Economics 101 & Public Square

May the Most Well-Connected Win: How Cronyism Steals our Wealth and our Values

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What if you or someone you knew were kept from pursuing a vocation or making a living because someone else had the power to put you down or block you from opportunities? What if that theft were legal? It is, and some people – even some Christians – think it’s legitimate.

This theft takes place in plain sight every day, in the public square. This is cronyism, and not only does it prevent us from pursuing our vocations, it results in injustice, corruption, and poor stewardship. It harms the poor and it prohibits the downtrodden and struggling from pursuing their dreams. It destroys the creation mandate to take dominion, to create, and to thrive. The sanctity of our God-given creativity and purpose is undermined with every act of cronyism.

Defining Cronyism

Cronyism” is a word that has come into usage recently. Economists formerly referred to cronyism as “rent-seeking,” and it exists when firms or companies use their resources to lobby the state for special privileges. These privileges can vary from:

  • Special subsidies that others don’t receive.
  • Blocking others from entering your industry so you are better protected from competition.
  • Requiring your products (from insurance to light bulbs) to be purchased, in order to artificially drive people to your business.

These things and many more are what we now call cronyism. When one thinks of a “crony,” what emerge are images of dark, smoke-filled, wood-paneled board rooms where the well-connected make deals to rig the system in their favor.

That mental picture is not how cronyism is being carried out in the United States. Companies are setting up permanent shop on K Street in Washington D.C. These offices are staffed with pedigreed lawyers and well-intentioned interns who devise plans to get themselves deals and favors.

What is amazing is that the practice of cronyism seems legitimate on its face, and carried out right in the public square. We have become so accustomed to it as a part of our political process that we may mistake it for a benign business dealing. But it is not benign. It is theft.

Cronyism Breeds Corruption and Injustice

There is no other word for cronyism than theft. Theologian and Old Testament Scholar Walter Kaiser puts it this way:

…possessions or property could be gained by industriousness (Proverbs. 10:4; 13:4; 14:23), wisdom (Proverbs. 3:16; 24:3), or by the development of insight (Proverbs. 14:15). The book of Proverbs, in particular, stressed the merits of doing a job with pride, satisfaction, and excellence (Proverbs. 12:24). Theft is both a shortcut to obtaining possessions and property by means of avoiding any work to gain such, as well as by an outright denial of God’s law.

Cronyism is theft of opportunity and creativity. We are taking the ability of people to use their God-given gifts and talents in the service of others when we engage in cronyism. We rob them of the ability to do “a job with pride, satisfaction, and excellence.”

In doing so we don’t just hurt those individuals, but all of society, which loses out on what could have been created had these people not been hindered by cronyism.

The worst aspect of cronyism is that only the already well-connected and wealthy can participate, so it disproportionately harms the poor. The poor can’t lobby, and they suffer the consequences of the resulting rent-seeking environment that makes it hard for them to start businesses.

Cronyism Impedes Our Vocation

Competition in the marketplace is intense. If your vocation is to be an entrepreneur or a CEO or even a mid-level manager, you face any number of tough scenarios. You could risk your life savings on an idea that doesn’t pan out. You could put millions of dollars of current profits on the line for a new product that doesn’t serve the needs of customers or ends up being too costly to produce.

The process is a tough game, and as such, it is not difficult to see why firms who have assets and profits they want to protect would seek refuge in the government. This trend is on the rise in the United States, with decades-old farm subsidies in products like sugar, corn, and peanuts, as well as newer programs like Cash for Clunkers.

The problem with these programs, as unthreatening as they may seem on their face, is that they hurt competitors and potential competitors. They take away from legitimate start-ups and competitors who are working with integrity to serve their customers the best they can. Cronyism, by definition, is a zero-sum game. If I “win,” it is only because I took from others in a way that is sanctioned by the government.

This brings about larger cultural problems that harm all of us because it encourages behavior that seeks favor rather than working hard. It promotes an atmosphere where everyone works for political favors rather than working to be the best he or she can be.

The biblical doctrine of work teaches us that we are to carry out our vocations with excellence, integrity, and a heart of service. Cronyism fails on all these counts.

Cronyism Results in Poor Stewardship

More devastating than some of the short-term losses and opportunity costs is the cultural change cronyism brings. In a world where you must be politically connected to win, people have strong incentives to spend money and resources in order to become politically connected, rather than steward them towards more beneficial uses.

But let us not disregard the short-term opportunity costs either. Cash for Clunkers was a program which may have seemed harmless by encouraging owners of cars with low gas mileage to trade in their used vehicles for more fuel-efficient vehicles. This program clearly benefited manufacturers of new, fuel-efficient cars, but it hurt the used car market and anyone who would have purchased those “clunkers.” This program actually encouraged the destruction of resources. We took perfectly good used cars and poured sodium silicate in the engines, rendering them useless.

Christians must rise up and fight against the injustice, theft, and poor stewardship in cronyism. Over the coming weeks, we’ll be featuring case studies of several current examples of cronyism and finish with ways in which you can become aware of and stand up to this devastating trend.

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