Alawite). This can be explained by considering personal relationships as a social network . As government and business leaders try to accomplish various things, they naturally turn to other powerful people for support in their endeavors. These people form hubs in
2640-699: The headquarters of corporations to mergers, where ventures were reduced to subsidiaries of conglomerates based in New York or Los Angeles. Pittsburgh, for example, lost about a dozen. The terror instilled by the mere prospect of such harsh consequences for executives and their home cities meant that fending off takeovers, real or imagined, was a constant distraction for executives at all corporations seen as choice acquisition targets during this era. The chain reaction of rapid growth through acquisitions could not last forever. When interest rates rose to offset rising inflation, conglomerate profits began to fall. The beginning of
2706-464: The impetus behind campaign finance reform in the United States and in other countries is an attempt to prevent economic power being used to take political power. Ravi Batra argues that "all official economic measures adopted since 1981 ... have devastated the middle class" and that the Occupy Wall Street movement should push for their repeal and thus end the influence of the super wealthy in
J. K. Organisation - Misplaced Pages Continue
2772-548: The latter course had become deeply embedded in China. The anti-corruption campaign under Xi Jinping (2012–) has seen more than 100,000 high- and low-ranking Chinese officials indicted and jailed. Many prosperous nations have also had varying amounts of cronyism throughout their history, including the United Kingdom especially in the 1600s and 1700s, the United States and Japan. The Economist benchmarks countries based on
2838-477: The legal barriers are light. The term crony capitalism is generally used when these practices either come to dominate the economy as a whole, or come to dominate the most valuable industries in an economy. Intentionally ambiguous laws and regulations are common in such systems. Taken strictly, such laws would greatly impede practically all business activity, but in practice they are only erratically enforced. The specter of having such laws suddenly brought down upon
2904-462: The mixture of business and government stifles competition, a collusive result called regulatory capture . Burton W. Folsom Jr. distinguishes those that engage in crony capitalism—designated by him political entrepreneurs—from those who compete in the marketplace without special aid from government, whom he calls market entrepreneurs. The market entrepreneurs such as James J. Hill , Cornelius Vanderbilt and John D. Rockefeller succeeded by producing
2970-399: The most powerful organizations in the country due largely to being the depository of the government's revenue. The Gramm–Leach–Bliley Act in 1999 completely removed Glass–Steagall ’s separation between commercial banks and investment banks. After this repeal, commercial banks, investment banks and insurance companies combined their lobbying efforts. Critics claim this was instrumental in
3036-503: The most powerful private economic conglomerate in 1920s Europe – Stinnes Enterprises – which embraced sectors as diverse as manufacturing, mining, shipbuilding, hotels, newspapers, and other enterprises. The best-known British conglomerate was Hanson plc . It followed a rather different timescale than the U.S. examples mentioned above, as it was founded in 1964 and ceased to be a conglomerate when it split itself into four separate listed companies between 1995 and 1997. In Hong Kong, some of
3102-433: The network. In a developing country those hubs may be very few, thus concentrating economic and political power in a small interlocking group. Normally, this will be untenable to maintain in business as new entrants will affect the market. However, if business and government are entwined, then the government can maintain the small-hub network. Raymond Vernon , specialist in economics and international affairs, wrote that
3168-653: The new businesses they had recently purchased, and by the mid-1970s most conglomerates had been reduced to shells. The conglomerate fad was subsequently replaced by newer ideas like focusing on a company's core competency and unlocking shareholder value (which often translates into spin-offs ). In other cases, conglomerates are formed for genuine interests of diversification rather than manipulation of paper return on investment. Companies with this orientation would only make acquisitions or start new branches in other sectors when they believed this would increase profitability or stability by sharing risks. Flush with cash during
3234-402: The only way to run a profitable business in such a system is to have help from corrupt government officials. Likewise, Hernando de Soto said that mercantilism "is also known as 'crony' or 'noninclusive' capitalism". Even if the initial regulation was well-intentioned (to curb actual abuses) and even if the initial lobbying by corporations was well-intentioned (to reduce illogical regulations),
3300-499: The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 . More direct government involvement in a specific sector can also lead to specific areas of crony capitalism, even if the economy as a whole may be competitive. This is most common in natural resource sectors through the granting of mining or drilling concessions, but it is also possible through a process known as regulatory capture where
3366-473: The political process which he considers a manifestation of crony capitalism. Socialist economists, such as Robin Hahnel , have criticized the term as an ideologically motivated attempt to cast what is in their view the fundamental problems of capitalism as avoidable irregularities. Socialist economists dismiss the term as an apologetic for failures of neoliberal policy and more fundamentally their perception of
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#17328773248663432-413: The process is more subtle, such as expanding training and certification exams to make it more expensive for new entrants to enter a market and thereby limiting potential competition. In technological fields, there may evolve a system whereby new entrants may be accused of infringing on patents that the established competitors never assert against each other. In spite of this, some competitors may succeed when
3498-714: The production of electronics such as televisions. While not a keiretsu, Sony is an example of a modern Japanese conglomerate with operations in consumer electronics , video games , the music industry , television and film production and distribution , financial services , and telecommunications . In China, many of the country's conglomerates are state-owned enterprises , but there is a substantial number of private conglomerates. Notable conglomerates include BYD , CIMC , China Merchants Bank , Huawei , JXD , Meizu , Ping An Insurance , TCL , Tencent , TP-Link , ZTE , Legend Holdings , Dalian Wanda Group , China Poly Group , Beijing Enterprises , and Fosun International . Fosun
3564-560: The state's deployment of public goods, for example, mining concessions for primary commodities or contracts for public works. In other words, it is used to describe a situation where businesses thrive not as a result of free enterprise , but rather collusion between a business class and the political class . Wealth is then accumulated not merely by making a profit in the market , but through profiteering by rent seeking using this monopoly or oligopoly . Entrepreneurship and innovative practices which seek to reward risk are stifled since
3630-529: The term "crony capitalism" came about in the 1980s, to characterize the Philippine economy under the dictatorship of Ferdinand Marcos . Early uses of this term to describe the economic practices of the Marcos regime included that of Ricardo Manapat , who introduced it in his 1979 pamphlet "Some are Smarter than Others", which was later published in 1991; former Time magazine business editor George M. Taber, who used
3696-477: The term in a Time magazine article in 1980, and activist (and later Finance Minister) Jaime Ongpin , who used the term extensively in his writing and is sometimes credited for having coined it. The term crony capitalism made a significant impact in the public as an explanation of the Asian financial crisis . It is also used to describe governmental decisions favoring cronies of governmental officials. The term
3762-406: The transaction was " accretive to earnings." The relatively lax accounting standards of the time meant that accountants were often able to get away with creative mathematics in calculating the conglomerate's post-acquisition consolidated earnings numbers. In turn, the price of the conglomerate's stock would go up, thereby re-establishing its previous price-earnings ratio, and then it could repeat
3828-405: The value-added is little by crony businesses , as hardly anything of significant value is created by them , with transactions taking the form of trading . Crony capitalism spills over into the government, the politics, and the media, when this nexus distorts the economy and affects society to an extent it corrupts public-serving economic, political, and social ideals. The first extensive use of
3894-480: The watchdog and to use it against competitors. This typically takes the form of making it very expensive for a new entrant to enter the market. An 1824 landmark United States Supreme Court ruling overturned a New York State-granted monopoly ("a veritable model of state munificence" facilitated by Robert R. Livingston , one of the Founding Fathers ) for the then-revolutionary technology of steamboats . Leveraging
3960-412: The weaknesses of market allocation. Supporters of capitalism also generally oppose crony capitalism. Further, supporters such as classical liberals , neoliberals and right-libertarians consider it an aberration brought on by governmental favors incompatible with free market . . In the capitalist view, cronyism is the result of an excess of interference in the market which inevitably will result in
4026-425: The well-known conglomerates include Jardine Matheson (AD1824), Swire Group (AD1816), (British companies, one Scottish one English; companies that have a history of over 150 years and have business interests that span across four continents with a focus in Asia.) C K Hutchison Whampoa (now CK Hutchison Holdings ), Sino Group , (both Asian-owned companies specialize business such as real estate and hospitality with
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#17328773248664092-663: The whole process with a new target. In plain English, conglomerates were using rapid acquisitions to create the illusion of rapid growth. In 1968, the peak year of the conglomerate fad, U.S. corporations completed a record number of mergers: approximately 4,500. In that year, at least 26 of the country's 500 largest corporations were acquired, of which 12 had assets above $ 250 million. All this complex company reorganization had very real consequences for people who worked for companies that were either acquired by conglomerates or were seen as likely to be acquired by them. Acquisitions were
4158-462: Was formed in 1981 from the merger of Fletcher Holdings , Challenge Corporation, and Tasman Pulp & Paper, in an attempt to create a New Zealand-based multi-national company. At the time, the newly merged company dealt in construction, building supplies, pulp and paper mills, forestry, and oil & gas. Following a series of bungled investments, the company demerged in the early 2000s to concentrate on building and construction. In Pakistan , some of
4224-661: Was founded in 1918. The group rose in importance in the 1950s to 1980s, when it was the third-largest industrial conglomerate in India after the Birla and Tata conglomerates. The group has multi-business, multi-product, and multi-location operations, with interests in many countries. It has overseas manufacturing operations in Mexico , Indonesia , Romania , Belgium , Portugal , the UAE , and Switzerland . The organization also includes research and development institutes in various fields. The family
4290-428: Was initially applied to states involved in the 1997 Asian financial crisis such as Indonesia, South Korea and Thailand. In these cases, the term was used to point out how family members of the ruling leaders become extremely wealthy with no non-political justification. Southeast Asian nations, such as Hong Kong and Malaysia, still score very poorly in rankings measuring this. It was also used in this context as part of
4356-487: Was on its way out. The stock market eventually figured out that the conglomerates' bloated and inefficient businesses were as cyclical as any others—indeed, it was that cyclical nature that had caused such businesses to be such undervalued acquisition targets in the first place —and their descent put "the lie to the claim that diversification allowed them to ride out a downturn." A major selloff of conglomerate shares ensued. To keep going, many conglomerates were forced to shed
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