What's So Bad About Cronyism?. Jay Cost

      

      ENCOUNTER BROADSIDES Inaugurated in the fall of 2009, Encounter Broadsides are a series of timely pamphlets and e-books from Encounter Books. Uniting an 18th century sense of public urgency and rhetorical wit (think The Federalist Papers, Common Sense) with 21st century technology and channels of distribution, Encounter Broadsides offer indispensable ammunition for intelligent debate on the critical issues of our time. Written with passion by some of our most authoritative authors, Encounter Broadsides make the case for ordered liberty and the institutions of democratic capitalism at a time when they are under siege from the resurgence of collectivist sentiment. Read them in a sitting and come away knowing the best we can hope for and the worst we must fear.

      Table of Contents

       Cover

       Beginning

       Copyright

      CRONYISM IS a relatively new issue for the conservative movement. While long worried about burdensome regulations and taxes, the right has only recently grown concerned about the improper networks connecting the government and special interests. Of course, conservatives have opposed cronyism in specific instances over the decades. For instance, they complained about farm subsidies as early as the 1950s, and they celebrated the 1986 Tax Reform Act because it eliminated tax breaks for many special interests. Still, thinking about cronyism as a general issue is of recent vintage.

      The first conservative critiques of cronyism began around 2006. In The K Street Gang, Matt Continetti attacked the relationship between congressional Republicans and lobbyists, and in The Big Ripoff, Timothy P. Carney detailed how the government favors special interests. Combined, they signaled growing conservative frustration that the “Republican revolution” had facilitated bigger government and more corruption. The Troubled Asset Relief Program of 2008 exacerbated these worries. While many believed this program to be necessary, conservatives of all stripes thought it a bitter pill to swallow. Government favoritism toward the housing and financial-services industries had precipitated an economic collapse, and here was Uncle Sam bailing out its own cronies.

      Then came the Barack Obama administration. For the two years that Obama, Nancy Pelosi, and Harry Reid ran the government, it was as if Tammany Hall had descended upon the Potomac River. Suddenly, cronyism was everywhere. From the stimulus to Obamacare to Dodd-Frank to the IRS scandal, it seemed as if Obama’s cronies had taken complete control over public policy. That is when cronyism emerged as a major issue on the right, generating an explosion of serious work. Carney, Peter Schweizer, Michelle Malkin, and David Freddoso all wrote accounts detailing the pernicious links between the government and special interests. The Washington Examiner and the Washington Free Beacon started tracking down bad actors on a daily basis. The Tea Party waves of 2010 and 2014 produced senators like Mike Lee and Tom Cotton, who made cronyism a centerpiece of their political campaigns.

      This hardly marks the start of the fight against cronyism. Ralph Nader and his allies have been railing against “corporate welfare” for a half century. Before him, Teddy Roosevelt’s Progressive Party bemoaned the “invisible government” of “corrupt interests … owing no allegiance and acknowledging no responsibility to the people.” Nearly a century before T.R., Andrew Jackson had denounced the capacity of government “to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful.” Before Old Hickory, Thomas Jefferson and James Madison had been deeply worried about corruption in the Bank of the United States.

      In other words, cronyism is an old issue, even if conservatives are relatively new to it. As a public-policy problem, it should not be taken lightly. Jefferson, Madison, Jackson, and Roosevelt all fought cronyism, yet it still vexes the body politic. So if we hope to deal with it, we need to understand it better.

       Cronyism is an old issue, even if conservatives are relatively new to it. As a public-policy problem, it should not be taken lightly.

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      A sensible starting point is Aristotle. In The Politics, he categorizes a polis (civic body) by answering two questions: First, is the sovereign a single person, a few elite, or the people at large? Second, on whose behalf does this sovereign rule?

       On this basis we may say that when the One, or the Few, or the Many rule with a view to the common interest, the constitutions under which they do so must necessarily be right constitutions. On the other hand the constitutions directed to the personal interest of the One, or the Few, or the Masses, must necessarily be perversions.

      By this reckoning, cronyism is a perversion of good government. Merriam-Webster defines cronyism as “the unfair practice by a powerful person (such as a politician) of giving jobs and other favors to friends.” When politicians use their authority to benefit their associates rather than the people at large, that is cronyism. Because you usually have to have money to make friends with politicians, cronyism is typically a type of oligarchy, which Aristotle defines as the rule of the wealthy.

      The question of what to do about cronyism has long troubled political philosophers. The framers of our Constitution did not use the word cronyism, but they understood how government could be perverted in such ways. Madison in particular was worried about factions distorting policy for their own ends. Factionalism, he argues in Federalist No. 10, is “sown into the nature of man,” which means that the promotion of public virtue is only of limited efficacy. The best way to deal with this problem is a “well-constructed Union,” which may “break and control the violence of faction.” In other words, all people are self-interested and will try to pervert government toward their interests; what we need, therefore, are rules that keep this from happening.

      Prior to Madison’s age, cronyism had been a common problem in monarchies. The king’s favorites often established a court faction that could rule against the common good. England’s Glorious Revolution strongly cut down on the sovereignty of the king, but new problems soon emerged, thanks to the development of international trade and the market economy. This was a boon for Europe, and many governments adopted a mercantilistic model to direct the economy. Britain, for instance, kept tight control over her American colonies with the Navigation Acts and directed the flow of trade via royally chartered organizations like the East India Company, which was enormously profitable for Britain and created many a fortune for those who invested in it. This in turn gave it enormous political power, as these wealthy nabobs entered the House of Commons with an eye to protecting the company.

      This mixing of public and private interests led to cronyism. By the 1760s the company was struggling, so the nabobs lobbied for a bailout, which the government supplied. The Tea Act of 1773 allowed the company to dump its surplus directly into North America, rather than through secondary merchants. Moreover, the Tea Act retained the Townshend duties on tea sold in the colonies. Lord North, the British Prime Minister, thought he had killed two birds with one stone: the company could unload its surplus, and the American colonists would implicitly accept Parliament’s right to tax them (as the company’s tea would still be cheaper than that of its competitors, even with the tax). Yet North had gravely miscalculated. Boston merchants and the Sons of Liberty sneaked into Boston Harbor in December 1773 and dumped more than 300 crates of tea into the water. This event, later named the Boston Tea Party, would be a milestone in America’s path to independence. It was also one of the nation’s first experiences with cronyism.