The Poole College of Management hosted Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago Booth School of Business, Wednesday night.
Zingales gave a lecture on how the innovations produced from the capitalist system benefit society and how perversions of that system led to widespread ramifications. The lecture was funded by the John W. Pope Foundation as part of the John W. Pope Lecture Series.
After receiving his doctorate from the Massachusetts Institute of Technology, Zingales became a prolific author in the field of economics and finance, having recently written A Capitalism for the People: Recapturing the Lost Genius of American Prosperity. The subjects of his works range from the minute details of economics to the broad societal implications of government intervention in the free market.
In his lecture, Zingles praised American exceptionalism and individual liberty as the driving forces behind raising the standard of living in the United States as what “made the American Dream a reality.” He described how the free market system in the United States led to success unparalleled by the rest of the world following the second World War.
Given these achievements, Zingales was disconcerted by the economic system in the United States becoming more similar to that of his native Italy. According to Zingales, government subsidization and intervention in the private sector has amounted to crony capitalism. The Italian government’s involvement in business caused a fundamental distrust of governmental authority, as well as economic stagnation apart from areas where the government became directly involved.
The intermingling of government and business caused Italy to be uncompetitive in the global market, and ill-equipped to foster the entrepreneurship that benefits its citizens.
Zingales said Americans in recent times have fostered a “dangerous intermingling between government and business” in addressing the problem of economic inequality, akin to what he believes negatively affected economic prosperity in Italy.Zingales said he worries that this sort of intervention in the U.S. could be the “end of entrepreneurship as we know it.”
Zingales expressed that he is certainly not in favor of a market entirely lacking government intervention and regulation. On this point he said, “Without rules, the free market system may become who can cheat the best,” as opposed to who can create the best products. According to Zingales, the Tea Party right and progressive far left are attacking two aspects of the same problem.
What Zingales finds particularly consequential is the extent to which lobbying on the part of powerful businesses can become a more lucrative investment than spending money on improving its products. “It used to be business lobbying to get the government off your back, now it’s lobbying to get the government in your pocket,” Zingales said.
Zingales clarified the distinction between the pro-market agenda and the pro-businesses agenda, the first of which is in the best interest of the consumers.
The pro-market agenda favors few barriers to entry and free markets as the breeding grounds for success and innovation. The pro-businesses agenda supports these ideals when businesses are on the rise, but move on to suppress them once they become powerful.
The less competition a business has once it has established itself, the higher its profit margins become, as nobody can potentially step in and offer what they offer for a cheaper price. This difference, Zingales argues, is imperative to understand when analyzing government policies concerning lobbying and the economy.
Organizers taped the presentation, which is available online at Carolinajournal.tv.