Sunday, April 15, 2012

Nostalgia for the land of opportunity

by John Plender

Financial Times

April 15, 2012

Luigi Zingales, a noted economist at the University of Chicago’s Graduate School of Business, knows a thing or two about crony capitalism. The reason he emigrated to the US from his native Italy in 1988 was because he had had enough of living in a country where promotion was based on who you knew, not what you knew. Competition there was suppressed, corruption rife and clientelism rampant. Even emergency-room doctors in Italy were promoted on the basis of political affiliation instead of ability, he says, in a new book to be published shortly.

In the US he found a country that had built a system of capitalism that was the pre-eminent exemplar of the free-market ideal of economic liberty and open competition. He thrived on this meritocratic ethos. Yet now he is beginning to have his doubts, detecting hints in America of the kind of crony capitalism that afflicted Italy in the years of economic stagnation and corruption under Silvio Berlusconi.

A clear case in point is the extent to which the legislative process has become hostage to the lobbyists, while politicians increasingly depend for campaign finance on big business. The land of opportunity is thus turning into a land of rent seekers in which business has acquired excessive power and regulators have been captured by those they regulate.