Saving Capitalism from the Capitalists: How Open Financial Markets Challenge the Establishment and Spread Prosperity to Rich and Poor AlikeCapitalism’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. •Vibrant financial markets threaten the sclerotic corporate establishment and increase corporate mobility and opportunity. They are the reason why entrepreneurship flourishes and companies like The Home Depot and Wal-Mart—mere fly specks a quarter of a century ago—have surged as they have. •They mean personal freedom and economic development for more people. Throughout history, and in most of the world today, the record is one of financial oppression. Elites restrict access to capital and severely limit not only general economic development but that of individuals as well. •Open borders help check the political and economic elites and preserve competitive markets. The greatest danger of the antiglobalization movement is that it will keep the rich rich and the poor poor. Globalization forces countries to do what is necessary to make their economies productive, not what is best for incumbent elites. Open borders limit the ability of domestic politics to close down competition and to retard financial and economic growth. •Markets are especially susceptible in economic downturns when the establishment can exploit public anger to restrict competition and access to capital. While markets must be free to practice “creative destruction,” Rajan and Zingales demonstrate the political and economic importance of a sustainable distribution of wealth and a baseline safety net. Capitalism needs a heart for its own good! There are no iron laws of economics that condemn countries like Bangladesh to perpetual poverty or the United States to perpetual prosperity. The early years of the twentieth century saw vibrant, open financial markets that were creating widespread prosperity. Then came the “Great Reversal” during the Great Depression. It can—and will—happen again, unless there is greater understanding of what markets do, who benefits, and who really wants to either limit them or shut them down. Saving Capitalism from the Capitalists breaks free of traditional ideological arguments of the right and left and points to a new way of understanding and spreading the extraordinary wealth-generating capabilities of capitalism. |
From inside the book
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... investors, and bankrupt firms—see no legitimacy in a system in which they have been proved losers. They want relief, and since the markets offer them none, they will try the route of politics. The unlikely alliance of the incumbent ...
... investors, and bankrupt firms—see no legitimacy in a system in which they have been proved losers. They want relief, and since the markets offer them none, they will try the route of politics. The unlikely alliance of the incumbent ...
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... investors (most of them the original investors in the search fund). In fact, the prospects they offered the individual investors were so attractive, they were able to raise the money they sought in just twentyfour hours! Under Kevin and ...
... investors (most of them the original investors in the search fund). In fact, the prospects they offered the individual investors were so attractive, they were able to raise the money they sought in just twentyfour hours! Under Kevin and ...
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... investors are clearly demarcated by contract, not just when the fund is set up but going forward. The legal system works so contracts can be enforced at low cost. Secure in their shares, the parties do not have incentives to deceive or ...
... investors are clearly demarcated by contract, not just when the fund is set up but going forward. The legal system works so contracts can be enforced at low cost. Secure in their shares, the parties do not have incentives to deceive or ...
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... investors who lose their entire life savings, the smallbusiness owners and farmers who are overburdened with debt taken to finance investment in rosier times . . . The distressed, staring at destitution, will have a strong incentive to ...
... investors who lose their entire life savings, the smallbusiness owners and farmers who are overburdened with debt taken to finance investment in rosier times . . . The distressed, staring at destitution, will have a strong incentive to ...
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... investors or allocating it to those investors who can best bear it. Because financiers in an underdeveloped financial system do not have the ability to distribute risk appropriately, the risk premium their investors demand is high, and ...
... investors or allocating it to those investors who can best bear it. Because financiers in an underdeveloped financial system do not have the ability to distribute risk appropriately, the risk premium their investors demand is high, and ...
Contents
Shylock Transformed | |
The Financial Revolution and Individual Economic Freedom | |
The Dark Side of Finance | |
The Bottom Line on Financial Development | |
The Taming of the Government | |
THE GREAT REVERSAL | |
HOW CAN MARKETS BE MADE MORE VlABLE | |
Saving Capitalism from the Capitalists | |
About the Authors | |
Other editions - View all
Saving Capitalism from the Capitalists: Unleashing the Power of Financial ... Raghuram Rajan,Luigi Zingales No preview available - 2003 |
Common terms and phrases
3Com access to finance arbitrage arm’s-length assets banking system become benefits better bonds borders borrower Cambridge capital flows collateral companies competition corporate cost country’s create debt deregulation developed countries domestic economists efficient emerged employees Enron entry equity market example financial development Financial Economics financial markets financial sector financial system firm’s firms force foreign France free markets Glass-Steagall Act growth important incentive increase incumbents industry infrastructure innovation interest investment investors Journal of Economics Journal of Finance junk bonds land limited loans Luigi Zingales Mediobanca million NBER owners ownership paper percent policies political politicians production profits property rights protect Rajan relationship system restrictions Return to text risk search fund shareholders shares steel stock market stock prices trade underdeveloped United University Press vertically integrated workers York Zingales