Wednesday, January 04, 2017

How Crony Capitalism Works

How Crony Capitalism Works - Hit & Run :
"Higher campaign contributions by companies helps them to secure more federal government contracts at better terms that yield higher profits, says a new working paper from researchers associated with the Networks Financial Institute at Indiana State University.
In "It's a Sweetheart of a Deal: Political Connections and Federal Contracting," economists Stephen Ferris and Reza Houston confirm earlier econometric findings that firms that make more contributions to politicians do better than companies that supply lower or no contributions. 
They measured political connections of firms by taking into account the size of political contributions made by each company's political action committee (PAC) to directly to Congressional candidates and political parties and to their associated PACs.
...Additionally, Ferris and Houston wanted to find out whether larger contributors got better contractual terms, that is, sweetheart deals. 
To probe this, they constructed a four-point Sweetheart Index based on contractual terms that are clearly advantageous to the contractor but not necessarily so for the government.
Specifically, they scanned government contracts for no-bid, cost-plus, multi-year, and exemption from cost and pricing data provisions.
Obviously, all four provisions enhance the profitability of the contracts.
So what did Ferris and Houston find..?
Read on!

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