A Capitalism for the People: Recapturing the Lost genius of American Prosperity
Basic Book, 2012
$27.95; 336 pages
A capturing title for the election season to say the least. The relevance of the subject matter could not be more apropos to the times we live in. Luis Zingales lays out the glaring defects that have come to corrode our current economic system in a very easy to understand picture. The “ease of understanding” is of itself a flashing red warning light for the public, or should be. The author catches the reader’s attention from the first sentence — “Americans are angry” — and then proceeds to deliver a well-researched treatise on the “crony capitalism” that is running America, using precise examples to illustrate how it has come to this stage of effrontery. At times you can feel his passion come through his writing, this possibly because of the fact that he came to us from Italy in 1988 and experienced the debilitating effects of crony capitalism on the economy first hand.
Upon arriving in America Mr. Zingales studied at MIT where he obtained his Ph.D in Economics. He now holds the Robert C. McCormack Professor of entrepreneurship and Finance and the David G. Booth Faculty fellow at the University of Chicago’s graduate school of business. With his pedigree I assumed he knew the subject matter extremely well and after reading his book I am convinced.
As he illustrates the issues in the American evolution of capitalism, he uses references to Italy’s “crony capitalistic system” and the dangers America faces as it slides toward this indubitably warped version of Adam Smith’s competitive free market system. He defines crony capitalism as an approaching form of socialism. When a corporation becomes powerful enough to inhibit entry to the field and influence politicians to pass legislation to advance its desires then you have a system that is inherently noncompetitive. That pretty much destroys the idea of capitalism.
He is a huge backer of the capitalistic system as a free market economy but adamantly against the cronyism we are witnessing at the top tier. Time and time again throughout the book he unveils stunning examples that are hiding in plain sight. He emphasizes how undue influence between the top tiers of our corporate and political spectrums is ruining the American Capitalistic system. Stressing accountability as a key element to a successful system, he uses examples that shock the reader. I must say I found at times he argues some points so well that it is hard to discern his leanings, but I find that to be an exemplary trait. He does not force feed the reader but lays out the facts and lets the reader come to his own conclusions.
In the second half of the book Mr. Zingales proceeds to propose solutions to these issues and offers them up for debate. I believe he is looking to spark a debate on the subject matter emphasizing the urgency to resolve these issues before the tipping point. I myself will not condone them as proposed, as I have not the expertise on the subject, but applaud the desire to educate the reader enough to spur debate of the plausibility of action.
The author does a great job of pointing out that Capitalism is constantly evolving, as is Democracy, as it grows. The interaction is what makes this country great and the need for some form of regulation overseeing the process is necessary for the system to function beneficently for the people. Self-regulation in the form of social norms is inherently flawed, it goes back to Sir Thomas More’s Utopia “the world as it should be and the world as it is.” Mr. Greenspan himself admitted the error of letting the market take care of regulation for self-preservation.
Recommended reading for those interested in the evolving nature of our interconnected system of government and the economy. Fair warning, some examples used are not for the squeamish when it comes to the audacity of some of our so called leaders.
John Siewers III has been a commodity broker for more than 20 years with 15 years experience on the Chicago trading floors.