Raghuram Rajan: prediction

Transcript context

…How fragile is a free society with respect to the behavior of its own corporations? Can crony capitalism bring the system down? Or is it just a deadweight loss we’d like to minimize, and as long as we have some economic growth, we can pay off the interest groups and get on with our business and live to fight another day? No, I believe very much that crony capitalism is really the danger for any economy because it not only constrains economic growth, but I also think it limits political freedom. That, to some extent, a comparative independent private sector is extremely important to keep government in check. That when the private sector gets compromised and depends on tariffs to protect itself or depends on cartels — government-sanctioned cartels as we had post-depression — I think that’s when we find that the private sector’s no longer independent. When it is no longer independent, it becomes a pawn of the government, and that’s when we get authoritarianism. So to some extent, Hayek’s The Road to Serfdom — I think essentially one way of looking at that in the current context is, it’s when the private sector is co-opted by the government that we get both political unfreedom as well as a noncompetitive economy. If I look at the federal budget, don’t I see a problem being that too much of it is controlled by voters, not that too much is controlled by corporations? And tariffs — even under Trump, they’re still quite low.…

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