Monday, July 28, 2014

Crony Capitalism, Corporate Executives, Hogs at the Trough

In fact, political activity and connections do not lead to higher profits for the vast majority of firms or industries, with the only notable exception being banking-related firms. Using firm-level data spanning a decade, we see no statistically significant correlation between firm or industry profitability and firm (or industry) lobbying or political action committee activity. If lobbying and political efforts do not increase returns for firm shareholders, why would firm executives channel resources in this direction? Our research suggests that — while measures of firm performance and profitability are not correlated with political activity — the compensation of top firm executives is strongly correlated. (source infra)

Crony Capitalism Pays Well For Rent-Seeking Corporate Executives - "In the wake of the financial crisis, businesses have rushed to ensure that their interests were and continue to be heard in Washington. With more than 12,000 registered federal lobbyists seeking influence in policymaking, the reported expenditures on lobbying federal government in 2013 topped $3 billion. Remember Solyndra This is perhaps no surprise, given that programs such as the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act of 2009 (or the "stimulus") doled out more than $1 trillion in federal subsidies, grants and contracts directly to specific private businesses. It's now a common belief that business success depends partly on a company's ability to secure favors through political connections. Known as "cronyism," in this system the government — rather than consumer-driven market forces — picks the winners and losers in the marketplace." (read more at the link above)


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