url?sa=t&source=web&cd=1&ved=0CCYQFjAA&url=http://mercatus.org/sites/default/files/Holcombe_Cronyism_web

elationship between the prevalence of amakudari
within the country’s financial sector and the growth of
the Ministry of Finance (MOF) that regulates that sector.
6 Evidence of corruption between industry and government
in state industrial planning calls into question
the true motivation behind the plans.
Olson uses Japan as a prime example of the rise and
decline of nations due to interest-group politics. He
notes that after policy disruptions eliminate old political
connections and networks, businesses concentrate
on productive activity because they can no longer secure
political favors. 7 Industrial policy in Japan favors some
Japanese businesses over others, creating incentives for
business leaders to develop political connections so that
they can be among the privileged. Over time, connections
become increasingly important to business profitability,
and an entrepreneurial economy evolves into one in
which success is based on political favoritism and cronyism.
As we have noted in previous chapters, Olson argues
that such a system leads to the decline of nations. Note
that Olson made this argument in the early 1980s, well
before Japan’s financial crisis in 1991 that led to its “lost
decade” of economic stagnation in the 1990s.
Japan’s rapid economic growth in the 1950s and 1960s
laid the foundation for South Korea to implement similar
policies to try to join the global economic community
with export-led growth. 8 Political power changed
hands several times in the decades following the war’s
end before it was finally seized by Park Chung-hee, an
ambitious military general with grand plans for the
South Korean economy, in 1961. Park’s leadership experience
was steeped in military logistics and the planning
96 LIBERALISM AND CRONYISM