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The Failure of Our Economic System

Greg Reeves, Staff Writer

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In our modern world, with modern people, modern machines, modern technology, everything we do is a reflection of our social, political, and economic ideologies. Each of those have their own issues, but this article will focus more on the economic ideas. In our modern economy of Capitalism, we face many issues which will become the forefront of our politics. This article’s intention, however, is not to sway political beliefs, its purpose is to bring up one of our major economic issues with Capitalism – income inequality. Income inequality causes many problems, a few examples being an unequal divide between the very rich and the very poor, the problem caused by automation, and  a very strong division of power. This is an ever worsening problem that we must have dialogue about. Both to bring up the problem, and then hopefully agree on a solution.

Throughout Capitalism’s history, there has always been an economic divide between every participant in society, however, today that divide is growing, as it has been for decades. In 1915, the richest 1 percent of Americans earned around 18% of all national income. After the Great Depression, that number dropped below 10% up through the 1970s. By the mid 2000s, the richest .1%, 1 tenth of a percent, controlled 22% of all U.S. income. The top 1% controls 40% of the entire nation’s wealth. As for the rest of the world; in 2013 the richest 85 people in the world had the same wealth as the 3.5 billion of the poorest. In 2014, that number was only 66 people. Today, that number is 8. The wealth of the richest 8 people in the world own as much as the bottom 3.5 billion. In a percentage, that is 0.000000001% of the world’s population; that owns as much as the bottom 3.5 billion. The argument for this level of inequality states that if you have really rich people, the really poor will want to be like the really rich, and therefore will work hard for a better life for themselves. However, the stated statistics disproves this idea. Other than the unfairness of this distribution of wealth, what else is the problem? The last time income inequality reached this level, the Great Depression took place. This is trouble within itself, but who was hurt? Some rich people lost some money, but their lifestyles didn’t have to change drastically. It’s the middle class and the poor who took the damage from the Great Depression, even if they didn’t participate in the stock market, they still are the ones who lost. In Capitalist theory, as a company or corporation grows, the profit is used to develop the company, by hiring more workers, expanding, giving a pay raise, whatever the board of directors decides. In theory, as the corporation grows, the money ‘trickles down’, and everyone in the corporation benefits. However, in our form of Capitalism, this is clear the theory does not work, “In 1965, CEO pay at the largest 350 U.S. companies was 20 times as high as the pay of the average worker; in 1989, it was 58 times as high; and in 2012, it was 273 times as high”. On top of all of this, the worker has been left behind, wages for the workers have remained stagnant for over 50 years, as shown in the graph provided.

Image result for cumulative growth in annual wage since 1979

This problem won’t ever go away, even when an economic crash has happened, the rich always came out on top, and with an even larger share of global wealth. Lastly, a defining trait of Capitalism is its instability, as put by economist Richard Wolff, “Capitalism has been the dominant economic system for over 300 years — It has an economic downturn every 3-7 years. Every 20-30 it’s a really bad one. Then if you look at the 1930s or the one we’re still in that crashed in 2008, you can see that instability is sometimes catastrophic in terms of its global impact.”

Furthermore, in a Capitalist economic system, automation, instead of helping us, as promised, will destroy the poorest in society, not by making all of the poor richer, but making them poor, homeless or dead. The people who will benefit are those who control the means of production, this being the owners of the company. Automation could provide for all of us, it could allow everyone to live a well-off life, but it won’t. The profit motive of Capitalists, that has been hailed by many pro-capitalists, is the exact same thing that will be their undoing. This is because production is for profit and the benefit of the ones who own the production. Albert Einstein, in a paper for the Monthly Review, worded it like this, “Technological progress frequently results in more unemployment rather than in an easing of the burden of work for all. The profit motive, in conjunction with competition among Capitalists, is responsible for an instability in the accumulation and utilization of capital…”. This isn’t to say that technological progress is a problem, but the progress in this society’s economic policies are what makes this type of advancement a problem. Automation can be one of the greatest achievements under humans, however, if we stay the economic course, it will be one of the worst results for those who do not benefit.

Even with this, arguably the most important issue is the power divide between the very affluent and the very destitute. Without any statistics, it should be obvious that wealth and power correlate together. The wealthier you are, the more powerful you are, in multiple ways, politically, socially, and economically. We’ll focus on the political aspect for now. In the U.S., we see political candidates “being bought,” by special interest groups. We see this happening where the laws are made, in Congress. This is done through lobbyists, who legally buy a vote for whoever they work for interests. This is one of the most bipartisan adaptations into our political atmosphere. No one rarely ever turns down vasts amounts of money if all they have to do is vote (or think) a certain way. The Elite class using this power because they want to. They do it for the benefit of themselves, and maybe other elites as well. When the elites invest money into our politics, they get that money out of it, in larger quantities, which allows them to invest it right back into the political system, and gain even more power. This allows for many people today to consider the United States to be an oligarchy, with the current system in place, can we really blame them? Can elections for Congress be used only as a way to appease those without true power? Democracy and Capitalism do not work together, because after a while, it’s only a matter of time before the rich find out a way to get legislation to favor themselves, instead of the masses. How do workers and middle class gain power? Historically this has been done by unions, through unions the workers fought back against the wealthy and won. But after the second World War, the Corporations pushed back, using propaganda tactics, they made Americans view unions as terrorists, socialists, and communists. This attack is still felt today, with people believing that unions destroy America, even though it is themselves who will destroy the conception of American freedom. The best example of this in a history perspective is in Germany, 1933. In January after Hitler was in power, he realized and understood that there is no way he could gain the workers obedience if workers rights existed. Due to his realization, he abolished all labor unions but one, the one that supported Hitler and the Nazis. This was the German Labour Front, they became a national organization in Nazi Germany and they controlled all wages for the workers, and all of the disputes between management and labor. The wages dropped a little bit, and the cost of living rose by 25%. The working class had no power and no organization, they could do nothing but allow this to continue. There is no better way to end this paragraph than with a quote from Tadeusz Borowski, “The world is ruled by neither justice nor morality; crime is not punished, nor virtue rewarded, one is forgotten as quickly as the other. The world is ruled by power and power is obtained with money.”

However the view of Capitalism it cannot be denied the achievements brought from it to our point in history, however, it will not bring us as far as society can achieve. Income inequality is only one of the many problems critics of capitalism recognize. It is important to note that the theory of Capitalism has a level of income inequality in it, however, this pure unfairness and unequal distribution of wealth and power in a capitalist society worries many people, on top of all of that, we recognize that money is power, and the more money you have, the more power you can obtain, and vice versa, creating a never ending power cycle. There must be a rational alternative to the blights upon our current society as we know it, or else we will face its ultimate demise.

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The Failure of Our Economic System