XI.19.2018 Capitalism - Is That All There Is
The mid-term elections in the United States illuminated the potential for socialism to make it to centre stage for the presidential election in 2020. The self-appointed champion for the socialist agenda is Bernie Sanders with a platform built upon the pillars of social justice and economic equality. Bernie has an easy argument when the concentration of wealth in the U.S. was super-charged by the Republican tax cuts that favoured the wealthiest Americans. But, are our neighbours south of the 49th parallel ready to accept the logic of universal healthcare or paying income-scaled taxes that produce positive outcomes for all citizens. America is still the biggest producer of GDP in the world but that won’t last long with India and China mobilizing their economies with populations — 2.7 billion combined — that dwarf that of the United States with 325 million people. Consumerism and capitalism are now inextricably intertwined so where do we go from here?
When Thomas Picketty’s book, 
Capital in the Twenty-First Century, was published in French in 2013, there was immediate pushback from economists around the world. It was a direct attack on the inequality of the distribution of wealth that has been baked into modern capitalism since the early 20th century. While it’s true that more people have been lifted out of poverty in the past 20 years than at any other time in history, it’s also true that there is enough wealth in the world that if distributed fairly to people around the world, poverty would end. One of the principles of capitalism is that there are winners and losers and, another principle, is that somehow an “invisible hand” will, eventually, make the system fair for everyone. The facts belie that belief.
As a general rule, wealth grows faster than economic output. Picketty explains the concept in the expression r > g where “r” is the rate of return to wealth and “g” is the economic growth rate. Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it. Demographic change that slows global growth will make capital more dominant. But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth from technological progress or rising population such as after the Second World War or government intervention keep economies from returning to the “patrimonial capitalism” that worried Karl Marx.
Back to that invisible hand. Adam Smith (Wealth of Nations, 1776) is still considered to be capitalism’s high priest and the author of its First Principles. Smith said, “[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”
Perhaps Karl Marx and Adam Smith were saying the same thing in different ways — there is enough for everyone. Let’s get our act together because there must be something better than capitalism if we really care about our species.