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In the world of neoclassical economics, private corporations are expropriated by “greedy elites” but letting large corporations and wealthy individuals expropriate the social surplus is the foundation for “growth.”
That’s how the world looks to Ryan Avent, building on Daron Acemoglu and James Robinson. Avent is all up in arms about Argentine president Cristina Fernández’s decision to seize a majority share in the country’s largest oil company, YPF.
A country with strong, pluralistic institutions can restrain the grabby hands of the government, reassuring private investors that the fruits of their efforts won’t simply be stolen from them. That, in turn, encourages investment and growth. A country with poor institutions, however, can’t stay the hand of the greedy elite. The government will therefore be inclined to take decisions that enrich or protect its leaders, in the process poisoning the well of future growth.
And what, their “strong, pluralistic institutions” did such a good job protecting us from the “greedy elite”—of large banks, giant corporations, and wealthy individuals—in the United States in the lead-up to the Second Great Depression?