Professor Luigi Zingales is angry. He's also scared. He's angry and scared because he claims America is diving headlong into a Berlusconi-style crony capitalism in which big business and dishonest politicians are destroying the US economy and, if allowed to persist, will lead to the collapse of democracy. Entrenched big business interests are taking the country over from the man in the street, he says, while lobbyists and political insiders make millions from their personal connections to an ever-expanding federal government and politicians – Democrats and Republicans – are all corrupt.
And it's this big business-backed corruption which Professor Zingales claims has given rise to the Occupy Wall Street and Tea Party movements; both are anti-elitist and each is fighting a Leviathan – in the case of the Tea Party, the monster is big government while the Occupy activists are fighting bailout-addicted business.
But Professor Zingales says both groups are battling against the same monsters: monopolistic and politically powerful business, and intrusive and corrupt government.
No wonder people are angry, dispossessed and feel powerless. What's more worrying, he adds, is that while these politically opposite movements are united in their opposition to the status quo, neither of them know how to change the system.
But the Italian-born, US-trained professor of finance at the University of Chicago does know what should be done to mend the American Dream: more competition, end subsidies, stop lobbying, more free markets and less privilege for the few. It's why he's written a new book, A Capitalism For The People: Recapturing the Lost Genius of American Prosperity, which is published this week in the UK.
Professor Zingales was on the US West Coast when we spoke ahead of his visit to London today and the telephone line was crackling, but his warning was clear: "Cronyism has robbed my home country of much of its potential for economic growth. I do not want it to rob the United States as well."
Worse even than losing money, he says, is losing freedom: because cronyism represses freedom of speech, eliminates the incentive to study and jeopardizes career opportunities.
" You can see it happening already. The middle-classes are seeing their incomes squeezed and their life savings are disappearing with the burst of the housing bubble and the fall-out from the financial crash. Banks are still making record profits while costing the taxpayers billions in bailouts. Americans on both ends of the political spectrum – Occupy to the Tea Party – have come to the same conclusion; American capitalism is in crisis."
His analysis has an edge because he's seen it before. Growing up in Italy he experienced first-hand the nepotism of his home country, escaping to the US in his twenties in search of the "American Dream" where hard work wins over patronage.
In some ways, he says the transformation of US finance into an Italian-style crony capitalist system is worse as Americans cannot even blame it on one bad guy as the Italians can on former Prime Minister, Silvio Berlusconi, under whom corruption worsened.
It's apocalyptic stuff: but Professor Zingales has written the book for the silent majority who don't see the impending apocalypse on their doorstep.Put simply, pro-business forces have overwhelmed the pro-market principles that made American capitalism so great. To get back to that more transparent capitalism, he argues the US must introduce more competition, break-up its monopolies, stop bailing out the banks and other vested interests, do more to prevent illnesses rather than pay-out billions in healthcare and iron out the loopholes and special exemptions in the tax system which act as corporate subsidies.
"We must curb the political power that large companies and industry have over legislation," he said.
A late convert, he now supports bringing back a new form of Glass-Stegalls, the legislation that separated investment banking and commercial banking that was repealed under President Bill Clinton. The separation between investment and commercial banking helps make the financial system more resilient, and restrained the political power of banks which now has government by the throat.
He said: "Under the old regime, commercial banks, investment banks and insurance companies had different agendas, so their lobbying efforts tended to offset one another. But after the restrictions ended, the interests of all the major players were aligned."
Indeed, these new freedoms gave the banking industry disproportionate power in shaping the political agenda, a power that damaged not just the economy but the financial sector because of the distortions of bonus incentives and sky-high pay.
Some of the worst excesses of the last two decades he dates back to the Federal Reserve's rescue of LTCM, the hedge fund which went bust. Instead of letting it go, there was a generous rescue for LTCM's investors and managers – including one former vice chairman of the Fed.
Such pro-business favouratism continued under George Bush who moved away from Ronald Regan's pro-market principles, backing big business with subsidies and protection. So did the Democrats, who pushed policies like public-private partnerships that were sucking money from the taxpayer but claiming to be for the good. And then came the bailouts under President Barack Obama.
As ideological differences between Democrats and Republicans have dwindled, there's a new target – or rather cow – to be milked, and that's the taxpayer. Professor Zingales points out that when growth is high, it's easier to satisfy everyone without burdening future generations. But when that pie shrinks – as it is today – the temptation to shift the burden on to someone else is irresistible, which is why you get expanding budget deficits and welfare costs.
But Professor Zingales is also confident that its not too late for reform; Americans have been through this process before. In the late 19th century there was a similar popular movement against big business which led to the Populist Party and, although it failed, led to many of President Theodore Roosevelt's reforms – ranging from anti-trust to accounting transparency, anti-fraud and a less-concentrated financial system.
"That's what we need today; structural reforms that break the elites. We are already looking like Italy and if we don't do something to stop that, we will end up like Greece."
What does he think about the UK, where the problems of crony capitalism are also starting to be debated?
Professor Zingales is more circumspect: "I don't know the country well enough; but I do know that people were outraged here too by what happened after the financial crash."
On past form, from sky-high pay to lobbying, where the US goes, the UK follows: we have been warned.