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a regulatory battle. Environmental regulations can help businesses by protecting them from competition. 13 Larger businesses, the profit-seeking “bootleggers,” can easily absorb the high costs of regulation, but smaller firms cannot cope with these costs and cannot enter the market or are forced to leave it. 14 Environmental activists and regulators, the moralizing “Baptists,” want regulations to be passed to improve the environment and expand their spheres of influence. In this way, the “Baptists” provide moral cover for many environmental regulations that benefit special interests, and this cover disguises cronyism as furthering the public interest. Instances of cronyism stemming from environmental regulations abound. A regulation that mandated industrial scrubber requirements benefited the high-sulfur eastern US coal industry at the expense of the cleanerburning western coal industry. 15 Regulators designed the Clean Air Act of 1970 to benefit established firms at the expense of newcomers by compelling only new firms to install expensive scrubbers at coal-fired electric plants and exempting established firms from this obligation. 16 A 1973 Supreme Court decision further tilted the playing field in favor of established firms by making the construction of new smelting plants more difficult for new competitors. Economists Michael Maloney and Robert McCormick empirically tested the effect of the strengthened Clean Air Act and found that the tougher regulations benefited existing firms that saw their stock prices increase immediately following the ruling. 17 The same study analyzed the effects of a Department of Labor regulation on cottondust levels in textile factories and found that the stock ENVIRONMENTALISM 71
prices of firms within the textile industry increased as the level of regulation increased. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, commonly known as “Superfund,” was a boon to the waste management industry. 18 As Congress was drafting the law, industrial waste companies’ stock values rose in tandem with the stringency of the environmental regulations. 19 In all these instances, lawmakers tailored regulations to benefit a specific firm or industry under the guise of protecting the environment. Despite the good intentions of citizens who advocate for stronger environmental protection through government intervention, the actual experience with environmental regulation demonstrates that special interests benefit when government regulators have the power to dole out protection. Cronies with political clout are able to tilt the regulatory playing field to their advantage. Businesses are not the only cronies. Environmentalists seek to establish parks and wilderness recreation areas for their use, at taxpayers’ expense, and those who run environmental organizations use personal connections to pursue their organizations’ goals. This behavior is not unique to environmental groups, of course; politics works this way in general, and it is not surprising that the same type of cronyism that leads to corporate subsidies and bailouts also characterizes the political activities of nonprofit organizations. Environmental lobbyists use government funds and government connections to attract more funding from both government and private sources. 20 One organization, the Nature Conservancy, had nine employees making in excess of $200,000 a year in 2009 and in that same year had assets of $5.6 billion. 21 72 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 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: enefits for his former venture capi
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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