Saving Private Enterprise


Former Reason Editor Virginia Postrel has an excellent NY Times col on the fascinating recent book Saving Capitalism From the Capitalists, by Raghuram G. Rajan and Luigi Zingales. Writes Postrel:

Professors Rajan and Zingales argue that financial markets make the biggest difference between open, market capitalism and closed, relationship capitalism. Free financial markets allow outsiders with good ideas to raise funds, even when their businesses will compete with insiders.

"Free financial markets are the elixir that fuels the process of creative destruction, continuously rejuvenating the capitalist system," they write. "As such, they are also the primary target of the powerful interests that fear change."

The book, which I've read, has some rotten policy prescriptions at the end but provides a great history of the rise of property rights–and the curious way in which, in England anyway, the definition of those rights followed the massive expropriation of church lands under Henry VIII. From Amazon's description:

Capitalism?s biggest problem is the executive in pinstripes who extols the virtues of competitive markets with every breath while attempting to extinguish them with every action.

Saving Capitalism from the Capitalists is a groundbreaking book that will radically change our understanding of the capitalist system, particularly the role of financial markets. They are the catalyst for inspiring human ingenuity and spreading prosperity. The perception of many, especially in the wake of never-ending corporate scandals, is that financial markets are parasitic institutions that feed off the blood, sweat, and tears of the rest of us. The reality is far different.