Crony Capitalism

Here is the latest NY Times op-ed by Paul Krugman. The key bit is:

... these days America is looking like the Bernie Madoff of economies: for many years it was held in respect, even awe, but it turns out to have been a fraud all along.

It’s painful now to read a lecture that Mr. Summers gave in early 2000, as the economic crisis of the 1990s was winding down. Discussing the causes of that crisis, Mr. Summers pointed to things that the crisis countries lacked — and that, by implication, the United States had. These things included “well-capitalized and supervised banks” and reliable, transparent corporate accounting. Oh well.

One of the analysts Mr. Summers cited in that lecture, by the way, was the economist Simon Johnson. In an article in the current issue of The Atlantic, Mr. Johnson, who served as the chief economist at the I.M.F. and is now a professor at M.I.T., declares that America’s current difficulties are “shockingly reminiscent” of crises in places like Russia and Argentina — including the key role played by crony capitalists.

In America as in the third world, he writes, “elite business interests — financiers, in the case of the U.S. — played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive.”

Here is an earlier blog entry on Simon Johnson.