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Solyndra’s major investors, Ge<strong>org</strong>e Kaiser, contributed $50,000 to Obama’s campaign efforts and helped to raise another $50,000 to $100,000 in donations. 8 Emails released by House Republicans in November 2011 show that Kaiser, who was a regular guest at the White House in the months before Solyndra was awarded the grant, was optimistic about the company’s chances of securing a loan guarantee because he had won the favor of Secretary of Energy Steven Chu and Vice President Joe Biden. Although the administration denied that it granted the loan guarantee to Solyndra because of the firm’s political connections, it is clear that the administration favored this company as a poster child of the program and that the firm did have personal connections to the administration—a clear case of cronyism. Internal communications reveal that the White House pressured the Office of Management and Budget behind the scenes to approve the necessary documentation for the loan guarantees in time for scheduled public appearances at the company by Vice President Biden and President Obama. Although the Solyndra scandal is the most wellknown scandal of the DOE loan guarantee program, this instance of cronyism is likely just the tip of the iceberg. One estimate suggests that the government awarded 70 to 80 percent of the loan guarantees to firms in which the primary investor or top executive financially supported Obama during his 2008 campaign. 9 A Washington Post investigation in February 2012 found that the government directed $3.9 billion in grants and loan guarantees to 21 companies with political connections to the Obama administration. 10 One former Obama fundraiser and DOE employee used his influence to procure $2.46 billion in ENVIRONMENTALISM 69
enefits for his former venture capital firm, Vantage Point Venture Partners. Another venture capitalist turned Washington insider was working at the DOE while his former firm, General Catalyst, received $105 million in government support. In addition to this direct kind of cronyism, environmental loan programs incentivize nonconnected firms to become politically connected to stay in business and remain competitive. For instance, an article in Wired magazine describes how electric car manufacturer Aptera Motors laid off 25 percent of its workforce so that it would have the resources to focus on procuring a DOE loan. 11 The remaining employees spent the bulk of their time navigating the myriad forms and processes that were necessary to procure government support. The incentives produced by government loan guarantees, grants, and subsidies remove resources from productive activities and direct them toward unproductive cronyism. Another area in which cronyism manifests itself in environmental policy is regulation. Environmental regulation provides an excellent demonstration of economist Bruce Yandle’s “bootleggers and Baptists” political model. 12 Contrary to the commonly accepted wisdom that the interests of businesses and regulators are fundamentally opposed, the bootleggers and Baptists model provides the insight that both groups stand to gain by cooperating to pass regulations, although their motivations may be different. As in the days of Sunday alcohol prohibition when both profit-seeking bootleggers and moralizing Baptists became strange bedfellows in their pursuit of a common policy, so too do environmental activists and big businesses frequently find themselves on the same side of 70 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 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: promises to assume a company’s de
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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