A strong press is best defence against crony capitalism
In the past decade economists have shown a growing interest in the media. Most of their attention has focused on the role the media play in limiting government corruption or in shaping electoral outcomes. Little attention has been dedicated to its influence on the type of capitalism prevailing in a country.
While nowadays almost all the world professes itself to be capitalist, not everybody experiences the same type of capitalism. In fact, the form of capitalism prevailing in most of the world is very distant from the ideal competitive and meritocratic system we economists theorise in our analyses and most of us aspire to. It is a corrupt form, in which incumbents and special-interest groups shape the rules of the game to their advantage, at the expense of everybody else: it is crony capitalism.
The reason why a competitive capitalism is so difficult to achieve is that it requires an impartial arbiter to set the rules and enforce them. Markets work well only when the rules of the game are specified beforehand and are designed to level the playing field. But who has the incentives to design the rules in such an impartial way?
While everybody benefits from a competitive market system, nobody benefits enough to spend resources to lobby for it. Business has very powerful lobbies; competitive markets do not. The diffused constituency that is in favour of competitive markets has few incentives to mobilise in its defence.
In the past decade economists have shown a growing interest in the media. Most of their attention has focused on the role the media play in limiting government corruption or in shaping electoral outcomes. Little attention has been dedicated to its influence on the type of capitalism prevailing in a country.
While nowadays almost all the world professes itself to be capitalist, not everybody experiences the same type of capitalism. In fact, the form of capitalism prevailing in most of the world is very distant from the ideal competitive and meritocratic system we economists theorise in our analyses and most of us aspire to. It is a corrupt form, in which incumbents and special-interest groups shape the rules of the game to their advantage, at the expense of everybody else: it is crony capitalism.
The reason why a competitive capitalism is so difficult to achieve is that it requires an impartial arbiter to set the rules and enforce them. Markets work well only when the rules of the game are specified beforehand and are designed to level the playing field. But who has the incentives to design the rules in such an impartial way?
While everybody benefits from a competitive market system, nobody benefits enough to spend resources to lobby for it. Business has very powerful lobbies; competitive markets do not. The diffused constituency that is in favour of competitive markets has few incentives to mobilise in its defence.