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."
Image: QuotesGram
6 comments:
It looks like you doubled up on the last paragraph there. Otherwise, good post, thank you.
I've been having that problem recently, Graham. Usually I -- or my wife -- catch it before publication. Today we both missed it.
Back when woolly mammoth roamed the Earth and I was taking ECON101, we learned that unregulated capitalism leads to monopolies. And monopolies bring enormous economic and political power concentrated in a few hands, along with economic stagnation and decline for everyone else. The Gilded Age monopolies of Rockefeller and Carnegie served as examples of large capital driving small out of business. In other words, we knew where the Reagan-Thatcher-Mulroney attack on economic regulation and unions was headed.
Now, surprise, surprise, we have a new Gilded Age, with greater social inequality and more powerful monopolies than the original one. The good news is that we know exactly what needs to be done to right the ship. Break up the monopolies and tax the hell out of the concentrated wealth they unjustly created. The bad news is that the political will to do the right thing seems to have evaporated.
Cap
That' precisely the problem, Cap. We don't lack the knowledge. We lack the will.
I believe it was John Kenneth Galbraith who said that the only form of socialism the United States would ever accept was socialism for the rich. He went on:
“One of man’s oldest exercises in moral philosophy … is the search for a superior moral justification for selfishness. It is an exercise which always involves a certain number of internal contradictions and even a few absurdities. The conspicuously wealthy turn up urging the character-building value of privation for the poor.”
The farm boy who grew up on the north shore of Lake Erie understood his adopted country very well, Mound.
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