Crony capitalism is destroying the foundation of the free-market system in the United States. That was the message economist Luigi Zingales brought to students at N.C. State University yesterday when delivering the 2013 John W. Pope lecture.
Zingales, the Robert C. McCormack Professor of Entrepreneurship and Finance at the Booth School of Business at the University of Chicago, highlighted the core arguments in his new book, A Capitalism for the People: Recapturing the Lost Genius of American Prosperity.
The native of Italy said that American capitalism has benefited from the belief among the American people that wealth inequality is acceptable provided there is room for upward mobility. That core traditional American belief has eroded in recent years; many now see the government as working against the best interests of the people.
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The end of entrepreneurship as we know it happens when the key aim of business isn’t to satisfy customers and make a profit but to curry favors from the government, Zingales said. A major pursuit of business nowadays is figuring out how to suck money out of Washington.
He said that anxiety over the perception of a rigged system has taken two different forms recently — the Tea Party movement that opposes big government and the Occupy Wall Street movement that opposes big business. They have more common elements than one might at first think.
They are fighting, to some extent, two sides of the same problem. They are fighting two faces of the same leviathan. The problem is not government, and the problem is definitely not business. The problem is a dangerous intermingling between business and government. Both sides look only at one side of the picture and they don’t get the complete picture. The big picture is that the intermingling between the two sides is corrupting the system, making the system less fair, less productive, and leading to a deterioration of public support for the system.
Zingales’ solution is to adopt a pro-market populism position.
“The goal should not be to kill the free-market system, but to kill the crony component of the free-market system,” he said. “We can try to capture that populist outrage, not against the free-market system, but against the degeneration of the free-market system — against the excessive lobbying, against the corruption that is in Washington.”
Video courtesy of the John Locke Foundation.