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The Spectacle Blog
The Chicago economist Luigi Zingales has written an article on pro-market populism that is timely in light of yesterday’s announcement regarding the administration’s plans for re-regulation. It’s well-worth reading. He talks about the difference between being pro-business and pro-market, and explains why the GOP should be the latter but that unfortunately it’s been the former recently. One key line:
A pro-market party will fight tirelessly against letting firms become so big that they cannot be allowed to fail, since such firms may take risks that ordinary companies would never dream of.
Notice that this line is an explicitly anti-big business line. Zingales is suggesting the kind of reform that is necessary to prevent highly connected firms from ripping of the taxpayers. It’s a reform that Republicans would need some convincing to appreciate, but one that liberals and Democrats should be naturally inclined to like. Unfortunately, it doesn’t at all resemble the reforms that Obama and Barney Frank want.
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More Blog Posts by Joseph Lawler
http://spectator.org/blog/2009/10/28/zingales-on-pro-market-populis
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Ryan Evans| 10.28.09 @ 11:11PM
Great link. Zingales really makes an important point. Too bad most readers of AmSpec just want to whine about RINOs ...
S.L. Toddard| 10.29.09 @ 7:56AM
"A pro-market party will fight tirelessly against letting firms become so big that they cannot be allowed to fail, since such firms may take risks that ordinary companies would never dream of."
Hear, hear! This is a lesson conservatives need to learn. As I've said before: if an institution is "too big to fail", it is TOO BIG TO EXIST in the free market. Any institution "too big to fail" already by definition exists *outside* the free market, as it can not face the penalties the free market imposes upon it when it does fail, and is immune to the incentives to operate responsibly inherent in a "free market". To repeat: any system with institutions that are "too big to fail" is by definition NOT a "free market".
We must either allow institutions that are "too big to fail" to fail, or ensure that no institutions become "too big to fail".
I think conservatives make a mistake when they focus on Big Government while ignoring Big Business entirely, because they are often one and the same entity - Big Business *owns* big government. Tim Geithner and his cronies/aids all made zillions working in the financial industry, and are now enthroned in Washington, supervising the transfer of hundreds of billions of dollars *to their former (and probably future) employers*. This scenario is more the rule than the exception.
We need to stop thinking of our government and our mega-corporations as separate, antagonistic entities. It is commonplace for agents of our largest corporations write the very legislation intended to "regulate" them, thus perpetuating the rapid centralization of wealth and power in this country from the American people to a small cabal of well-connected political/corporate/financial elites.
The line between the public and private sectors has been blurred to the point of nonexistence, and is the direct cause of the "too big to fail" mentality.