Is capitalism the engine of destruction or the engine of prosperity? On this podcast we talk about the ways capitalism is—or more often isn’t—working in our wor...
America’s Addiction to Easy Money, with Ruchir Sharma
Are bailouts the new “trickle-down” economics? Have government debt and deficits caused capitalism’s collapse—thus ending the American Dream?Ruchir Sharma is a well-known columnist for the Financial Times, the author of bestselling books Breakout Nations and The Rise and Fall of Nations, and an investment banker who worked as Morgan Stanley’s head of emerging markets for 25 years. His new book, What Went Wrong With Capitalism, traces the roots of current disaffection with our capitalist economy to unabashed stimulus and too much government intervention. Take an example: Sharma writes that the United States federal government has introduced 3,000 new regulations in the last twenty years, and withdrawn just 20 over the same span. He likens the Federal Reserve’s constant bailouts—under chairs appointed by presidents from both parties—to the opioid crisis, in which the solution created more problems than the pain it was designed to treat.Sharma joins Bethany and Luigi to explain how constant government intervention leads to inefficient “zombie” firms, higher property prices, housing shortages, massive inequality, and a historic government debt and deficit crisis. Together, they discuss the first step to a cure—a correct diagnosis of the problem—and how to approach the treatment without exacerbating the problems. In the process, they leave us with a renewed understanding of how “pro-business is not the same as pro-capitalism,” a distinction that Sharma says “continues to elude us.”Episode Notes:Link to submit papers for the Stigler Center 2025 Antitrust ConferenceRevisit “Is the Federal Reserve an Engine of Inequality?”, our previous episode on modern monetary theory or the claim that debt doesn’t matter.Revisit “Capitalism After the Crisis,” Luigi’s article for Foreign Affairs (2009), where he outlines the tensions between a pro-capitalism and a pro-business agenda. Also, check out ProMarket.org, our publication at the Stigler Center that he founded in 2016, with the mission of shedding light on this tension and how to ameliorate it.
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49:08
The Argentinian DOGE
A new U.S. Department of Government Efficiency (DOGE) is headed by Elon Musk and Vivek Ramaswamy. Its goals include administrative reductions, cost savings, regulatory cutbacks, and reducing federal spending by nearly $2 trillion. President-elect Donald Trump has called DOGE the "Manhattan Project of our time," and has indicated that DOGE will reduce regulatory burdens to firms and individuals. But is the act of cutting rules and regulations the same as cutting spending? Does it unleash the economy in a way that benefits everyone or just a select few who don't want the rules in the first place?Right now, it’s impossible to know what DOGE will be able to accomplish, but there is another remarkably similar example we can learn from. Argentinian President Javier Milei took office a year ago with a promise to “take a chainsaw to the state.” As part of that promise, he appointed economist Federico Sturzenegger – a former classmate of Luigi's at MIT – as the Minister of Deregulation and State Transformation of the Argentine Republic. Within a year, Sturzenegger has overseen the review of approximately 42,000 laws, and as confirmed by Milei, is in "direct contact" with Musk.Bethany and Luigi talk to Sturzenegger to understand, most importantly, what Argentina's experience might foretell about DOGE's upcoming role and impact on the United States government and economy.
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47:57
The Fertility Crisis: Capitalism's Next Challenge, with Sir Niall Ferguson
For years, the world worried about overpopulation and our capacity to sustain ever-increasing numbers of people. Now, the worry is underpopulation—and recent numbers are stunning. Fertility rate is the average number of children that are born to a woman over her lifetime. According to the United Nations, this number is currently 1.64 in the U.S.: If it stays this way, in three generations there will only be half as many young Americans as there are today, holding immigration constant. In China, this number is even lower: one child per woman. Just eight countries are expected to account for more than half the rise in global population between now and 2050.Economic theory is based on the idea of expansion, and humanity has been expanding since 1500. If that is about to change, then the very foundation of our economic theory will need rethinking.Acclaimed author, historian, and filmmaker Sir Niall Ferguson (Stanford/Harvard) joins Bethany and Luigi to discuss why we're heading toward a global population decline and what it all means for civilization. They discuss how factors like climate change, immigration, reproductive rights, artificial intelligence, and the trade-offs women face between career and motherhood are influencing decisions to have children. What are the implications of falling birth rates not just for the market economy but also for geopolitics and intergenerational conflict? Can we reverse trends in fertility before it is too late?
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45:59
Visa's Hidden Tax on Americans
While Americans rely on debit transactions for the necessities of life, most are unaware of the networks that drive those transactions, nor are they aware that one company, Visa, has monopolized debit transactions, penalized industry participants that seek to use alternative debit networks, and co-opted innovators, technology companies, and financial institutions to forestall or snuff out threats to Visa's debit network dominance.” So begins the monopolization lawsuit filed on September 24 by the United States Department of Justice (DOJ) against the country’s largest card company, Visa Inc.On one level, the case is simple: The DOJ alleges a clear violation of laws protecting markets against monopolies. But the case gets more complicated when looking at the details, in part because payment systems are mostly invisible part of the financial ecosystem. In effect, the DOJ alleges that Visa is pulling the levers of a really opaque and complex system to preclude competition and squeeze fees out of banks and vendors for itself.To understand the complexities and implications of the case, Bethany and Luigi are joined by Kathryn Judge, Harvey J. Goldschmid Professor of Law at Columbia University. Judge is an expert on banking, financial crises, regulatory architecture, and intermediation design beyond finance. Her book, Direct: The Rise of the Middleman Economy and the Power of Going to the Source (HarperBusiness, 2022), was on the long list for the Financial Times Business Book of the Year Award. Together, the three of them discuss both the surface-level and structural issues of an economy where consumers and small businesses are shortchanged on what is essentially a private sales tax on all debit-card purchases—and how to look for collective solutions when opt-outs aren’t possible.Episode Notes: Also check out the ProMarket article “A DOJ Victory Against Visa May Not Help Merchants or Consumers” by Lulu Wang, Assistant Professor of Finance at Northwestern University’s Kellogg School of Management.
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47:01
How Lobbying Led to Crony Capitalism, with Brody Mullins
As the United States elections draw near, everyone is wondering who will take control of Washington next. In this week’s Capitalisn’t episode, Pulitzer Prize-winning reporter Brody Mullins reveals how the real winner will be neither Democrats nor Republicans. Rather, it will be the lobbyists.Mullins is the co-author (along with his brother Luke, also an investigative reporter) of The Wolves of K Street: The Secret History of How Big Money Took Over Big Government. Brody joins Bethany and Luigi to discuss how corporations ranging from Genentech to Google participate in the invisible but massively influential lobbying industry to bend government policy toward their favor. Together, the three trace the roots and evolution of political lobbying from the 1970s to now and explore how it penetrates and leverages other spheres of society to abet its operations. How are academia and the media complicit in this ecosystem of influence operations? How has lobbying adapted to the changing attitudes of Americans towards Big Business? How might it change under either a Harris or Trump administration and beyond?Episode Notes: Luigi mentions the transformational work of one figure in American politics who fought back against lobbyists’ substantial influence: consumer advocate Ralph Nader. Revisit our prior conversation and episode with Mr. Nader.
Is capitalism the engine of destruction or the engine of prosperity? On this podcast we talk about the ways capitalism is—or more often isn’t—working in our world today. Hosted by Vanity Fair contributing editor, Bethany McLean and world renowned economics professor Luigi Zingales, we explain how capitalism can go wrong, and what we can do to fix it.
Cover photo attributions: https://www.chicagobooth.edu/research/stigler/about/capitalisnt.
If you would like to send us feedback, suggestions for guests we should bring on, or connect with Bethany and Luigi, please email: contact at capitalisnt dot com. If you like our show, we'd greatly appreciate you giving us a rating or a review. It helps other listeners find us too.
Österreich