When deficit hawks compare the United States to the ailing economies of Europe, they're often making a point about America's unsustainable debt and social welfare spending. But Luigi Zingales, an influential business professor at the University of Chicago, likens the United States to his native Italy for a different reason: They're both reeling from crony capitalism. Runaway debt and ballooning entitlements, he argues, are merely symptoms of a debilitating disease: widespread collusion between politicians and big business. Zingales left Italy for the States in 1988 to escape a country that "invented the term nepotism and perfected the concept of cronyism," only to find the phenomenon spreading like a virus in his adopted home.
In his new book, A Capitalism for the People, Zingales contends that the Republican Party abandoned its pro-market principles under George W. Bush and instead became pro-big business, courting companies with tariffs and tax breaks rather than building a competitive marketplace. Now he's pleading with Republican leaders to return to their conservative roots by busting monopolies, refusing to bail out banks, eliminating de facto corporate subsidies in the tax code, and imposing a tax on lobbying. "We need to stand up and criticize business when business is not helping the cause of free markets," he declares.
It's a resonant message at a fraught moment for American-style capitalism. In the wake of the global recession, faith in the free market has plunged in countries such as Italy and Spain and declined in the United States, albeit less sharply. Nearly 40 percent of Americans believe their country has a system of crony capitalism, while seven in 10 think government and big business are working together against them. In that sense, his ringing denunciation is the Capitalism and Freedom of our time. As economist Tyler Cowen put it, "If I had to pick out one book … to explain what is going on right now to a popular audience of non-economists, this might well be it."
Reading list: Bailout, by Neil Barofsky; So Damn Much Money: The Triumph of Lobbying and the Corrosion of American Government, by Robert Kaiser; Republic, Lost, by Lawrence Lessig. Best idea: Debt restructuring for Greece. Worst idea: Another stimulus plan for America. American decline or American renewal? Hoping a renewal, fearing a decline. More Europe or less? More reformed Europe. To tweet or not to tweet? With moderation.
Among the largest companies in the European Union, women held just 10.3 percent of corporate board seats five years ago. This year, that figure is all of 13.7 percent. "Sorry," Viviane Reding, the European Commission's top justice official, told Der Spiegel, "that's just too slow for me."
Her solution? Reding this year pushed an ambitious, if improbable, EU law to create mandatory quotas for women in the boardroom across the member states of the world's biggest economic union. The proposal called for large companies to give at least 40 percent of their supervisory board positions to women by 2018. (In the United States, women filled a grand total of 16 percent of board seats at Fortune 500 companies in 2011.)
A native of Luxembourg and ex-journalist, Reding insists that giving women greater decision-making powers is not only a matter of fairness but also would be a boon for the economy. Having women on corporate boards corresponds to higher profits, she argues, and a standardized policy would make intra-European business easier. Unsurprisingly, she faces entrenched opposition. The law was shot down amid legal concerns in October, though Reding vowed to put forward a modified version. She is keeping at it if only because her proposal is the one serious idea on the table for addressing a gender imbalance that is consequential enough to impact Europe's economic performance -- and its values. "I hope that I'll live to see the day when we have a society in which it isn't important whether you're a man or a woman," she sighs.