by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The latest Commentary magazine (not yet posted online) includes William Voegeli‘s review of University of Chicago economist Luigi Zingales‘ latest book, A Capitalism for the People.
In that book, Voegeli tells us, Zingales laments that the American economy seems to be losing the characteristics that helped attract him here from his home country of Italy, “after he became disgusted with the necessity to curry favor and secure patrons to establish a career.”
Zingales dreads a future in which America is no longer exceptional in this crucial regard, but he sees unnerving evidence that we are coming to resemble the morally shabby and economically inefficient countries where capitalism is a racket, not a system. He discusses how Archer Daniels Midland, for example, turns “investments” in the form of political contributions into ethanol and sugar-cane profits, which depend on government subsidies and tariffs. The rot works through the economy as entrepreneurs in smaller firms, observing how fortunes really get made, tend to their political needs before their business ones: “When the primary concern of a startup is to devise a strategy to milk money from taxpayers — indeed, when a new company refines its lobbying strategy even before it defines its market strategy — it means that crony capitalism has corrupted American society.”
A Capitalism for the People offers a diagnosis and a remedy for America’s acquired susceptibility to cronyism. The diagnosis is that by blurring the distinction between a “pro-market system and a pro-business one,” we are vitiating the qualities that make capitalism both admirable and productive. The shift from supporting markets to being in favor of business puts America on a slippery slope. As we descend it, the profit motive deteriorates into a by-any-means necessary ethos. Practices that are good for business (or at least certain businesses), such as seeking government subsidies or guarantees, are bad for capitalism.