Crony capitalism is everywhere around us. We are so used to it that we often don’t even notice it. Any time a privately-owned business uses its influence on government officials (e.g., friendship, money, or other favors) to shape government policies in its favor or to avoid the enforcement of the existing laws, we are faced with an example of crony capitalism. Crony capitalism reduces the accountability of politicians and businesspeople for their actions and it also infringes on the freedom of others to compete in the marketplace.
One of the most common ways in which cronyism manifests itself in Serbia is when professional degrees and employment positions are awarded based on political party membership, and not on the basis of professional expertise. For example, institutions of higher education, including public and private universities, may award academic degrees to people who show substandard academic performance, but who are expected to benefit those institutions through their political influence. This results in the phenomenon known as “state capture,” when an interest group takes control over the state decision-making process for the purpose of acquiring private or party benefits. This inevitably imposes the costs of such interventions on the rest of the population.
Money and power become concentrated in a relatively small group of closely allied individuals, while the costs are dispersed over the entire population. As a result, each individual in the general population experiences only a small negative impact of a particular cronyist policy. On the other hand, each of the individuals in the relatively small group that is in power have a vested interest in keeping the relationship with their allies in the economy. Individual costs of organizing the crony relationship are far outweighed by the benefits that each of its participants can derive from this relationship.
At the same time, for the rest of the population, the opportunity costs of researching the structure of the crony relationships at the political and economic top are high. In addition, the costs of organizing some sort of a meaningful and effective public response to cronyism is high for each individual relative to the potential benefits. It is generally extremely hard to coordinate a large number of people (i.e., millions) with different interests, needs, plans, and expectations in a way that would lead to focused, effective action.
Many of my Serbian friends are vaguely aware of this problem, but they often stress that they “have to worry about paying the bills and putting food on the table” and that they “have no time for changing the world.”
The end result of such a constellation of costs and benefits is that crony relationships are quite resistant to change. Once established, it takes a long time, and usually a catastrophic event or series of scandals, for the general population to do something about it. This is why obvious, staggering examples of cronyism are valuable for reminding us about the nature of the economic system in which we live.
One of those staggering examples of crony capitalism is currently occurring in Serbia. There is strong evidence that the Ph.D. dissertation of the Serbian minister of internal affairs, Nebojša Stefanovic, is filled with plagiarized text, and that its scholarly contribution is otherwise nil. The minister obtained his Ph.D. at the privately-owned Megatrend University in Belgrade in only two years. He also obtained his undergraduate and master’s degrees from the same university while at the same time being a high profile politician in the party of the current prime minister, Aleksandar Vucic. Stefanivic’s dissertation has been examined by economists from the London School of Economics, the European Business School in Wiesbaden, and the University of Belgrade, and all the assessments conclude that it is rife with plagiarism.
In the meantime, another, perhaps even more staggering case of academic dishonesty was discovered at Megatrend. A group of scholars found that Megatrend University owner and dean Mica Jovanovic’s claim that he earned his Ph.D. at the London School of Economics, was false. The administration of the London School of Economics confirmed that Jovanovic never attended LSE.
In these conditions, one would expect some sort of a mitigation strategy by the political authorities, like moving the incriminated minister onto a different, less prominent position. However this has not happen. Serbian prime minister Aleksander Vucic defended Stefanovic from the day the first evidence of plagiarism came out. In a press conference, he even called the analysis by the LSE economists “the stupidest explanation” he has ever seen. He even publicly claimed that the minister of education agreed with his assessment of the LSE scholars’ analysis.
As most media outlets’ funding directly or indirectly depends on approval by state officials through crony relationships with their owners and sponsors, formal media are reluctant to publish anything that might anger the state officials. The public outcry about these developments has been expressed mostly through the blogosphere. The public’s frustration mounted as there was no action on the part of the government. Eventually, the government curbed some of that outcry by recommending that the dean of Megatrend University resign from that function, which he did soon after. But, in his resignation speech to the faculty and staff of Megatrend, he said there is no need for worry and happily exclaimed that “we have strong support from the prime minister.” Minister Stefanovic is still in his position and rejects all accusations of plagiarism.
However repulsive or shocking the actions of the people involved in this case might seem, they are perfectly explainable. Minister Stefanovic is a young, aspiring politician, but he was missing some academic prestige to cement his rising political trajectory. He is also the kind of person the Serbian prime minister obviously likes and wants to have as part of his government. But, as Stefanovic may not have the academic commitment necessary for satisfying the basic standards of academic integrity, it may be beneficial for his boss, Vucic, to persuade Megatrend’s examiners to lower their standards in this case. This persuasion does not even have to be direct. It is enough for the examiners to know that, as their dean had said, “they have the full support” of the prime minister. As this support may weaken if they fail his favorite party member, the incentives for lowering the standards of academic integrity are set in place. The only thing left is to start the well-oiled clockwork of crony capitalism.
Discovering Stefanovic was the first glitch in the functioning of this clockwork. This glitch opens the question of how many times academic standards in Serbian higher education have been lowered in the past. Just how many fake doctors are there in the political and economic establishment of Serbia?
To the uninitiated, this may sound like a story straight out of a Saturday Night Live or a Monty Python sketch. But, it is painfully real. We should use its lesson to underscore the basics of cronyism present in almost all spheres of political and economic activity in all countries. We often gradually get used to politicians using the force of the state apparatus to help their buddies and we stop noticing. But the fact that we get used to it does not make this social arrangement any less dangerous. It only takes us further in the direction of living in a Saturday Night Live or a Monty Python reality.
