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saddled left precious few nutrients for their own families. The cruel calculus of the state plan forced regional leaders to make the difficult decision to either meet their grain production quotas for export to urban centers and abroad while ignoring their constituents’ need for food, or ignore the unrealistic directives and face harsh punishment. These leaders furiously petitioned Stalin and his closest advisers for a reduction in their quotas. Stalin intervened and reduced quotas for the regions whose leaders were most aggressive in lobbying for a change, while raising quotas for other regions that were not as well-represented to make up for the loss. The less prominent officials who did not court favor with the higher echelons of the Soviet leadership would not be so fortunate as to have the rules rewritten for their benefit. Economic policy in the Soviet Union was inseparable from the winds of political influence. For instance, political influence dictated public policy in the Soviet research and development industry. 7 Engineers who spent time lobbying and building up a political reputation were more likely to be selected for lucrative state grants and fellowships than colleagues who were not as familiar with the political apparatus. More senior state officials in all industries routinely sacrificed unimportant Soviet officials as “fall guys.” 8 Likewise, public officials who openly questioned state policies found that their careers ended abruptly. The institutional structure of socialism therefore encourages state officials to dedicate much of their energy toward building relationships with superiors while casting blame on subordinates and toeing the official line with minimal—if any—objections. Rather than promoting a culture where government officials SOCIALISM 23
consider the benefits and costs of different policy options and promote employees based on merit, socialism creates a toxic environment that rewards undesirable character traits, as Hayek noted when he explained why the worst get on top in such systems. 9 Under socialism, people get ahead through their connections—cronyism—rather than through productivity. Civilians in socialist economies live austere lives of extreme scarcity and uncertainty. State distribution centers provide notoriously meager rations to nonelite members of society and offer no legal channels by which people can procure more. As economic conditions worsen and vital food supplies start to dry up from state storehouses, the issue of obtaining sustenance becomes one of life or death. Facing these dramatic conditions, citizens of socialist countries have incentives to turn to prohibited activities in order to avoid starvation. Over time, members of the nonprivileged classes begin to exploit the institutional weaknesses inherent in socialism in order to survive. The abolition of a natural price system substitutes time and influence for natural market prices. Goods flow to those who can wait in line for hours, those who have many family members with whom to share rations, and, despite the stated socialist values of egalitarianism and classlessness, those who have personal connections with the officials who distribute resources. For instance, Cuban citizens who are fortunate enough to have personal relationships with their neighborhood jefe de servicios, or chief of services, who is responsible for distributing daily necessities to nonelite workers, receive extra resources and high-quality rarities that their less-connected neighbors never see. 10 Collective farm authorities in socialist 24 LIBERALISM AND CRONYISM
Page 1 and 2: LIBERALISM AND CRONYISM Two Rival P
Page 4 and 5: LIBERALISM AND CRONYISM: TWO RIVAL
Page 6: CONTENTS Introduction 1 Chapter 1:
Page 10 and 11: INTRODUCTION People often see polit
Page 12 and 13: who have the power to make decision
Page 14 and 15: CHAPTER 1: LAYING A FOUNDATION Befo
Page 16 and 17: hijacking of the term to describe a
Page 18 and 19: esources can be taken from some for
Page 20 and 21: suffers from “market failure,”
Page 22: is a group of cronies in a dictator
Page 25 and 26: ecause it permits voluntary exchang
Page 27 and 28: people’s economic well-being. The
Page 29 and 30: consumer demands. Examples of rent-
Page 31: the Politburo and the needs of conn
Page 35 and 36: upon state privilege and disproport
Page 37 and 38: their loyalty to the socialist stat
Page 39 and 40: cronyism from gripping every area i
Page 41 and 42: communism are well documented and w
Page 43 and 44: Accountability was embodied by refo
Page 45 and 46: despite comprising only 3 percent o
Page 48 and 49: CHAPTER 5: FASCISM Fascism, the pol
Page 50 and 51: use the sword of the Nazi state to
Page 52 and 53: planners created a back door for in
Page 54 and 55: CHAPTER 6: CORPORATISM Corporatism
Page 56 and 57: puts men and their possibilities in
Page 58: that this form of guided capitalism
Page 61 and 62: therefore provide sufficient benefi
Page 64 and 65: CHAPTER 8: PROGRESSIVISM Progressiv
Page 66 and 67: 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 121 and 122:
with power support each other to ma
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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