Capitalism’s Bad Behavior

I think we kind of have some aspects of socialism already: Social Security, Medicare, Medicaid, and possibly our education system for elementary, junior high and high school, our police force, our firemen, our road system. Our taxes pay towards these greater goods for society.

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Now I have to admit that I do conflate communism and socialism because of what I hear in the news. I have to pull back up notes on the two in order to discern the difference…and they still don’t seem that different. According to one site, Investopedia, both socialism and communism are on the left side of the political spectrum but communism is more hardcore, or what is deemed hard left. Communism is basically a one party state, a totalitarian state, which brooks no opposition. Socialism has a broader range of theory and can be either for or anti-market but anti-capitalist. (I’m having a hard time squaring that, but yeah I see that is possible. That may be what is going on in Norway, Denmark, and Finland.) . Both seeks to abolish social classes.

Another site, Dictionary.com, has similar definitions and portrays socialism as between democracy and communism.

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All of that brouhaha that we are becoming socialist is just a lot of noise. Most Americans probably support socialism but just don’t realize it. If you ask them if they are in favor of keeping Social Security or abolishing it, I think most would want to keep it. Same thing with Medicare: they don’t want to do away with Medicare, they want to improve our healthcare system. And some don’t realize that Obamacare is really ACA which the majority are in favor of.

No, I think what is bothering most Americans when they hear socialism is that taxes could go up for them. Norway, Denmark and Finland do have high taxes in order to support their socialistic society. (And, they are regarded as one of the happiest countries in the world. Go figure.) But more importantly, it is the wealthy and the super wealthy who are opposed because tax increases could hit their pocket books. Howard Schultz, a presidential candidate, is a prime example: he does not believe in socialism and has been speaking out against raising taxes to fund social issues such as healthcare and education. I suppose you could say the same thing about Sean Hannity and the other news media celebrities who are wealthier than the average American because they squawk so much about AOC, Bernie and Medicare or any kind of social spending.

But here’s the thing, if corporations and the wealthy continue to act badly, people will start to turn toward socialism. High income equality, wage stagnation, and offshoring/automation are pushing people toward socialist ideas or at least against capitalism.

So when companies get the largest tax cuts in history, on the theory that they would then turn around and invest in people and in the company, and instead funnel that money toward their shareholders instead of investing in their people, what do you think is going through Americans’ minds?

When drug companies push opioids or jack up drug prices 300, 400, 500%, what do you think American are thinking?

When the Wall Street companies nearly derailed our financial system back in 2008 and got away with no “punishment” but instead claimed they deserved their bonuses, how do you think Americans felt?

When Facebook keeps getting embroiled in privacy and data controversies such as Cambridge Analytica, how can there not be suspicion about big business in Americans’ minds?

The Economist has an article outlining these various bad behaviors and more in American companies and suggests America’s capitalism may be broken. Other countries have capitalism but American companies have been particularly egregious.

Such bad behaviors are making Americans more susceptible to socialist or populist ideas.

If companies want to keep capitalism, they are going to have to embrace some socialism. We need both in order to ensure some level of fairness. We need government as a counterbalance against big business and greed, but we also need capitalism because it is the engine of innovation and progress (governments can also be a force but the bureaucracy can be a hindrance.) We need both, not just one or the other. Now I don’t know what will happen to capitalism as the Fourth Industrial Revolution progresses; it seems that the drive towards automating all jobs, if it goes that far and so far the shareholder mindset indicates it will, will lead to a breakdown of capitalism – at least the American kind of capitalism.

There are some wealthy people who realize that the American form of capitalism that we’ve had since 1970’s is not working for most people. Warren Buffet, Lawrence Fink and Nick Hanauer are a couple who comes to mind. Apparently Martin Lipton is one too, although I haven’t heard anything about him. Ray Dalio, a hedge fund manager, fears that there will be an uprising, much like Nick Hanauer fears. Then there is Peter Georgescu who grew up in Romania during WWII and ended up behind the Iron Curtain. He has seen enough to know how today’s capitalism is damaging.

“People in the 50s “were influenced by a post-World War II culture that (while deeply flawed in some ways) fostered a sense of community over individuality. Corporate executives didn’t pay themselves outlandish salaries. Workers enjoyed consistently rising wages.
Things began to change after 1970s. Stakeholder capitalism – which, Georgescu says, optimized the well-being of customers, employees, shareholders and the nation – gave way to short-term shareholder-only capitalism. Profits have soared at the expense of worker pay. The wealth of the median family today is lower than two decades ago. Life expectancy has actually fallen in the last few years. Not since 2004 has a majority of Americans said they were satisfied with the country’s direction.

“Capitalism is a brilliant factory for prosperity. Brilliant,” Georgescu says. “And yet the version of capitalism we have created here works for only a minority of people.””

“A CEO Who’s Scared for America”, New York Times, David Leonhardt, March 31, 2019

And he says America is not that far off from falling apart.

So, if you want to retain capitalism, start promoting more stakeholder capitalism and invest in your people and maybe start accepting a slightly more expanded socialism a la the Nordic countries. When you get windfall in taxes, don’t just buy back stocks, invest in training and pay better wages for your people.

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Oh, and one final thing, this story is so outrageous that it is the epitome of bad behavior. This is the kind of stuff that drives people over the edge. This story tells how a billionaire from Europe is digging a hole in the cement in New York to build a basement pool, and the constant jackhammering has been going on for months, starting at 8 am every morning. People and animals are being adversely impacted by the constant noise. And the wife believes

“that all things around us have a soul, have a spirit, and participate in this world, so the tree, the wind, the air, wood, stone, animals, people – all of us share this earth…And what’s difficult is when things get knocked out of balance because man believes he’s above everything else and refuses to respect the environment around him.”

“That Noise? The Rich Neighbors Digging a Basement Pool in Their $100 Million Brownstone”, New York Times, David Margolick, April 5, 2019.

My god, that’s really rich.