Political Capitalism: How Economic And Political Power Is Made And Maintained

305 Pages·2018·1.637 MB·English

by  Randall G. Holcombe

POLITICALCAPITALISM
Problems associated with cronyism, corporatism, and policies that favor the
elite over the masses have received increasing attention in recent years.
Political Capitalism explains that what people often view as the result of
corruption and unethical behavior are symptoms of a distinct system of
political economy. The symptoms of political capitalism are often viewed as
theresultofgovernmentinterventioninamarketeconomy,orasattributesof
a capitalist economy itself. Randall G. Holcombe combines well-established
theoriesineconomicsandthesocialsciencestoshowthatpoliticalcapitalism
isnotamixedeconomy,orgovernmentinterventioninamarketeconomy,or
someintermediatestepbetweencapitalismandsocialism.Afterdevelopingthe
economic theory of political capitalism, Holcombe goes on to explain how
changesinpoliticalideologyhavefacilitatedthegrowthofpoliticalcapitalism,
andwhatcanbedonetoredirectpublicpolicybacktowardthepublicinterest.
RandallG.HolcombeisDeVoeMooreProfessorofEconomicsatFloridaState
University.Dr.HolcombeisalsoSeniorFellowattheJamesMadisonInstitute,
a Tallahassee-based think tank that specializes in issues facing state govern-
ments. He served on Florida Governor Jeb Bush's Council of Economic
Advisors from 2000 to 2006, and is past president of the Public Choice
SocietyandtheSocietyfortheDevelopmentofAustrianEconomics.
CAMBRIDGE STUDIES IN ECONOMICS, CHOICE, AND SOCIETY
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CASS R. SUNSTEIN The Ethics of Influence: Government in the Age of Behavioral
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Generating Generosity in Catholicism and Islam: Beliefs, Institutions, and
PublicGoodsProvision
RANDALLG.HOLCOMBEPoliticalCapitalism:HowPoliticalInfluenceisMadeand
Maintained
VERNON L. SMITH AND BART J. WILSON Humanomics: Moral Sentiments and the
WealthofNationsfortheTwenty-FirstCentury
PAULDRAGOSALIGICAPublicEntrepreneurship,Citizenship,andSelf-Governance
Political Capitalism
How Economic and Political Power Is Made and Maintained
RANDALL G. HOLCOMBE
FloridaStateUniversity
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DOI:10.1017/9781108637251
©RandallG.Holcombe2018
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Title:Politicalcapitalism:howpoliticalinfluenceismadeand
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Identifiers:LCCN2018006517|ISBN9781108471770
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Contents
ListofFigures pageviii
Preface ix
1 TheConceptofPoliticalCapitalism 1
2 PoliticalCapitalismasanEconomicSystem 20
3 ThePoliticalandEconomicElite 44
4 InterestGroupsandPoliticalExchange 72
5 PoliticalCreationofEconomicRents 97
6 TransitionalGainsandRentExtraction 122
7 TheRegulatoryState 148
8 CapitalismVersusDemocracy 171
9 TheInstitutionalEvolutionofPoliticalCapitalism 198
10 PublicPolicyandPoliticalCapitalism 224
11 IsPoliticalCapitalismInevitable? 251
References 279
Index 291
vii
Figures
2.1 EconomicandPoliticalSystems page26
4.1 IsPoliticalPoweraContinuousFunction? 85
4.2 TheDiscontinuityinPoliticalPower 86
viii
Preface
The Industrial Revolution, which began in the mid-1700s, brought about
thelargesteverincreaseinthematerialwell-beingofmankind.Priortothe
IndustrialRevolution,mostpeoplebarelyscrapedbyatasubsistencelevel
ofexistence.AsThomasRobertMalthusnoted,thesizeofthepopulation
was regulated by its ability to produce enough food tosupport itself, and
starvation was a constant threat. In the twenty-first century, people who
liveincapitalisteconomiesaremoreconcernedaboutobesitythanstarva-
tion,andeventhosebelowthepovertylevelenjoyamenitiesunimaginable
afewdecadesearlier,suchasmobilephones,microwaveovens,flat-screen
televisions, and indoor plumbing. People who live in economies that are
primarilymarket-orientedenjoyhighstandardsofliving,whilethosewho
do not are much poorer. Judged by its ability to produce material well-
being,capitalismisanundeniablesuccess.
CapitalismhasitscriticswhopointtoperiodicfailuressuchastheGreat
Depression and the financial collapse that began in 2008, and, more
generally,depictitasasystemthatleadstoincomeinequalityandallows
sometousetheirprivilegedpositionswithintheeconomicsystemtogain
advantages over others. Regarding these more general criticisms, capital-
ism is well named, because it is the ownership of capital that conveys
advantagestotheeconomicelite.Capitalism,asaneconomicsystem,has
takenthebulkofthecriticismforthecronyismandfavoritismthatallows
sometoexploitthesystemfortheirownbenefit.
Theanalysisthatfollowsconcludesthatpoliticalcapitalism,inwhichthe
politicalandeconomicelitecontrolthesystemfortheirownbenefit,isnot
marketcapitalismandshouldbeanalyzedasaseparateeconomicsystem.
The study of economic systems, a major area of inquiry in the twentieth
century, when there was a vigorous debate on the merits of capitalism
versus socialism, has fallen out of favor in the twenty-first, so economic
ix