The Trouble With Capitalism?
The problem isn’t capitalism. It’s capitalists like me
Blame Money Guys Like Me
I AM A CAPITALIST BECAUSE I remember socialism.
I was converted to capitalism by a few years at the University of Chicago and a few decades working internationally and seeing socialism up close and personal. Until recently, I was confident that we need not worry about trying that experiment again because socialism had been tested and had failed. It looks like I was wrong. Socialism is on the rise. Don’t blame Bernie and Elizabeth. Blame ourselves. Here’s why.
The version of capitalism we have implemented is a flawed one. Capitalism is based on the idea that enlightened self-interest and free markets produce the best possible allocation of resources and opportunities. When socialist economies began to fail in the late ‘70s, capitalists figured that if less socialist regulation was good, none at all would be even better. We’ve been working toward that end ever since. According to the Financial Times, 2018 had the lowest enforcement of antitrust regulation in almost a half-century. Even Adam Smith argued that capitalism needs rules. Without them, capitalism quickly dissolves into cronyism and eventually Russian-style kleptocracy. We also rigged the system. Capitalism is a $30 trillion game of Monopoly, with few winners and many losers. That’s okay. That’s the nature of the game. But we’ve fixed it to make sure the same people win all the time. We’ve created a twotier educational system that stymies upward mobility. We have taxation that lets capitalists pay too little for the public resources that led to their success. We’ve put in laws that protect industries and shield corporations from true competition. And we have played off one disadvantaged group against another. What we have now is a game where some players get extra rolls of the die and their own stack of Get Out of Jail Free cards.
We have been hypocrites about socialism. At its core, socialism is redistribution of wealth by the government. As Karl Marx put it, “to each according to his needs.” The U.S. has gotten the redistribution part down, but in our case we redistribute to each according to his voting clout—that is, we transfer wealth from urban areas to rural ones, to farmers, to older people and to industries with enormous lobbying budgets, like Big Pharma. All the while denying that’s what we’re doing. We’re increasingly being called out by have-nots who want a turn at the trough, like The Atlantic’s Derek Thompson who asks, “Boomers have socialism. Why not millennials?” If capitalists are against socialism, then we need to be against it all the time. If we are not really against it, then we need to stop demonizing people like Bernie Sanders and Elizabeth Warren.
We have refused to listen to criticism, especially around income inequality. Technically, everyone in America (and most people in the world) are much better off since the ascendancy of capitalism. But they don’t feel better off. It’s biology. Let’s say tomorrow morning I drive across
“The U.S. has gotten the redistribution part down, but in our case we redistribute to each according to his voting clout.”
the street to Randy’s house and drop off a million dollars and then head down to George’s and drop off 10 million. You’d think Randy would be pretty happy. But I doubt it. Instead, he’ll come over and ask why George got more. According to the journal Science, the brain is more responsive to relative wealth than absolute wealth. Rather than trying to understand why people are frustrated, we have, for the most part, dismissed complaints about the wealth gap as sour grapes, or in the case of congresswoman Alexandria Ocasio-cortez, as childish naivete.
And throughout it all, we have been less than gracious. Instead of being modest about our good fortune, we have often been boastful and accused the less fortunate of bringing it on themselves through sloth, profligacy or being unwilling to take risks.
Principled, fair capitalism remains the best and fairest system for everyone. It is far superior to socialism, “democratic” or otherwise, particularly for the poor and disadvantaged. Socialism would reduce inequality in America not by lifting the poorest up, but by forcing everyone toward a miserable mediocrity. (Although probably not billionaires. They’d move to Monte Carlo.) However, principled, fair capitalism isn’t really on the menu. We have created a type of capitalism and a class of capitalists that are very hard to like. If we want to know why socialism is making a comeback, we need only look in the mirror.