Capitalisn't University of Chicago Podcast Network

We had initially prepared an entirely different episode for today, but last week's Silicon Valley Bank collapse, the largest in U.S. history since 2008, meant a quick change of plans.

What happened? What is unique about this bank run, and what isn't? How much should regulators be blamed, and how much should bank management be? Do social media and today's frantic digital environment mean this is the end of banking as we know it?

Luigi and Bethany talk to two experts with unique insights into the crisis: Chicago Booth Professor Douglas Diamond, who won the 2022 Nobel Prize for his decades-long work on bank runs, and Eric Rosengren, former Boston Fed President, for his view as a regulator. They discuss the factors that led to the collapse, including risky lending practices, lack of oversight, and the challenges of regulating the rapidly evolving world of banking. They also explore the broader implications of the collapse, including the impact on the broader financial system and the role of regulation in promoting financial stability.

Any discussion about the costs and benefits of capitalism is incomplete without a conversation about the costs and benefits of consulting, especially global consulting behemoth McKinsey & Company. The firm has consulted with over 2000 institutions — ranging from Presidents to CEOs, including 90 of the top 100 corporations worldwide, and acted as an accelerant to nearly every trend in the global economy. But, do consultants make the world a better place, or is their advice solely geared towards making their clients (and themselves) money in the short term, without regard to any potential societal damages?

In recent years, the New York Times has published several exposés on McKinsey. On this episode, Bethany and Luigi speak with the Pulitzer Prize-winning investigative journalist behind those exposés, Walt Bogdanich, about his new book “When McKinsey Comes to Town: The Untold Story of McKinsey & Co., the World’s Most Controversial Management Consulting Firm” (co-authored with Michael Forsyth). Bogdanich traces the history and culture of McKinsey and some of the shocking stories he uncovered in the book. Our hosts then discuss the ethical implications of the consulting industry and the questions raised about the accountability of powerful societal institutions, including the role of business education.

ProMarket, the sister publication of Capitalisn't at Chicago Booth's Stigler Center, has been hosting thought leadership on political economy, competition, antitrust, special interests, and more since 2016. To follow up on the discussions on the podcast, we are launching an occasional additional segment where listeners can further explore the show's conversations in ProMarket.

For our first segment, Bethany and Luigi talk to Brooke Fox, Managing Editor at ProMarket. They discuss Martin Wolf's 2020 article in ProMarket, where he draws a direct line between economist Milton Friedman's advocacy for unfettered markets and the erosion of democratic institutions. In it, he calls for rethinking the prevailing economic ideology to safeguard democratic values -- an idea he further develops in his recent book, “The Crisis of Democratic Capitalism.” Luigi, Bethany, and Brooke also discuss the intersection of Friedman's ideas with George Stigler's, and the role of corporations in society today.

Martin Wolf is a renowned Financial Times columnist, and his new book is The Crisis of Democratic Capitalism. In it, he argues that liberal democracy and market capitalism are inextricably linked – and that both must be reformed to survive. Bethany and Luigi discuss with Wolf how meritocracy, rising inequality, polarization, and the erosion of trust led to this crisis and debate whether it was policy failures or the mistakes of capitalism that exacerbated it. Ultimately, they also try to answer the question: Will the US be a functioning democracy by the end of the century?

Last month, the U.S. Department of Justice filed a second landmark antitrust lawsuit against Google, targeting its monopoly in the online advertising marketplace. To simplify the apparent complexity of the case – and to understand why and how it matters to consumers, the advertising market, the tech industry, and the economy – Luigi conducted a special bonus interview with Dina Srinivasan, one of the foremost lawyers in the field of competition policy, and the author of the 2019 article, "Why Google Dominates Advertising Markets" (Stanford Technology Law Review).

Then, Bethany joins Luigi to discuss the implications of this case and the Facebook-Google "Jedi Blue" ad agreement for consumer harm, the business model of journalism, democracy, and beyond.

China's emergence from its stringent zero-COVID policy seems to be the opposite of controlled and competent, two words that have otherwise been frequently used to describe its balancing act between capitalism and one-party rule. Beyond this, we are witnessing an unprecedented convergence of factors: a government crackdown on domestic Big Tech, population decline, a persisting real estate crisis, and the Biden administration’s recent introduction of some of the most draconian export controls in history.

To discuss this crossroads in China’s economy and society, Luigi and Bethany talk to Chicago Booth’s Chang-Tai Hsieh. Amidst the paradox of escalating tensions and record-breaking bilateral trade, they discuss whether we are underestimating China, what advice to give to Western businesses operating there, and the long-term prospects for the country's economy and their global implications.