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

political connections received huge government subsidies,
only to go bankrupt. Substantial funding from the
Troubled Asset Relief Program (itself a manifestation
of cronyism), approved to buy mortgage-backed securities,
went to bail out bankrupt auto manufacturers, with
sweetheart deals going to politically connected unions.
The most common policy response to cronyism is to argue
that more government oversight and more government
regulation can curb cronyism, but decades of economic
analysis show that government intervention is the cause
of crony capitalism, not the cure. 7
This book has expanded the analysis to look at political
and economic systems beyond capitalism to illustrate that
liberalism is the only way to curb cronyism. Can greater
democratic oversight of the economic system curb cronyism?
Perhaps an industrial policy to oversee the economy,
as has been used in Japan and South Korea, can curb cronyism.
By looking at how these systems and others have
worked in practice, it becomes apparent that all alternatives
to a liberal political and economic system lead
to cronyism. History shows that socialism, fascism, and
corporatism did not work well, and our analysis shows
that despite the differences in their structures, because
they were not liberal systems, politicians within each of
them made decisions based on cronyism.
These historical analyses are valuable because they
show how political and economic systems actually
worked rather than conjecturing how they might work if
the world were populated by “good princes and virtuous
citizens,” to use Mises’s phrase. 8 But the dangers of cronyism
also lie in the contemporary push to provide “rights”
to natural amenities like animals and sand dunes, as the
ECONOMIC AND POLITICAL SYSTEMS 115