When government and business collude, it's called crony capitalism. Expect more of this from the financial reforms contemplated in
Free markets depend on truth telling. Prices must reflect the valuations of consumers; interest rates must be reliable guides to entrepreneurs allocating capital across time; and a firm's accounts must reflect the true value of the business. Rather than truth telling, we are becoming an economy of liars. The cause is straightforward: crony capitalism. […]
Distorted prices and interest rates no longer serve as accurate indicators of the relative importance of goods. Crony capitalism ensures the special access of protected firms and industries to capital. Businesses that stumble in the process of doing what is politically favored are bailed out. That leads to moral hazard and more bailouts in the future. And those losing money may be enabled to hide it by accounting chicanery.
If we want to restore our economic freedom and recover the wonderfully productive free market, we must restore truth-telling on markets. That means the end to price-distorting subsidies, which include artificially low interest rates. No one admits to preferring crony capitalism, but an expansive regulatory state undergirds it in practice.
Piling on more rules and statutes will not produce something different than it has in the past. Reliance on affirmative principles of truth-telling in accounting statements and a duty of care would be preferable. Deregulation is not some kind of libertarian mantra but an absolute necessity if we are to exit crony capitalism. Mr. O'Driscoll is a senior fellow at the Cato Institute. He has been a vice president at Citigroup and a vice president at the Federal Reserve Bank of
The improvement in the quality of life of ordinary Kenyans made possible today by globalization is noticeable. Ten or eleven years ago my friend Bob Higgs visited
. He returned with pictures, of course. Some of these showed small mud huts that were the homes of some of the Kenyans he met. I don’t know how many Kenyans today live in such conditions, but I do know that, as long as globalization continues to spread and as long as Kenya is part of it, the day is not far off when mud huts in Kenya – like mud huts in Kenya Europe – will no longer exist.