Capitalism Isn't to Blame, Failure to Grasp Its Benefits Is
A year-end review by the online publication Axios raises what seems like an age-old question: How can democratic capitalism endure when the gains of prosperity seem to accrue to a relatively small cohort in the winners’ circle while more and more people are locked outside looking in, struggling to simply hold their place?
But that question has been asked about capitalism, and answered by its extraordinary results, many times since Adam Smith authored The Wealth of Nations. Like Mark Twain, rumours of its death have been greatly exaggerated.
The truth is that the apparently disproportionate distribution of the fruits of capitalism is not a bug but a feature. The opportunities to garner large wealth, and the risk of losing it or losing out on it, drives the animal spirits that foster progress. Far more people enter capitalism’s winners circle than appear to be excluded from it. Indeed, everyone has the opportunity to enter the circle of opportunity – the problem is that many fail to grasp it. If capitalism appears to leave many behind, it is because too many people fail to recognize its opportunities or seize them.
The notion that capitalism is on the brink of foundering is not a new one, and it is not one that is restricted to the Great Recession and the Great Depression. Rather, pessimism about capitalism’s promise and potential to deliver on it was a predominant view during the Cold War, World War II, the Gilded Age, and even the post-war years of now-lionized prosperity and opportunity. Lincoln Steffens' comment about the Soviet Union that he had seen the future and it works has been banished to the ashcan of the collective vocabulary, something that prompts laughter rather than rebuttal, but at one time it represented a growing point of view. Capitalism has thrived despite some significant setbacks, considerable angst, and much state mismanagement, for a simple reason: It is by far the best and most efficient means of growing wealth and providing the economic opportunity necessary to preserve political stability.
The Axios article points out there are flaws in the system; hardly surprising given its breadth. But what economic system does not contain flaws – usually grievous ones? And if we are going to discuss capitalism’s shortcomings, shouldn’t we also cast a thought or two to what we would lose if we sought to alter it?
The article suggests that flattened wages in the developed world reflects the way the benefits of capitalism wound up getting spread across the globe, rather than being concentrated in the West. But any change in the wage structure of post-industrial countries does not signal that capitalism is failing to do its job; rather, it demonstrates that it is doing its job as we would like – by shifting capital to meet its most efficient possible utilization. Capitalism achieves that goal largely through the process of creative destruction. A technology that absorbs much human, financial and industrial capital is supplanted by a technology that is faster, better and cheaper – such as the way word processors displaced typewriters, or Netflix eclipsed Blockbuster. Both of these creative upheavals visited considerable destruction on people, communities and companies that had grown to depend on then-existing technologies. Many see clearly or feel painfully the destruction of existing jobs; what they often fail to see, or choose or to ignore, are the benefits that accrue. How many people would give up a streaming service for the return of video stores, or sacrifice their laptop to return to typewriters?
The apparent costs of destroyed jobs providing an old technology are temporary. So for that matter is the value of newly minted ones. Just as telegraphers were replaced by telephone operators, and telephone operators gave way to efficient direct dial systems, the process of creative destruction is a never ending one – constantly raising our standard of living and improving our quality of life. It also sheds jobs, but fosters new ones – or at least new ways of making a living – in their stead.
Rather than seeing a one-sided revulsion at capitalism and globalization, we are seeing a stand-off between those who clearly benefit from them, and those who apparently don’t. But no one should blame capitalism for their own failure to grasp its benefits; rather, they should extend their own reach.
