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Despite the considerable benefits afforded to individuals working within the Soviet state and the unsustainability of strictly centralized planning, archived records demonstrate that top Soviet officials disliked and desperately tried to eliminate the rampant corruption that saturated socialist society. In stark contrast to mixed economies, where cronyism is an intentional tool that political leaders use to induce industrialists to conform to the state’s dictates, cronyism in socialist economies tends to be a costly unintended consequence. Corruption imposes much higher costs on an economy than taxation. 25 This “branching out” of interests within the Soviet planning apparatus was a fact of life that party officials only acknowledged in private correspondence. On the ground, average people navigated this <strong>web</strong> of connections and influence daily with the help of informal norms like blat and tolkachi that permeated the system. In secret correspondence to his closest councilors, Stalin privately despaired about his comrades’ lack of revealed devotion to true socialist ideals as they scrambled to line their own pockets well before those of the state. 26 High planners in the Soviet Union, Cuba, China, and North Korea all attempted to implement numerous anticorruption edicts that encouraged whistle-blowing and ramped up punishments for corruption, but these initiatives were, perhaps unsurprisingly, either overwhelmingly ignored or selectively enforced. Despite their best efforts to create “socialist man” through education, propaganda, and state force, even the most ideologically dedicated socialists succumbed to the unavoidable forces of self-interest. The Soviet Union, with the extreme control it exercised over its citizens’ lives, could not prevent SOCIALISM 29
cronyism from gripping every area in which the state intervened. Its example illustrates how government intrusion in economic affairs creates conditions under which individuals must divert energy away from productive activities like cost-cutting and improving production processes and toward destructive political competition in order to survive. In this way, the socialism of the Soviet Union, Cuba, China, and North Korea moved these countries’ economies away from the positive-sum game that characterizes liberal capitalist economies and embraced the negative-sum game that permeates crony systems. 30 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 and 32: the Politburo and the needs of conn
Page 33 and 34: consider the benefits and costs of
Page 35 and 36: upon state privilege and disproport
Page 37: their loyalty to the socialist stat
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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