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Capitalizing on Relationships

Virginia Postrel asks, “Should you know your banker?” In a New York Times essay, Postrel considers whether open markets are threatened more by a pro-business or an antibusiness ideology, contending that relationship capitalism — business based on personal connections — is a closed system that limits competition.

Drawing heavily on Raghuram Rajan and Luigi Zingales’ book, Saving Capitalism from the Capitalists, the piece offers that free financial markets allow outsiders with good ideas to compete with insiders.

Which makes sense. Yet I’m torn. I miss knowing my banker personally. I miss having a close relationship with the family doctor. How can we better balance the benefits of an open system with the positives of relationship capitalism?

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