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Is Capitalism Perfect?

Entry 2053, on 2020-07-15 at 18:58:11 (Rating 3, Politics)

One of the greatest concerns many people - especially those on the left - have with modern society is inequality. They quite rightly point out how the top 100 (or less) people have more wealth than the bottom several billion. Also, to a lesser extent, most - and possibly every - modern society is also very unequal, with a small number of people (such as Bill Gates and Jeff Bezos) owning "obscene" amounts of wealth, while so many others have next to nothing.

The phenomenon is undoubtedly real, and definitely is a problem, even if the problem is only one of perception rather than reality (see later in this post for an explanation of what I mean here). One major point of disagreement though, is what causes this inequality. The most common institution to be blamed is capitalism, but is this fair?

Karl Marx had a lot to say on this subject, obviously, and he blamed capitalism, and that is probably where the left today gets the idea from, considering how many of them seem to be proponents of neo-Marxism. So Marx was undoubtedly right about the fact of inequality, but I would say he was wrong about the cause, because I don't believe blaming capitalism is realistic.

In the past I have criticised capitalism for this exact fault. For example, I criticised capitalism in a post titled "Capitalism Sucks" from 2014-04-22 and spent a bit of time analysing the stats of inequality in "When the Revolution Comes" of 2013-03-13. Here are some points from those posts: Warren Buffet, the world's highest earner, makes $402 in 1 second, while someone on the global poverty line makes $0.0000144; and the top 1% (of high income people, shown on a graph divided into 5 categories based on income) have more wealth than all of the poor, and all of the lower middle, and all of the middle, and all of the upper middle, and a good part of the rich all put together!

Those numbers certainly seem very damning on the surface, but I do have a more nuanced view on the subject now. Actually, if you look at my blog posts from 5 to 10 years ago and compare them with today you might have noticed how I have a more nuanced view on many things now!

I still think massive inequality like we see in most modern societies is a bad thing, but I don't just jump on the good ol' anti-capitalism bandwagon any more, for two main reasons...

First, inequality has always been a phenomenon in society, even before there was capitalism in anything like the form we see today. For example, after their deaths, the upper echelons of ancient Egyptian society were buried with great riches and had massive monuments built for them (the pyramids being the most obvious example) while the vast majority of the people were poorly paid peasants (if not slaves) who got very little. That shows inequality on a scale possibly even greater than what we have today, yet capitalism wasn't involved.

For a more recent example look at the USSR. According to a paper on this subject, the level of inequality there was comparable with many western countries. Surely the Soviets could not be accused of implementing capitalism, yet inequality was an obvious part of their society. In fact an elite class was a conspicuous part of their political system.

And in more "primitive" societies there are often other mechanisms which allow one individual, family, or group to dominate others and to own far more of the available resources. In many cases this is simply physical force, and the threat of violence; and in others it might be some hereditary right, such as with monarchies. Surely it is preferable to have the ruling class determined by commercial skills rather than being born into the right family or being more violent.

My second point is this: even if capitalism results in a small number of people becoming "obscenely rich" it does seem to improve the wealth level of almost everyone. So by following capitalism instead of some other system, a rich person might have a billion dollars instead of a million, but the poor might have a thousand instead of 100. As a ratio of their income to the income of the super-rich the poor are badly off, but in absolute terms they are better off. Look at the standard of living in Soviet Russia in comparison to the US at the same time to see that this is real.

And, related to that, what is the alternative? Clearly from what I have said above, socialism doesn't work. The death toll from that is far more obscene than anything capitalism is responsible for. It seems pointless criticising one economic system if you don't have a superior alternative in mind. To be fair, it is OK to point out the problems inherent in any system, including capitalism, so we can consider what changes could be made, but until some reliable changes are identified it is best to stick with the status quo.

Note that I have concentrated on one negative aspect of capitalism here: inequality. Of course, there are many other issues as well we should be aware of, such as environmental degradation, inability to engage with societal functions which cannot provide a profit, the negative effects of inevitable monopolies, and many others. But similar arguments to what I have provided above also apply to those. We need to look at the big picture, and balance the good and the bad when discussing all of these issues.

Is capitalism perfect? Not even close. Have the alternatives worked out very well? Hell, no!

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Comment 1 (5404) by Anonymous on 2020-08-11 at 13:37:42:

Sure, it's the concentration of wealth, power, and influence in a small number of peoples' hands that bugs me. I agree that there aren't a lot of viable alternatives, and that generally things are getting better for a large proportion of the population.

But, if a smaller number of people are getting disproportionately wealthier, then that wealth needs to be taxed disproportionately and distributed to the society that purchased the products and services that are responsible for extreme wealth. We can't become a society dependant on the philanthropic moods and whims of the billionaires club.

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Comment 2 (5405) by OJB on 2020-08-11 at 14:09:29:

Yes; I think the points you make are all fair. We need a system where innovative, productive people feel rewarded when they make a contribution to society using their abilities, but which also rewards people who make other contributions which aren't traditionally compensated financially. Good luck trying to figure that one out!

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