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Why capitalism needs populism

Raghuram G Rajan
Raghuram G Rajan5/13/2019 08:00 AM GMT+08  • 5 min read
Why capitalism needs populism
SINGAPORE (May 13): Big Business is under attack in the US. Amazon.com cancelled its planned new headquarters in the New York City borough of Queens in the face of strong local opposition. Lindsey Graham, a Republican US senator for South Carolina, has ra
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SINGAPORE (May 13): Big Business is under attack in the US. Amazon.com cancelled its planned new headquarters in the New York City borough of Queens in the face of strong local opposition. Lindsey Graham, a Republican US senator for South Carolina, has raised concerns about Facebook’s uncontested market position, while his Democratic Senate colleague, Elizabeth Warren of Massachusetts, has called for the company to be broken up. Warren has also introduced legislation that would reserve 40% of corporate board seats for workers.

Such proposals may seem out of place in the land of free-market capitalism, but the current debate is exactly what the US needs. Throughout the country’s history, it has been capitalism’s critics who ensured its proper functioning, by fighting against the concentration of economic power and the political influence it confers. When a few corporations dominate an economy, they inevitably team up with the instruments of state control, producing an unholy alliance of private- and public-sector elites.

This is what has happened in Russia, which is democratic and capitalist in name only. By maintaining complete control over commodity extraction and banking, an oligarchy beholden to the Kremlin has ruled out the possibility of meaningful economic and political competition. In fact, Russia is the apotheosis of the problem that US President Dwight D Eisenhower described in his 1961 farewell address, when he admonished Americans to “guard against the acquisition of unwarranted influence” by the “military-industrial complex” and the “potential for the disastrous rise of misplaced power”.

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