I think why nepotism gets a bad rap is because of favoritism. I touched on this in my Nepotism Logic entry. Favoritism happens when someone in power favors some subordinate. This is not right, but it is human nature. It could be that the employee reminds the employer of herself someway. Because of this the employer starts to show favoritism. Or the employer finds out that the employee shares similar beliefs or belongs to the same social group as the employer. Then again maybe the employee is good at "brown nosing"-- ie kissing the boss' behind. All of the reasons for favoritism above do not necessary depend on the employee being someone the employer knows already. It could be the employee left a good first impression on the employer during the interview.
Favoritism does not necessary have to happen in the private sector alone. Government probably has favoritism in it too. The president usually hires staff he knows and trusts usually from the same political party. When a new president comes from a different party the staff is let go (although probably they would not want to work with the new president). The same goes for Congress and the House. They hire people they know.
Classrooms can have favoritism too. Ever heard of the "teacher's pet?" A teacher might call on a certain student all the time to answer classroom questions. Either because he raises his hand all the time more than the other students or just because he appears to be smarter than the rest of the class to the teacher. Or it could be because the teacher likes the student more for whatever reason.
Even families have favoritism in them. A parent could have a child because the child has a similar personality as the parent or they share similar likes and dislikes. Then the other siblings start to resent that child.
I could continue with other examples but you get the point. All social groups have some sort favoritism. I kind of got sidetracked from talking about nepotism to favoritism but the two are linked. You cannot understand nepotism without understanding favoritism first.
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