When the pandemic has been reigned in, Tom Friedman writes that we have to have a conversation about what has become conventional wisdom over the last forty years -- socialism for the rich, capitalism for the rest:
This new consensus has a name: “Socialism for the rich and capitalism for the rest,” argues Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, author of “The Ten Rules of Successful Nations” and one of my favorite contrarian economic thinkers.
Socialism for the rich and capitalism for the rest — a variation on a theme popularized in the 1960s — happens, Sharma explained in a phone interview, when government intervention does more to stimulate the financial markets than the real economy. So, America’s richest 10 percent, who own more than 80 percent of U.S. stocks, have seen their wealth more than triple in 30 years, while the bottom 50 percent, relying on their day jobs in real markets to survive, had zero gains. Meanwhile, mediocre productivity in the real economy has limited opportunity, choice and income gains for the poor and middle class alike.
The best evidence is the last year: We’re in the middle of a pandemic that has crushed jobs and small businesses — but the stock market is soaring. That’s not right. That’s elephants flying. I always get worried watching elephants fly. It usually doesn’t end well.
We have bailed out companies that are zombies:
Sharma wrote in July in a Wall Street Journal essay titled “The Rescues Ruining Capitalism,” that easy money and increasingly generous bailouts fuel the rise of monopolies and keep “alive heavily indebted ‘zombie’ firms, at the expense of start-ups, which drive innovation.” And all of that is contributing to lower productivity, which means slower economic growth and “a shrinking of the pie for everyone.”
As such, no one should be surprised “that millennials and Gen Z are growing disillusioned with this distorted form of capitalism and say that they prefer socialism.”
In the 1980s, “only 2 percent of publicly traded companies in the U.S. were considered ‘zombies,’ a term used by the Bank for International Settlements (BIS) for companies that, over the previous three years, had not earned enough profit to make even the interest payments on their debt,” Sharma wrote. “The zombie minority started to grow rapidly in the early 2000s, and by the eve of the pandemic, accounted for 19 percent of U.S.-listed companies.” It’s happening in Europe, China and Japan, too.
During the pandemic, big countries have prospered. Small businesses have closed. As Hamlet said, "The time is out of joint."