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CHAPTER 16: ECONOMIC AND POLITICAL SYSTEMS The wide variety of economic and political systems analyzed here fall into either the category of individualism—where people make choices for themselves, their labor, and their property—or the category of collectivism, where some people have the power to make choices for everyone in the group. Collectivism may appear to imply that everyone in the collective has some say in group decisions, and the systems are designed to give that impression. 1 If people believe everyone has some say and that the government’s programs are something citizens agreed to, it becomes easier for those with political power to obtain citizen compliance for their mandates. 2 Democracy is the clearest case of such a system, because in a democracy government actions are the result of a democratic decision-making process that is open to all. But the reality is that some people have more decisionmaking power, and others have almost none. Democracy has the symbolic advantage that with one person, one vote, it appears that power is spread evenly. The reality is different, because those within the government have the power to force the policies they want onto others. Those ECONOMIC AND POLITICAL SYSTEMS 111
with power support each other to maintain that power. Those are the cronies. The people who have power support each other to maintain their power, whether the collective decisionmaking group is a democracy or a dictatorship, a socialist society or a capitalist one. Pure capitalism is the liberal economic system, but by interjecting government control through taxation, subsidies, regulation, and even the specter of government interference, a liberal economic system moves toward government control, which produces cronyism. Critics of crony capitalism tend to view themselves as critics of capitalism, but cronyism in crony capitalism exists because of growing government interference in the economy through taxation and regulation, not because of mutually beneficial market exchange. Families tend to be run like communes, as collective <strong>org</strong>anizations where members contribute for the good of the group, so it is instructive to consider why this arrangement works. Everyone in the family is a crony because each member relies on personal relationships with other family members for resources and support. When groups—even families—grow large enough that individuals have much closer personal relationships with some members of the group than with others, the collectivism of the group evolves into cronyism. Collectivism only works in groups that are small enough that everyone in the group can be in the same group of cronies. The model of the family, while it works well for a small group, does not scale up to function well with larger groups. Beyond small groups, liberalism allows individuals to deal with other individuals knowing that their arrangements will be for their mutual benefit. Voluntary exchange for the 112 LIBERALISM AND CRONYISM
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LIBERALISM AND CRONYISM Two Rival P
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LIBERALISM AND CRONYISM: TWO RIVAL
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CONTENTS Introduction 1 Chapter 1:
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INTRODUCTION People often see polit
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who have the power to make decision
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CHAPTER 1: LAYING A FOUNDATION Befo
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hijacking of the term to describe a
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esources can be taken from some for
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suffers from “market failure,”
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is a group of cronies in a dictator
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ecause it permits voluntary exchang
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people’s economic well-being. The
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consumer demands. Examples of rent-
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the Politburo and the needs of conn
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consider the benefits and costs of
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upon state privilege and disproport
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their loyalty to the socialist stat
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cronyism from gripping every area i
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communism are well documented and w
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Accountability was embodied by refo
Page 45 and 46:
despite comprising only 3 percent o
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CHAPTER 5: FASCISM Fascism, the pol
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use the sword of the Nazi state to
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planners created a back door for in
Page 54 and 55:
CHAPTER 6: CORPORATISM Corporatism
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puts men and their possibilities in
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that this form of guided capitalism
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therefore provide sufficient benefi
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CHAPTER 8: PROGRESSIVISM Progressiv
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people who argue for limited govern
Page 68: Security, Medicare, and Medicaid do
Page 71 and 72: the direct election of senators, ch
Page 73 and 74: argue for narrow individual interes
Page 75 and 76: their roots to diverse sources of i
Page 77 and 78: promises to assume a company’s de
Page 79 and 80: enefits for his former venture capi
Page 81 and 82: prices of firms within the textile
Page 83 and 84: ment the power to make decisions an
Page 85 and 86: of social justice, cronyism has an
Page 87 and 88: for women in the twentieth century,
Page 89 and 90: ecause it advocates granting these
Page 91 and 92: should pay the same as comparable b
Page 93 and 94: way, the US government replaced the
Page 95 and 96: an individual, social justice advoc
Page 98 and 99: CHAPTER 12: CRONY CAPITALISM AND DE
Page 100 and 101: subsidies, political connections di
Page 102 and 103: CHAPTER 13: INDUSTRIAL POLICY The t
Page 104 and 105: “cottage industries” that clust
Page 106 and 107: of complex systems. He applied this
Page 108 and 109: South Korean industrial policy gave
Page 110: The degree to which Japan’s and S
Page 113 and 114: to get involved in lobbying to prot
Page 116 and 117: CHAPTER 15: LIBERALISM VERSUS CRONY
Page 118: that power will arise with another
Page 123 and 124: an incentive to cooperate for the b
Page 125: environmental movement often advoca
Page 129 and 130: 6. Ludwig von Mises, Human Action,
Page 131 and 132: 12. James Heinzen, “The Art of th
Page 133 and 134: CHAPTER 5: FASCISM 1. Peter Temin,
Page 135 and 136: CHAPTER 8: PROGRESSIVISM 1. Terry L
Page 137 and 138: 16. Bruce Yandle, “Bootleggers an
Page 139 and 140: 3. Eamonn Fingleton, “Japan’s I
Page 142 and 143: FURTHER READING Acemoglu, Daron and
Page 144 and 145: ABOUT THE AUTHORS Randall G. Holcom
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