Socialism is for the rich — and capitalism for the rest

I understand why Democrats are fuming.

Donald Trump ran up budget deficits in his first three years to levels seen in our history only during major wars and financial crises — thanks to tax cuts, military spending and little fiscal discipline. And he did so prepandemic, when the economy was already expanding. But now that Joe Biden wants to spend more on pandemic relief and prevent the economy from tanking further, many Republicans — on cue — are rediscovering their deficit hawk wings. What frauds.

We need to do whatever it takes to help the most vulnerable Americans who have lost jobs, homes or businesses to COVID-19 — and to buttress cities overwhelmed by the virus. So, put me down for a double dose of generosity.

But, but, but … when this virus clears, we ALL need to have a talk.

There has been so much focus in recent years on the downsides of rapid globalization and “neoliberal free-market groupthink” that we’ve ignored another, more powerful consensus that has taken hold: That we are in a new era of permanently low interest rates, so deficits don’t matter as long as you can service them, and so the role of government in developed countries can keep expanding — which it has with steadily larger bailouts, persistent deficit spending, mounting government debts and increasingly easy money out of central banks to finance it all.

This new consensus has a name: “Socialism for the rich and capitalism for the rest,” argues Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, author of “The Ten Rules of Successful Nations” and one of my favorite contrarian economic thinkers.

“Socialism for the rich and capitalism for the rest” happens, Sharma explained in a phone interview, when government intervention does more to stimulate the financial markets than the real economy. So, America’s richest 10%, who own more than 80% of U.S. stocks, have seen their wealth more than triple in 30 years, while the bottom 50%, relying on their day jobs in real markets to survive, had zero gains. Meanwhile, mediocre productivity in the real economy has limited opportunity, choice and income gains for the poor and middle class alike.

The best evidence is the last year: We’re in the middle of a pandemic that has crushed jobs — but the stock market is soaring. That’s not right. That’s elephants flying. I always get worried watching elephants fly. It usually doesn’t end well.

And even if we raise taxes on the rich and direct more relief to the poor, when you keep relying on this much stimulus, argues Sharma, you’re going to get unintended consequences. And we are.

For instance, Sharma wrote in July in a Wall Street Journal essay titled “The Rescues Ruining Capitalism,” that easy money and increasingly generous bailouts fuel the rise of monopolies and keep “alive heavily indebted ‘zombie’ firms, at the expense of startups, which drive innovation.” And all of that is contributing to lower productivity, which means slower economic growth and “a shrinking of the pie for everyone.”

As such, no one should be surprised “that millennials and Gen Z are growing disillusioned with this distorted form of capitalism and say that they prefer socialism.”

So, yes we must help our fellow citizens, who are hurting, through this pandemic. But instead of more cash handouts, maybe we should do it the way the Koreans, Taiwanese, Singaporeans, Chinese and other East Asians have been doing it — cash assistance to only the most vulnerable and more investments in infrastructure. The East Asians also focus on making their governments smarter rather than bigger — one reason they have gotten through this pandemic with less pain.

Biden plans a big infrastructure package soon. I just hope that Congress, and the markets, don’t have debt fatigue by the time we get to the most productive medicine: infrastructure.

How about more inclusive capitalism for everyone and less knee-jerk socialism for rich people.