Elisa de la Nuez, Luis Garicano, Jesús Fernández-Villaverde and Ignacio Gomà
Summary:
On the occasion of the presentation of the book "Clientelist Capitalism", on 26 June a dialogue was held on "Why is a market in which the rules of the game are respected more efficient?"Elisa de la Nuez, State Lawyer and Secretary General of the Hay Derecho Foundation; Luis Garicano, Professor of Economics and Strategy in the Departments of Business Administration and Economics at the London School of Economics and Political Science; Jesús Fernández-Villaverde, Professor of Economics at the University of Pennsylvania, and Ignacio Gomà, notary and President of the Hay Derecho Foundation. Luis Garicano explained that crony capitalism has to do with cronyism practices that distort the market. Our society has fostered cronyism, it is part of it, but that is not capitalism. It is sometimes confused with the high remuneration of top executives without taking into account that the talent to run a big bank or a big company is worth a lot. It is very difficult to find people who are capable of making decisions that are very complex and therefore they have to be paid accordingly. They are paid what they are paid because such people are scarce. But this is not crony capitalism, it is part of good corporate governance. Ignació Gomá pointed out that clientelist capitalism is articulated in a central point of regulation. If regulation serves to make market failures fatter, then more inefficiencies are generated. These dysfunctions are not only a problem of Justice; it is that, in the end, the economy also malfunctions. On the other hand, with corporate governance there is a parallel between what happens in the world of politics and in the world of large companies. In this sense, the problem arises when there is a conflict of interest in the determination of salaries, for example, if the board sets its own remuneration. If, in addition, he gets the lawmaker to favour him, then we are still in the same situation. Jesús Fernández-Villaverde, on the other hand, considers that there is zero evidence that corporate governance problems are of the first order. In his opinion, clientelist capitalism exists everywhere, but in Spain it is particularly acute for historical reasons. First, because it is a small country and therefore easier for elites to capture. Secondly, Spain has been a heavily intervened economy and, because of so much intervention, people are instinctively against the market, they are very reluctant to admit that the market works. This problem of historical inheritance is very big and very difficult to overcome. Ignacio Gomá pointed out that the problem of clientelistic relations remains because of the problem of reliable commitment, i.e. the effective defence of property rights. One answer to this is a democratic state governed by the rule of law. A second best is clientelist capitalism. Jesús Fernández-Villaverde explained that the direct economic problem of clientelist capitalism is that resources are not properly allocated. There is also an indirect cost of legitimacy that is much more serious. Elisa de la Nuez, for her part, indicated that this cost of justice is a very big concern. It makes things work badly in the public sector. Moreover, we have to take into account the example that is being set with the politicisation of the regulatory bodies, which is an exchange of cards between political parties. This permeates the whole organisation downwards. Moreover, courts of law often do not understand markets, while companies have the best legal teams to defend them. Luis Garicano added that regulatory bodies have been used to give politicians jobs. It has always been done by placing like-minded people. Moreover, in Spain there is a very serious problem with the justice system. The National Competition Market Commission (Comisión Nacional del Mercado de la Competencia) is dedicated to imposing fines, but the National Court simultaneously says that these sanctions are too high. Judges have never cared about these competition issues. Jesús Fernández-Villaverde explained that the evil extends to the unions because they immediately say "what about mine", as big companies do. Everybody wants to react against everybody. Part of this is due to the fact that, during the Transition, many cheques were signed that we are still paying for and that make it very difficult to change things. Ignació Gomá pointed out that as the effect for each individual consumer is small, although the benefit for companies is very large, there is no incentive to fight against it. In relation to revolving doors, Elisa de la Nuez indicated that the problem is that the rules regulating the passage from public to private are not respected. In addition, politicians are often offered positions for which they have no experience. In order to leave clientelist capitalism behind, Jesús Fernández-Villaverde considers it necessary to reform the CNMV and the CNMC and that judges who deal with business issues should know about it. Ignacio Gomá added that the judiciary should not be politicised and that the political system should be more inclusive. Luis Garicano also insisted on the need to act on ideas and values, because they matter a great deal. And Elisa de la Nuez affirms that we can do very well if we are able to function without thinking about whether we have a friend.
The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of their authors.
The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.
