Cronyism vs Economic Freedom: experiencies from Brazil and India - Matheus Cosso (University of Chicago)

 Um estudo muito interessante, não necessariamente da corrupção por meio do tradicional rent seeking, mas pelo canal do rent selling, ou seja, deslocando as práticas corruptas ao nível institucional da governança nos duas maiores economias em desenvolvimento do Brics, Brazil e Índia. 

CRONYISM VS. ECONOMIC FREEDOM:

EXPERIENCES FROM BRAZIL AND INDIA

MATHEUS COSSO*

Chicago, United States of America, 2024

ABSTRACT

Businesses are driven by the need for profit to sustain their operations, while public authorities rely on political support for professional survival. When these actors can establish alliances to further their interests at the detriment of others, cronyism emerges. Starkly contrasting with the principles of economic freedom, cronyism is a system where benefits arise from questionable, though not necessarily illegal, relationships. It stems from institutional frameworks that enable ruling officials to exploit their discretionary power, creating rents for a select few private actors while pursuing their self-interest. The most common criticisms of capitalism or markets often target outcomes generated by cronyism, though many detractors miss this distinction. These outcomes include corruption, rent-seeking, resource misallocation, distorted competition, disrupted incentives, erosion of institutions, barriers to human flourishing, and authoritarian tendencies—all stemming from ruling officials engaging in rent-selling. This paper aims to move toward a general theory of cronyism by synthesizing diverse ideas and concepts into a single definition, focusing on the often-overlooked supply side of cronyism. Grounded in an institutionalism approach and bridging political economy concepts from the Chicago School with Public Choice research, this paper is organized into three sections: a

comprehensive analysis of cronyism's emergence, why and how ruling officials engage in it, and its consequences; a case studies investigation of cronyism in Brazil and India to examine this issue in two of the largest developing economies; and how market-oriented policies can mitigate cronyism, emphasizing the role of institutional entrepreneurs to promote it.

* The author is pursuing a Master's degree in Public Policy at the University of Chicago's Harris School of Public Policy. His research employs Political Economy to approach topics such as cronyism and the dynamics of economic freedom.