Is Capitalism Bad?
Should we save capitalism or try another theory?
Capitalism gets a bad rap. From every poll I could find, Gen Z’s opinion of capitalism is lower than previous generations, and positive opinions about capitalism have been steadily dropping for each generation.
I can’t blame them. In fact, I agree.
Capitalism in it’s current form is not working.
From 1990 to 2020, the number of American billionaires grew from 66 to 614. As of 2021, those same billionaires had nearly twice the combined wealth of the bottom half of Americans, helped by an effective tax rate of 8.2%. Americans living in poverty ranged from 10.5% to 15% over the same period, and wage stagnation has hit every group below the biggest earners. Given the statistics, it doesn’t look like capitalism is such a great option for most people.
But those are just statistics. Attitudes and behaviors come from emotions, not statistics. Let’s talk about how capitalism feels.
I’m from the generation that was told that if we worked hard, didn’t question, and waited our turn, it would all turn out. And we believed it, because it worked for our parents. One income, working 40 hours a week, could support a family, buy a house, pay for a car and a couple of modest vacations, even send the kids to college. Staying in the same job for 20, 30, 45 years was normal, and your paycheck would slowly but steadily increase as you put in the work and your responsibilities grew. Most middle class people retired by cashing in on a house that had steadily grown in value, bolstered by pensions, investments, and retiree medical plans. Life was good. The Silent Generation (1928-1945) and the Boomers (1946-1955) experienced capitalism at it’s best. Economic growth continued fairly consistently and was distributed reasonably equally.
Generation Jones (late-Boomers, 1955-1964), Gen X, Millennials, and Gen Z had a totally different experience of capitalism. We know we were lied to. We’ve worked harder than our parents and played by the rules, but capitalism has failed far more people than it’s benefited. So many people think they are the only one struggling under the current system, but that’s not true either. Violence is up. Domestic abuse is up. Alcohol and drug abuse are up. Divorce rates rose steadily until 2000, but the decrease is likely because marriage rates have dropped. All these are impacted by the decline in economic standards and wealth for the majority of people, but instead of dealing with the underlying problem, a theory which has failed us, we are diverted by culture wars.
63% of adults don’t have a college degree. For high school graduates, the median income is $37,024. With a bachelor’s degree, the median income is $60,996, with men who have earned a bachelor’s degrees earning approximately $900,000 more in median lifetime earnings than high school graduates, and $630,000 for women. The average college debt is $37,574. 41% of Americans have medical bill problems or are paying off medical debt, The median house price is $428,700. The cost to raise one child is $310,605. 22% of people are working more than one job. Pension plans have been replaced by 401(k) plans, so employees are expected to fund the majority of their retirement. People hold 12 different jobs over their working career, with a median tenure of 4.3 years. Hard to build a retirement fund without vesting in a company’s 401(k) match, putting even more pressure on workers. And, we need money for a lot longer. Life expectancy in 1928 was 58 years. Now it’s 78 years.
It doesn’t matter how you crunch the numbers, the financial situation of most Americans isn’t looking good.
Is capitalism the problem?
The theory of capitalism is credited to Adam Smith and his 18th century treatise, Wealth of Nations. The idea was to use accumulated capital to enlarge productive capacity (people) rather than economically unproductive enterprises, such as pyramids and cathedrals (monuments). Actually a really good idea, people should matter more than monuments. The idea of capitalism has been around since the 16th century and was closely linked to the Protestant Revolution, hence the emphasis on hard work and frugality, the “Protestant work ethic”. For people, the downside of the theory was that economic inequality was justified on the grounds that the wealthy were more virtuous than the poor. But then, no theory is ideal.
When we form opinions about capitalism, or any of the other -isms, like communism or socialism, we ignore the fact that they are theories. Just theories.
Theories are interpreted by people.
Capitalism interpreted by the United States with it’s democratic form of government is very different from capitalism interpreted by China with it’s communist form of government. Socialism in Sweden has been interpreted very differently from socialism in Venezuela. To my mind, communism is the theory most removed from reality, assuming equal distribution of wealth. One look at the wealth divide in North Korea, Russia, and China exposes that fantasy.
Is capitalism worth saving?
Capitalism in the United States has essentially become an oligarchy, resulting in a level of wealth inequality which typically precedes revolution. The regular protests, over so many issues, and the dismissal of capitalism by Gen Z suggests that we are in, or are entering, another period like the 1960’s, where the status quo was directly challenged.
If we eliminate capitalism, what is the replacement theory? Are there some aspects of capitalism that are worth saving? I think the system needs to be rebuilt, but we should take a hard look at what works before we tear it down. Destroying is easy. Building is hard. With no advance plan, the outcome may be worse. Supply and demand - without quotas and lobbyists messing with it, it’s a beautiful theory. Marketing - when done responsibly, demonstrates a solid grasp on human nature and the importance of using emotion to change attitudes and behaviors. As for the idea that people matter more than monuments? Seems to me that should be the mission statement for capitalism, ensure all policies and decisions support the mission.
I can’t predict the continued survival of any theory, but I can say with 100% certainty that if we pretend that theories exist in a vacuum, without interpretation and implementation by real people, we stand in very real danger of creating even more damaging systems.