ECONOMY - POLITICS

Capitalism for the people?

On and off Wall Street, Luigi Zingales argues, crony capitalism is displacing fair and free competition.

What to do about it? A chaired professor at the University of Chicago’s Booth School of Business, Mr. Zingales is out to rebuild the American meritocracy. He wants to shame Washington lobbyists, to empower the American health-care consumer and to make corporate directors truly accountable to shareholders. As for business schools, “they should stand up for what they think is the individual responsibility of a good capitalist.”He wrote a helpful guide to the story of how the U.S. government’s bailouts of Wall Street firms triggered populist resistance on both the left and the right of the U.S. political spectrum.

He believes that regulatory capture – when business interests and lobbyists exercise undue influence over the bureaucracies and legal structures meant to oversee them – is creating the kind of crony capitalism that sparked major populist surges in earlier eras of U.S. history. With a worried glance at Latin America, where anti-market populist leaders have led a number of countries into deep economic and polticical trouble, Zingales argues that pro-market populism can help fuel economic recovery in the United States and calls for policies that would foster a sense of fairness and bolster public support for capitalism and free markets.

In A Capitalism for the People, Zingales writes that he wants to rescue markets and competition from the twin forces that threaten them: over-regulation on the political left and, on the right, a pro-business (as opposed to pro-market) ideology. He sees crony capitalism as the great threat to the US economy. He suggests channeling populist anger, reversing the shift toward a crony system, reducing the opportunities for rent seeking, and increasing the opportunities for fair competition. Some of the other reforms he advocates are greater transparency of economic data as well as restrictions on lobbying.

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