Luigi Zingales, A capitalism for the people: Recapturing
the lost genius of American prosperity
New York, NY: Basic Book, 2012. xxvi + 310 Pages. USD 27.99 (cloth)
Matthew D. Mitchell
Published online: 26 February 2013
Springer Science+Business Media New York 2013
In 1971 the federal government guaranteed a $250 million loan to Lockheed Aircraft.
It was the first time in history that the federal government had come to the rescue of a
single failing firm (or, more precisely, its creditors).
By the end of the 1970s, Penn
Central Railroad and Chrysler would also receive bailouts. In 1984, it was Continen-
tal Illinois. And on the eve of the ‘90s it was the creditors of hundreds of savings and
loan associations. Nothing, however, would compare to 2008. In a single year, the
federal government bought stake in or bailed out hundreds of private financial and
automotive firms. The rules of the bailout game, if there were any, were not always clear.
Having come to the aid of Bear Stearns (via J.P. Morgan) and Fannie Mae and Freddie
Mac, the federal government stunned creditors when it let Lehman Brothers fall in mid-
September 2008. But just 2 days later, bailouts resumed when the Federal Reserve made
an $85 billion emergency loan to insurer American International Group.
The experience left a lot of people reexamining their beliefs about American
capitalism. From then on, were all large firms assumed to have the full faith and
credit of the federal government behind them? Was there any way to credibly commit
not to bail out systemically significant financial institutions? What cultural and
political norms and taboos had the bailouts shattered? And how did these changes
affect the public’s perception of government and “free market” capitalism? We are
fortunate that one of the people thinking about these questions was Luigi Zingales.
He recorded his first observations on the crisis in a must-read piece in National
Affairs titled “Capitalism After the Crisis” (2009). Now he has expanded those
observations to book-length in A Capitalism for the People.
Zingales is as qualified as anyone to address these questions, and that’s not just
because he is an extraordinarily creative and productive financial economist of the
University of Chicago’s Booth School of Business. He’s also an Italian émigré who is
refreshingly unafraid to draw on his personal biography to make his case.
Rev Austrian Econ (2013) 26:359–362
For details, see Ritholtz (2009).
M. D. Mitchell (*)
Mercatus Center at George Mason University, 3351 Fairfax Drive, 4th floor, Arlington, VA 22201, USA