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the Founders intended, however, and by the 1820s, most states had switched to the present system of popular voting for electors. However, the Constitution never has said, and still does not specify, how states must choose their electors. It may sound anti-American to question the merits of the current conception of democracy, so it is worth emphasizing that the Founders did not originally design the government to be responsive to the will of the people. The federal government was one of limited and enumerated powers, and democracy was a mechanism for choosing who held those powers and for making it relatively easy to replace them if they abused their office and its powers. The majoritarian vision of democratic government favors those who have the majority’s support. A publicinterest viewpoint might approve of favoring the poor, for example, or the working class, and might approve of imposing costs to pay for these favors on robber barons, or the rich, or those who smoke cigarettes. Nevertheless, when the government favors some groups over others, it incites political competition to be in a group that gets government favors and to avoid being in a group that pays for them. That competition leads to cronyism. Nobody knows what popular opinion is before people express their opinions, which gives everyone an incentive to argue that their interests are congruent with popular opinion when the government operates under the political philosophy of majoritarianism. People have a strong incentive to argue for their own interests, but at best a weak incentive to argue for the public interest, and arguing for the public interest displaces an opportunity to MAJORITARIANISM 63
argue for narrow individual interests. In this environment, economists Barry Weingast, Kenneth Shepsle, and Christopher Johnsen describe a government engaged in distributive politics, where people must try to join a group of cronies in order to receive their share. 3 Such behavior reinforces cronyism because gaining advantages in a democratic government requires others’ support. Recent work in the new institutional economics, including that of Douglass North, John Wallis, and Barry Weingast as well as that of Daron Acemoglu and James Robinson, 4 describes the poor institutions in which rising to the top of the income distribution depends on political power and connections rather than economic productivity. The reliance on connections is cronyism. Acemoglu and Robinson describe these institutions as extractive rather than inclusive, 5 so there is an advantage to being a crony who can extract benefits rather than engage in productive activity. Majoritarianism leads to cronyism. 64 LIBERALISM AND CRONYISM
Page 1 and 2:
LIBERALISM AND CRONYISM Two Rival P
Page 4 and 5:
LIBERALISM AND CRONYISM: TWO RIVAL
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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 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: the direct election of senators, ch
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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