It’s not enough that capitalism is under attack by socialists of all stripes, the far left wing of the Democratic Party, and their fellow travelers in most of the mainstream media. It now becomes necessary to defend the most productive economic system in world history with many of its leading practitioners. For example, my friend Kelly Rushing recently brought to my attention the commentary of Ray Dalio, the founder of the world’s largest hedge fund who, in a series of opinion pieces and interviews, has expressed his view that flaws in American capitalism have created destructive gaps in education, social mobility, and income inequality the result of which could be a revolution. And he thinks that inequality has produced populism and ideological extremism. Other business leaders, such as James Dimon, CEO of JP Morgan Chase, share some of these sentiments.
I watched a “60 Minutes” segment with Dalio and heard things like “radical truth, radical transparency”, “redistributing opportunity”, and “capitalism needs to be reformed, it is not sustainable”, but I didn’t hear how he would do this, except by raising taxes on people like him. And people like him get plenty of visibility and air time; the media love having a billionaire hedge fund guy promote wealth redistribution.
Tucker Carlson of Fox News has loudly voiced his own criticism of capitalism, which makes much more sense, although I don’t agree with all of his points either. He thinks that the cultural and social environment of much of America, in particular of rural people without college degrees, can be very grim in spite of what is on the surface a booming economy, and that this fact is being ignored by much of the capitalist “elite” on Wall Street and in Washington. He sees this as primarily a moral issue that is not being addressed, as follows: “….leaders will have to acknowledge that market capitalism is not a religion. Market capitalism is a tool…..Any economic system that weakens and destroys families is not worth having. If you want to put America first, you’ve got to put its families first.” He’s right, of course, but he should also acknowledge that capitalism, when properly understood and implemented, is the most moral of economic systems known to mankind. Former President Bill Clinton said at least one thing that I think made complete sense: “There is nothing wrong with America that cannot be cured by what is right with America”. And capitalism is one of the things that are right with America.
No doubt our system is under strain for the middle class, but my take on it, without being overly simplistic, is that we need more capitalism properly understood, not less. And this should include two things that need to be enhanced so that it can work properly–adaptability and mobility. Adaptability of the education system to better prepare both first time and transitional workers for the 21st century skills that are in demand. Mobility because our entitlement system provides perverse incentives for people who might otherwise move to better employment opportunities, either where the jobs are geographically or where additional training might be of benefit. Without the choices available through adaptability and mobility, the working class cannot take full advantage of the wonders of a capitalist system. But on one thing Tucker Carlson is spot on–no free market system works for long without an underlying moral component; it is the foundational element.
I see capitalism as free enterprise with the only necessary responsibility of government being to monitor it to prevent corruption and of course not allow crony capitalism. Other than that it needs to get out of the way and let natural human motivations come into play. THAT is the genius of capitalism. I have written a piece on this on my website which thankfully has been the most popular piece that I have written.
There are few things more moral than creating, keeping and satisfying customers, so long as the rule of law is respected and that laws create a framework within which entrepreneurs can compete fairly.
There is simply no politician of note in the USA today who is advocating for the government to take control of the means of production. Full stop.
This is the hallmark of true “socialism” – in fact communism. The trendy politicians who have appropriated the word “socialism” simply do not know what they are talking about.
That being said, the USA now has a GINI index in the mid – 40’s that has slid massively over the last few decades. This is heading toward 3rd world levels of inequity.
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
The issue with this is that the USA has fallen off the charts fro many markers of what constitutes a developed country – life expectancy, etc. (the USA is now out of the top 30 is that category, and with other countries rapidly rising, and the USA declining, will likely be out of the top 50 in a few years).
Many people still like to proclaim “the USA is the richest country in the World” – on a collective basis, this is true, but at a granular level, it is like the old story of having a room full of homeless people, and Bill Gates walks in, and thus the average wealth in the room becomes a billion dollars.
The USA could use investments in many of the things it used to lead the world in – education, and infrastructure. That takes taxes.
The OECD (top 36 developed economies in the world) has an average “tax take” of 36%. The USA – the 4th lowest taxed country in the group – is at 25%.
The USA is a very low tax country (anyone who does not believe that has never traveled outside the USA), and could easily afford to raise its’ taxes and pay for the infrastructure, and education, a modern competitive free enterprise economy needs.
https://www.oecd.org/tax/
I agree 100% with most comments. As someone who has traveled the world extensively, without extensive study I would not know the taxation policy of other countries compared to the United States. All I am acutely aware of is as a small business owner and citizen is that I pay income tax, social security tax, tax on my social security benefit, franchise tax, property tax on my business property, tax on my home and tax on my business inventory. I just read where Blenheim Palace in England, with 1000 windows, was taxed for the amount of sunlight it received from 1600 to 1800. Heaven help us if the politicians find that out.
It’s always nice to see your name in print when not in connection with some embarrassing behavior. So, thanks for the recognition. My big picture view of capitalism is simply that it’s about freedom of choice. That freedom can have some unfortunate results. People can lose and be impacted for a lifetime. Yes, freedom does require some barriers, but when the government steps in to determine the results or to ease the pain of failure, it seems to make matters worse. I’m sure you can provide a number of examples that illustrate that point.
There are no politicians of note in the USA today advocating for the government to own and control the means of production. Full stop.
That is the acid test of “socialism” or more accurately communism. Those who use that term to describe themselves simply do no know what they are talking about. (they probably are more likely “Social Democrats” – the banner of many political parties in Europe.)
However, the USA has a deficit in many areas of “public life” in which it is falling behind just about every other western country, primarily the OECD group of 36 advanced economies. This includes education, healthcare, and infrastructure.
In addition, it is facing an acceleration of base – line inequity within the population. Many in the USA still tout the phrase “the USA is the richest country in the world” – which is true, if you believe that when Bill Gates walks into a room with 50 homeless people, the average wealth soars to $1 billion. It may be statistically true, but it does not accurately describe what is going on.
The USA is now out of the top 30 in life expectancy, and soon to be out of the top 50. Its’ GINI index has declined greatly in the last few decades, and now stands at 45 – which is what several 3rd world countries are at – with a wealthy oligarchy presiding over a failing and falling general population.
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
The USA need roads and schools that are adequately funded to be a successful economy in the world. For those needs, it requires taxes.
The USA is the 4th lowest taxed country in the OECD. The average tax take in this group is 36%, the USA is at 25%.
http://www.oecd.org/tax/tax-policy/tax-database.htm
The USA could stand for substantial tax increases, fund its’ schools, roads and healthcare, and still be a “low tax” country.
All the above, is what many of the “socialists” in the USA are trying to improve on, to make the USA a better country for most of the population. And before someone equates “socialism” with paying people not to work, you will find that the countries you may think of as ‘Socialist” Denmark, Sweden, etc., they have higher labor force participation rates than the USA (see CIA factbook).
Do they have all the right answers? Not necessarily, but they do have answers that deserve examination.
I heard one a while ago, which I believe is true. The USA has the highest percentage of private sector involvement (primarily through insurance – the US healthcare industry is remarkably like other countries outside of the insurance industry) in the healthcare industry in the western world – nearly double the next highest country.
Yet it has some of the worst outcomes (lowest life expectancy), and the solution is MORE private sector involvement?
That is like being the only person in a group who has lung cancer and also is the only smoker. The solution is not to consume more cigarettes.