Do business leaders embrace cronyism because they receive favoritism from the government or do those who seek favoritism from the government do so because they’ve already embraced cronyism?
Whether it’s a matter of causation or correlation, there is definitely a connection, as a new study from the Mercatus Center at George Mason University finds.
The new working paper discusses a national survey of business leaders that sought to determine how government favoritism toward particular firms (i.e., cronyism) correlates with attitudes about government and the market.
The survey probed the beliefs of 500 business leaders who either share or completely own decision-making responsibilities in their firms. It also asked whether these leaders believe they are in some way the beneficiary of government favoritism, whether direct loans; loan guarantees; subsidies; bailouts (or the expectation thereof); regulatory barriers to competition; tax breaks or privileges such as tax credits; tariffs or quotas on foreign competition; government-created monopoly; or other assistance.
Those business leaders who believe they work for firms who benefited from favoritism are 10 percent more likely to believe markets should be generally free and nearly 10 percent more likely to agree that a freer market serves the general public. From that you might get the impression they’d want freer markets. But that’s not the case. They are also 9.5 percent more likely to believe that, at present, the US market is too free, and 8.5 percent more likely to agree that competition is unfair to business.
These leaders are also 11.7 percent more likely to approve of more-than-moderate government involvement in the economy and about 16 percent more likely to agree that regulations benefit the economy. They are also nearly 18 percent more likely to believe that government should favor specific businesses or industries, 10.4 percent more likely to say that government assistance has a positive effect on the economy, and 7.4 percent more inclined to say that either knowledge of influential policy-makers or government assistance is the most important factor in business success.
As the study notes, “This suggests that the effects of favoritism on cultural understandings grows stronger the more dependent one’s firm is on favoritism.”
An implication of this study is that being the recipient of government favoritism makes business leaders more inclined to embrace other statist cultural understandings. Cronyism, it seems, may be a gateway drug to nationalism, socialism, and pro-statist/anti-freedom positions.