Government Cronyism and the Erosion of the Public's Trust
Large governments with broad powers engender competition for influence over those powers. This leads to cronyism, where certain groups obtain special privileges in exchange for political support. The academic literature indicates that, in addition to other negative effects, cronyism can cause public mistrust in government that limits the effectiveness of core government functions such as maintaining property rights and other individual rights. Survey data show a large decline in trust in government, much of which has occurred while government grew rapidly. Evidence indicates that government growth has been associated with rent-seeking and cronyism, leading to a withdrawal of trust. Thus, cronyism—bad government— can undermine even the appropriate functions of government. The literature also suggests that trust can be restored by the practice of good government. It seems that the best way to do so is with a smaller, more focused government that is centered on carrying out its core functions and to steer clear of cronyism.
Large, centralized governments with broad powers and discretion over taxation and regulation naturally engender competition for influence over these powers. This competition goes by many names—lobbying, influence peddling, special interest influence, rent-seeking—and has recently come to be expressed by the term “government cronyism.” Essentially, this term means that government bestows privileges such as preferential tax treatment, preferential regulation, influence on policy, subsidies, and subsidized loans upon favored groups in exchange for their political support.
Much has been written about the negative consequences of government cronyism.[ 1] This essay explores an often overlooked adverse outcome—the squandering of the public’s trust in government—that should concern everyone, especially those who endorse greater government power and spending.
Public trust is crucial to effective government. However, numerous measures of trust in government have declined to all-time lows. If trust is essential for government to function effectively, then the present situation is disconcerting.
But trust cannot be recaptured by the wave of a magic wand or by the urgent pronouncements of public officials. A growi