The Problem with Capitalism

"The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by the Helsinki-based World Institute for Development Economics Research of the United Nations University (UNU-WIDER).

The most comprehensive study of personal wealth ever undertaken also reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In contrast, the bottom half of the world adult population owned barely 1% of global wealth."

This quote taken from the study completed by:

James Davies is a Professor, and the RBC Financial Group Fellow, in the Department of Economics at the University of Western Ontario. He is the Director of the UNU-WIDER project on Personal Assets from a Global Perspective. jdavies@uwo.ca

Susanna Sandström is a Research Associate at UNU-WIDER. She has previously held positions at the Luxemburg Income Study and Statistics Finland. sandstrom@wider.unu.edu

Anthony Shorrocks is the Director of WIDER and has previously held positions at the LSE and University of Essex. shorrocks@wider.unu.edu

Edward Wolff is Professor of Economics, New York University, Senior Scholar, Levy Economics Institute of Bard College, and Research Associate, National Bureau of Economic Research. edward.wolff@nyu.edu

This study tells us that the policy of trickle-down economics is a complete failure. This happened for an obvious reason as well - greed. The writing was on the wall since the writing of the Bible. This document clearly stated that this would be the case.

For those that don't know, the idea was to put more money in the pockets of the rich and that wealth would make it's way through the system and eventually benefit those of us on he bottom. This didn't happen. What happened was that the rich kept the wealth in order to build more wealth. Rather than going to the local Ford dealership and buying their child a Taurus, they opted to buy them a Porsche. This action hardly benefits the bottom 90%. Likewise, dinner is not enjoyed at the local greasy spoon but rather very upscale locations.

When the idea is submitted that the wealthy should pay more than the poor, the argument of capitalism versus socialism comes up rather than the argument of right and wrong. The US is certainly a capitalist society and is one that has learned to shun the idea of "evil communism". This idea was born of a concept where everyone had the opportunity to succeed and live "the American dream". Although this notion was once widely true, it is now only true for a few that are not already wealthy.

We know that the path to success has many common factors. It is these very factors that have become the problem. We will take a look at each.

1. Great Education - The public school system is a disaster. Our grades continue to plummet against the rest of the world and against our own past standards. These days, a great education means private schools and top colleges. These two things have the same common limiting factor - money. They aren't free and the best of the best cost far more money than the average American can afford. Obviously not everyone is playing on a level field at the start.

2. Great Job - We also know that the better the education, the better the job. Graduating Harvard Law School is certainly more likely to land the better position than the local community college. The top spots in the top jobs are often very much linked to networking or "who you know not what ya know".

3. Networking - Perhaps you want an interview at an exclusive company or you have an idea you want to get funded. To do either, you have to know someone that is either connected or on the inside. The problem for the majority - they didn't rub elbows with the elite at their school or in their neighborhood. They also don't have the family connections.

4. Family - Or inherited success. The former president GW Bush is a good and modern example of this principal. He avoided jail, went to the best schools, had a wide array of jobs including owning a baseball team and finally got elected to the highest office in the land all due to his family's efforts rather than his own. His past and his lack of command over his native language is not a secret and yet he succeeded. Many of our celebrities are generational and certainly those in control of the largest companies and financial institutions are.

Still, there are some that manage to achieve success against all odds in this modern time. They are few and almost all will tell you it was hard work, luck and timing. Again, we all know that hard work and determination alone doesn't mean success. I think we can agree that the thousands of men, women and even children that worked in this nation's coal mines certainly worked hard. In many cases, they literally worked themselves to death. If, on the other hand, we had the four factors above going in our favor, how small is the chance of failure now?

The good news - the system of capitalism is working perfectly. Money calls the shots and that is the idea. Now, to every point, there is a counter point. Some one has to take out the trash, wash the dishes and dig the ditches for a society to function. It can also be said that we are not 100% capitalists. We do have welfare programs and yes, some abuse it. Where does the "happy medium" lie then? Shouldn't a person who worked hard to get to where they are be rewarded and shouldn't they have the right to pass that success onto their children? Absolutely. The reason that true socialism and true capitalism do not succeed is that neither consider all the factors. In both cases, the theories fail to account for human nature. Our sins, if you will or our flaws such as greed, envy and downright laziness throw these ideal theories to the wind.

Let's now imagine a scenario of government. In this scenario, every child has the same health care, the same education, is well nourished and is taught that all people are truly equal in every way. What happens next? Some will be abused and will become abusers, killers, psychopaths, etc and many will be fine and start their life in the business world. Those that grow up "normal" will work in various different fields and specialize in various different skills. Still, some will choose to be lazy, to give up, and to coast. In these cases, they are relegated to ditch digging, trash hauling, etc. This is not a result of education, connections or any other factor beyond personal choice. Still, they can live a decent life because the pay is sufficient and their children have the same opportunities as all others. So what about the hard working guy? The one that isn't lazy? Is it fair that he lives at the same level as the lazy trash collector? It is not fair in the sense that he is working harder than another and reaping the same reward, however, it is fair in the sense that no one job is any more important than another. The trash must be taken out and the ditch must be dug. In some cases, their will be those that enjoy the ditch digging. We are still left at a crossroad though. How to answer the question of laziness versus hard working? Initiative versus indifference? We could be philosophical or even religious and say that we all have our flaws. The ditch digger happens to be lazy while the hard worker may be greedy. Which is worse?

For us to agree that one is worse than the other or to agree that they are the same, we must share a common belief system. Our beliefs are based on three main factors: Our education, our religion or morality and our life experiences. The US is a good example of how conflict can arise when this system is not common. Capitalism and Christianity do not mesh. A Christian Capitalist is conflicted by eating a $400 meal while another person is starving on the street. Is it any wonder that the number of non believers is growing and that religious symbols are being removed from public buildings and other places? We practice a law that enforces death penalties while practicing a religion that states "Thou Shalt Not Kill". No wonder we are often confused and stressed. We clearly can not practice true Capitalism and true Christianity at the same time without conflict and conflict creates stress.

Should we agree then that to be Christian or almost any other religion, that we must then be socialists? We may think of saying yes but then we remember - what about all my hard work and those that are lazy? It can be said that thinking of your own hard work or actions is selfishness. This conflicts with your religious beliefs but not with your personal beliefs. Still, it does not seem fair that the lazy guy gets to live equal to you - does it? Here again, laziness is that person's flaw - what is yours?

Let us now take a completely different view point. Let's walk over to the door, climb the stairs, go down the hallway and walk out on the balcony. What do we see? We see a world based on tangibles and substance. The ditch digger is doing something that contributes to a large population of people. His effort prevents disease, provides water and saves lives from floods. This is a worthy undertaking and he should be commended for his contribution. If we look at this from a capitalism standpoint, this is not what we see. What we see is a worthy ditch digger barely scraping by while a football player or movie star is living like a king. What contribution have they made to society? Entertainment? Who is more important to humanity? I submit that clearly the ditch digger is more important. Yet we reward the entertainer??? What gives? If we were to make everything small. If we said that in all the world there was one ditch digger and one movie star and we had to pick one to go away, which would we pick? You must assume that no one else can take their place. Will you choose to live with sewage for the sake of entertainment? I will assume that most of us will recognize the need for the ditch digger. Yet who receives the greater reward in our society?

We can see that we are now at conflict not only with our religious or moral values, but also our common sense and intelligence. The greater confusion, however, is this: Why do we continue this way? If we can see that it is wrong AND stupid, why do we do it? Stop here and ponder that for a moment.

Perhaps after your consideration you have concluded -"I don't know". Well join the club because neither does this author. One possible explanation and perhaps the simplest is that we do it because we are morally, spiritually and intellectually corrupt ourselves. After all, we made this, we practice this and we support this. We spend our time arguing the details of how to improve the system rather than realizing the system itself is wrong.