Books - The financial crisis has led some people to question the viability of America’s economic system.

Rehabilitating capitalism

For those who have lost faith

Why Capitalism? By Allan Meltzer. Oxford University Press; 154 pages; $21.95 and £14.99. 

The main problem, he argues, is that even nominally capitalist systems have, for better and worse, elements of state control. These often begin with defence and the police, and go on to national transport systems, which leads, in America’s case, to an ever-expanding network of bureaus and agencies. Much of bureaucracy is adopted under the rationale of enhancing “fairness”. But, as Mr Meltzer notes, fairness often means providing present benefits using debt that must be repaid by taxpayers in the future (which is hardly fair) or through regulations and subsidies created by people in government who then go on to exploit them in private-sector jobs (which is also unfair).

A Capitalism for the People: Recapturing the Lost Genius of American Prosperity. By Luigi Zingales. Basic Books; 304 pages; $27.99 and £17.99

Mr Zingales has written an elegy to the America he found when he moved there 24 years ago from an Italy that was rife with nepotism. Italian businesses preferred to stay small and discreet. Growing bigger made them vulnerable to scrutiny and would require them to hire people on the basis of talent rather than loyalty; and loyalty was important because it, once again, helped protect the firm from scrutiny.
Arriving in America, Mr Zingales found an enthusiasm for capitalism. Americans believed that it was possible to become rich and that increasing wealth benefited the poor as well as the not so poor. They regarded their capitalist system as fair—or at least fair enough. All of those sentiments, says Mr Zingales, have been eroded.






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