Are bailouts the new “trickle-down” economics? Have government debt and deficits caused capitalism’s collapse—thus ending the American Dream?

Ruchir Sharma is a well-known columnist for the Financial Times, the author of bestselling books Breakout Nations and The Rise and Fall of Nations, and an investment banker who worked as Morgan Stanley’s head of emerging markets for 25 years. His new book, What Went Wrong With Capitalism, traces the roots of current disaffection with our capitalist economy to unabashed stimulus and too much government intervention. Take an example: Sharma writes that the United States federal government has introduced 3,000 new regulations in the last twenty years, and withdrawn just 20 over the same span. He likens the Federal Reserve’s constant bailouts—under chairs appointed by presidents from both parties—to the opioid crisis, in which the solution created more problems than the pain it was designed to treat.

Sharma joins Bethany and Luigi to explain how constant government intervention leads to inefficient “zombie” firms, higher property prices, housing shortages, massive inequality, and a historic government debt and deficit crisis. Together, they discuss the first step to a cure—a correct diagnosis of the problem—and how to approach the treatment without exacerbating the problems. In the process, they leave us with a renewed understanding of how “pro-business is not the same as pro-capitalism,” a distinction that Sharma says “continues to elude us.”

Episode Notes:

Link to submit papers for the Stigler Center 2025 Antitrust Conference

Revisit “Is the Federal Reserve an Engine of Inequality?”, our previous episode on modern monetary theory or the claim that debt doesn’t matter.

Revisit “Capitalism After the Crisis,” Luigi’s article for Foreign Affairs (2009), where he outlines the tensions between a pro-capitalism and a pro-business agenda. 

Also, check out ProMarket.org, our publication at the Stigler Center that he founded in 2016, with the mission of shedding light on this tension and how to ameliorate it.

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