A Capitalism for the People: Recapturing the Lost Genius of American Prosperity
- Introduction
The book A Capitalism for the People is written by Luigi Zingales who is an American economist and currently based in University of Chicago as a professor of finance and entrepreneurship. Born in Italy, 1963, Zingales moved to United States in 1988 with an assertive passion that the economy of a country should not only benefit the big businesses rather it should be focused on the good of an overall market.
‘Capitalism for the People’ is a philosophical, moral, ethical and a monetary account of the current state of US economy. It articulates the author’s conviction that a country’s economy should not only benefit the big business class rather it should be kept pro-market, ascertaining the level playing field for everyone in order to ensure open competition particularly for the good of market and as a result, for the good of people in general. Zingales, the author, has also compared the present US economic state with that of Italy’s economic state at the times of Berlusconi’s rule and has cautioned that it is considerably becoming a crony capitalistic system. In addition, Zingales considered that overregulation is also an insignificant support for the economy as it often results into reducing the prevailing fairness in the market. In one of his earlier book, "saving capitalism from the capitalists", similar thoughts have been expressed by the author (Zingales 15).
- Analysis
The book has highlighted a long-standing debate between the capitalists and the socialists on the system of capitalism. Each one of them blames the other for the reason of supporting the crony system of capitalism. The capitalists consider that this system arises from the aspiration of socialists to keep their control on the State, which results in close ties between the governments and the businesses in order to seek greater achievement (Towers et. al., 11). In contrast, the socialists believe that the crony capitalism is rooted in the very definition of capitalism (Muller 31). They argue that in capitalism, the business and the government both are inevitable for each other as both of them want to stay in power and the only method is to create nexus between them in order to support each other. Nevertheless, Zingales argued that he initially adored the US capitalism for the reason of being fairer. His early enthusiasm of American capitalism after arriving there in 1988 is due to the reason that it was achievable to become rich not at the cost of the poor. He visualized this argument in the possibilities available for the rich people to increase their wealth that would benefit the poor people as well. However, gradually these sentiments are eroded due to the increasing inequality in the society and Zingales held capitalism accountable for this unfairness.
Zingales attributed this change to the obvious reason of vast expansion of the state by providing complex subsidies and regulations that lacked competitiveness and hence invited cronyism as a result. The legislative process is turning out to be hostage of the lobbyists and political campaigns are progressively more dependent on the finances of big corporate businesses. Consequently, when private sector is favored by the governments, it is often done by making policies which are ‘pro-business’ instead of pro-market. As a result, conditions are becoming favorable for one or few institutions instead of a broad support for all and effectively, only selected group of companies and corporations make profits while imposing expenses on the society.
Most of the corporate economies work on a principle of ‘winners take all’ that reduces the hope and trust and hence give the perception that the regulations are no longer applied equally to everyone (Schweickart 5). This feeling that the system is inflexible for the weaker business and flexible for the strong business corporations is increasingly gaining strength. Zingales compared the current circumstances with those of American populism in 20th century, by highlighting the current examples, that we are facing the same turbulent situation where most of the people are being squeezed and very few are growing richer. Big business and the lobbyists have joined their hands and they are influencing most of the policies and divvying up the power and resources among them. This requires a wakeup call to reform the economic policies that may be anti big business but largely are pro-market and in the interest of society. Moreover, government needs to promote entrepreneurship but it should not become entrepreneur itself. Currently the US economy, which was once considered as a land of opportunity, is turning into a land of those corporations, which are seeking rent while the other businesses have hold of the too much power, and regulators have been acquired by those they regulate. This consortium between the two is reducing the opportunities and withholding the power to the lobbyist to protect their interests.
Zingales argued that a suitable approach to address this issue and avert lobbying is to initiate a law removing subsides to corporation and in addition, by giving people a right to sue to recover the subsidies cost paid incorrectly. Zingales believed that anything that can be done well with subsidies could be done better with tax reforms that transform incentives. In that way, using the simplified polices, the secret favors and guarantees given to the stakes by the potential lobbyists would also be marginalized.
In most of the book, Zingales has identified the problems as well as their solutions. He articulated an imperative program that can help us to solve the current economic mess by reducing the opportunities and increasing the competition. According to him, governments need to take actions not only against corporate lawbreakers but also against those who are arguably taking legal passages such as borrowers and rent-seekers who run away from mortgages, but their actions are destructive to society. Moreover, he seeks a change in tax policies that these policies should be employed to the subsidies more relevant and their associated cost should be made transparent in order to avoid favoring particular individuals or business. For example, he proposed that the deduction on mortgages should be regarded as tax on renting and the benefits given for the ethanol production should be termed as tax on petrol. In addition, these polices should be simplified and replace the current complicated regulations which are applied to those areas that cost society such as the use of short-term debt by banks and the problem of pollution. He suggested only three regulatory agencies should be working instead of a large amount of bureaucratic institutions which are often competing with each other and hence confusing the prevailing situation. One of them would focus on protecting the consumer, other would lookout inflation and the third would focus on the banking sector to foresee and combat any forthcoming financial crises. However, Zingales proposal to open up competition even in the protected sectors of health care and education is controversial. Moreover, if not given protected treatment, taxing the charitable deductions would result in affecting the willingness of people to donate (Cater).
- Conclusion
It looks like Zingales identified a need of explicit and closer relationship between morality and capitalism. As said by him, without set of conventions even the concept of free market will not work well. He emphasized on the significance of trust, of moral and social behavior in the markets and in the economy. Although, not all ideas presented by Zingales are most appealing and agreeable, but this book will remains a thought provoking and philosophical account of American capitalism and of the problems, which will decide the future of US economy.
Works Cited
Zingales, Luigi. “A Capitalism for the People: Recapturing the Lost Genius of American Prosperity”. Basic Books (2012): 150.
Schweickart, David. “Is Sustainable Capitalism Possible?” Procedia Social and Behavioral Sciences 2.5 (2010): 6739–6752.
Towers, Petronas, and Kuala Lumpur. “The Rise of State Capitalism.” The Economist 402.8768 (2012): 11–12.
Muller, Jerry Z. “Capitalism and Inequality.” Foreign Affairs 92.2 (2012): 30–51. Print.
Carter, L. Stephen. "True Capitalists Are Pro-Market, Not Pro-Business" (2012). Web. 26 April 2012. www.bloomberg.com/news/2012-06-07/true-capitalists-are-pro-market-not-pro-business.html
