It’s becoming apparent that between the general public’s apathy, aversion to what I’ll call “scare” words (e.g., “socialism” and “Progressive”) and a GOP that’s suddenly against corporate free speech and has conveniently rediscovered its commitment to budget rigor now that the party doesn’t control government, it’s possible America will fail to meet the challenge of modernizing the world’s largest economy.
If that modernization effort were to fail, America’s won’t be the largest economy for long, something Joe Biden and Jamie Dimon alluded to on Wednesday, and a point Ray Dalio has made time and again using various arguments and examples.
Some of the commentary I read today around Biden’s infrastructure proposal seems to suffer from the same delusion that often hampers debates around reimagining capitalism — namely, too many people believe they’re capital, when in fact they’re labor.
Dalio (who is bonafide capital) has pleaded with Americans to grasp this simple, yet sobering reality. Capitalism run amok has not worked. Living in a mass-produced, cookie-cutter McMansion you bought (with borrowed money, of course) for $675,000 and driving a BMW X5 doesn’t mean capitalism worked for you. The family next door likely lives in an almost identical house, and they probably drive an identical car — maybe they chose the Mercedes GLC, just so Bob (your neighbor) doesn’t mistake his driveway for yours after he gets the mail and accidentally stroll into your living room while rifling through pizza coupons and AARP ads.
The point is, it’s not just that “the rich are getting richer.” Rather, wealth creation is an exponential process for a variety of reasons, some of them mathematical. In America (and, to a lesser, albeit still alarming, extent, in other advanced economies) that process has spun out of control, to the point where even the likes of Dimon are relative paupers compared to, say, Elon Musk, whose wealth went parabolic earlier this year (the figure below was current through February 15).
This is all too familiar to regular readers. For new readers, I’d emphasize that the point is not to suggest that capitalism should be abandoned, it’s just to say that if we continue along the current trajectory, a handful of people (maybe three-dozen) will literally control all the wealth on Earth within a relatively short period of time. And by “all” I mean it. They’ll control all of it. (Note that Walmart, Amazon and Apple are all making forays into banking.)
Too often, we fail to differentiate between an abstract conversation about whether capitalism is the “best” humanist religion we’ve managed to come up with (it is) and the concrete reality that it needs to be reined in, lest we should all become equally obsolete, at least relative to people who occupy the top 25 slots on the Bloomberg Billionaires list.
Similarly, we often fail to differentiate between discussions around what I’ll call “everyday inequality” and the kind of “existential inequality” illustrated so poignantly in the chart showing Musk’s personal net worth.
It’s true that our archetypal, well-to-do suburbanite and her neighbor, Bob, are “rich” compared to residents of a housing project. Theoretically, that gap is acceptable, or even desirable, to the extent it can honestly be explained by reference to merit, versus inequality of opportunity.
Of course, that’s laughable. The idea of an American “meritocracy” is largely a myth, but let’s pretend.
That kind of inequality, if it can’t be explained by merit, admits of a theoretically simple fix: Make an honest attempt to level the proverbial playing field so that the children who grew up in the housing project have mostly the same opportunities that Bob’s children have, and then let the chips fall where they may. If we really have leveled the playing field, the problem will sort itself out in a way that’s at least a semblance of “fair” in a capitalist system that operates within well-defined parameters and with sufficient guardrails.
Again: That’s a ridiculous oversimplification, but the point is just to say that it’s theoretically doable and it’s couched in terms that most people can readily understand.
However (and you can consider this a stark warning), if capitalism isn’t reformed quickly, much of this debate will become irrelevant. A world in which three-dozen people literally control all wealth is beyond fixing. Those people (and the companies they own) will dictate the goals humanity pursues, which of those goals should be prioritized and, when innovations start to raise philosophical questions (e.g., should humans be immortal?), they’ll decide the answers.
That’s existential inequality. And it’s already here.
I’ve made this a central theme in these pages. In the grand scheme of things, Bob in his cookie-cutter McMansion, a single mother subsisting on a trio of minimum wage jobs in low-income housing and a destitute orphan clinging to life in Idlib, all “matter” about the same to Musk, Bezos, Zuckerberg and their rarefied peer group — that is, not at all. They don’t matter at all. They’re all poor. They’re all inconsequential.
Someone like Bill Gates certainly wouldn’t admit to conceptualizing of the situation that way. But try as he might, he can’t escape the reality that someone whose net worth is, say, $2 million, is pretty much on par with a refugee whose net worth is the sum total of the tattered clothes on his back, when those figures are juxtaposed with Gates’s fortune.
Ironically, we’re all “equal” in the eyes of the lord(s).
That is a terrifying state of affairs, and remedying it starts with proposals like Biden’s infrastructure plan, which would find government at least taking baby steps towards reclaiming some power from these gods. Elected government (no matter how inefficient) is at least elected, and plans like Biden’s will reassert some control over the narrative via investments in all manner of areas, some of which might not be strictly “infrastructure.” And, yes, people like Musk will benefit from the process, but at least it’s somewhat collaborative.
If people don’t wake up to the reality described so vividly by the likes of Thomas Piketty, we’ll lose complete control over our future. Biden continually talks about “winning the future,” something he says China is already hard at work doing.
He’s right, and note that part and parcel of China’s efforts in that regard is a crackdown on the likes of Jack Ma (the familiar, annotated figure below shows what happened to Ma from the time he criticized regulators in late October through the end of 2020).
Yes, that (ongoing) crackdown is in part just a manifestation of spiteful, autocratic intervention by Xi, but it’s also a tacit acknowledgement of all the dynamics outlined above.
If you don’t think this is an accurate description of the world, you’ll come around if you’re still alive in, say, 40 years, when Mark Zuckerberg is cured of cancer by nanorobots created as part of an initiative funded by Musk’s kids.
The conspiracy isn’t in Davos, folks. And it’s not in Basel, at the The Bank for International Settlements. It’s not in Washington, either. The conspiracy you’re looking for is playing out right in front of you, at the top of the Bloomberg Billionaires list.
This game of monopoly is very close to its inevitable end. Time to box it up, take it out back and burn it. It was never a good game and it never will be. If not we will all be forced to sit around the table with the gloating winner for eternity.
No one/dozen/hundred human(s) deserves to helm humanity no matter how well they won a game of skill or cunning or luck or brutality. We have likely less than 5 years until Jeff Bezos is the 7th Trillionaire in history, up there with Genghis Khan and Augustus Caesar. I suspect that’s about as close to an event horizon as you get.
There are about 615 billionaires in the USA, who have aggregate wealth of about $4T. The USD/assets held by this group, for the most part, does not circulate through our domestic economy. There are also USD held by “foreigners” who are also very wealthy people and these USD, also for the most part, do not circulate in our domestic economy.
So far, Congress has handed out about $4T in various stimulus packages in 2020/21. Interesting that it equals the amount held by US billionaires, although doubtful there is a correlation.
A progressive estate tax would bring those USD sitting largely idle in the hands of those 615 individuals back into circulation.
Will Congress do that? They would upset so few people (615)?
Need a wealth tax. It would kick in immediately rather than waiting for Bill, Elon et al to pass on. Second it is much easier to plan to avoid taxes triggered on a single event than a simple tax based on one’s net worth as an economic reality. I’m sure there would still be some avoidance but it would be more difficult.
As Herbert Stein tod a congressional committee in 1986: “If something cannot go on forever, it will stop” (see Bourbons, Romanovs).
And the result is (what has ended up being) the definition of violent, political revolution. This is a future where people are not the change they seek whereas now people are not the capital they think they seek to be.
Capital disproportionately generates capital and that’s a weakness of capitalism as it’s currently practiced and that generates extremes in unequal wealth distribution. Capitalism needs to be reimagined so that a larger proportion of capital flows to labor and therein lies the issue that has driven the search for alternative economic systems through the ages. We may be past the time when an individual can write a book and spawn a new type of human governance. If so, is it possible for humans to do this in groups as large as a nation? That question does not give me the warm and fuzzies. Homo Deus anyone?
America is hollowed out. No new ideas. No purpose. No plan. People are confused.
All the while, America has been run into a ditch. The elites just didn’t care. America doesn’t matter to them except as a vessel to extract wealth from, from both the land and the people, including all of us reading these fine articles.
One observation that never seems to strike Americans after they return to America, after, say a visit to a European city, is why there are heavy, iron grilles and bars, however ornamental, on first-floor windows of many government buildings and residences. Gee, let me see, why would that be?
Even recent edition “official” buildings seem somewhat fortified, maybe easy to defend, and have more mass at street level.
A specific example of this is next time one is in London, walk through The City, and knock on the stone, at street level, of the newer buildings. The building is steel and concrete at it’s core and not with a thin, stone veneer skin.(Sure, they realize in London that building is expensive, best to do it right the first time.) A knock on the veneer of similar-purpose building in America rings thin.
I try not to get depressed about this stuff.
Very well written article. It should be outside the paywall. Hint hint.
It’s interesting to think about what would have happened had we not had the antitrust laws of the early 1900s.
We would all today be working for the descendants of Cornelius Vanderbilt. And by all of us, I mean all of us, including Bezos, Musk, and Gates.
We have replaced one set of monopolists with another, and it’s time that we reinvoke those same laws.
We don’t need kings today for the same reason that we did not need kings in 1776. I prefer democracy, thank you very much. It’s better than the alternative.
H
Another great post. It’s suddenly ironic to me that you refer to the Bloomberg “Billionaires List.” I remember when that list belong to Forbes. But now Bloomberg is a lot richer than Forbes so Mike gets to do the list now. Interesting.
I wish I had read this post about two hours ago because I sent the same general sentiment in a rant to a former classmate who is a Trumpist conspiracy believer, a striver who thinks he matters to his group of political hacks without realizing that even they don’t matter to the 25 people who really count. It’s not the new world order that folks like my friend think is scary, it’s the real thing on Bloomberg’s list that is actually scary. I’m told the Indians (Hindus) have a saying that goes something like: “When elephants fight, the grass dies.” I hate being the grass. I could have saved a bunch of time this morning by sending a couple of the best quotes from this post.
Is it as simple as ‘there are just way too many people on this planet’?? And because of the overload, human induced climate change and destruction of our natural support system is going to fix the problem, because the solution is either so far from do-able that we can’t comprehend what is required, or so simple but so destructive that it shouldn’t be contemplated?? And if the last 25 people on earth each have a mountain of dollars, it won’t matter because if the environment is unlivable their money will be worthless and they will all end up like the paupers. Shame really. (Now, if there really is a God, would he/she intervene or just shrug his/her shoulders and acknowledge a failed experiment.)
This. The world is awash in wealth. And in want.
Excellent article, thanks a lot!
Thanks also for the McMansion reference, btw, I just spent abt. 1 hour browsing the truly excellent McMansionHell blog. 😉
(almost forgot that site existed)
After careful consideration, I have decided that I am not capital.