Given that income and wealth inequality in America has reached record highs, only 52% of Americans view capitalism positively, and the fact that the Federal Reserve had to rescue us from economic collapse twice in just the last 13 years, I submit that capitalism in America has morphed into a system that no longer serves us well and must be restructured. While America’s brand of capitalism has enabled our growth into an economic and technological behemoth, it has also left us far from the egalitarian society our founding fathers wished for us and encouraged an accumulation of debt and a concentration of business that have left us far from secure. Given our current relative stability, we are ripe, right now, to begin restructuring in ways that enhance freedom, build dignity, advance competitiveness and improve the stability of our economy.
If anyone is inclined to not want to tinker with the status quo, consider the following. Just prior to the pandemic, when our economy was doing “Great”, 51 million Americans lived in poverty. That poverty fed not only a tragic a loss of hope, but many of our most intractable problems like crime, drug abuse, social and racial unrest, and a squandering of potential in terms of education, employment and healthcare. On top of that, income inequality worsened over the last 50 years, reaching record highs, with the top 20% among us earning more than the entire bottom 80%. America now ranks worst among our G7 allies in terms of income equality. Exacerbating this was the 2017 tax cuts that gave 83% of tax cut benefits to the wealthy. Warren Buffet and other billionaires have tried to nudge our “leaders” in Washington to rectify inequities by openly speaking about how current tax laws make their effective tax rates lower than that of their assistants.
In terms of wealth, the facts are no better. The top 5% among us now own 67% of the wealth in America, while the bottom 90% own 21%. To remedy these imbalances, we must close tax loopholes and increase tax rates on the wealthy.
While our founding fathers certainly had capitalist instincts, their concern about an “aristocracy of wealth” and their resolve to build up public education to avoid such, indicate that this is not what they wanted for us. To right these structural imbalances, and create a more egalitarian society, we must invest substantially more in public education and resource it with increased taxes on the wealthy. If the wealthy gentlemen on the Titanic could give up their places on lifeboats for women and children, it would be tragic for all if the wealthy today failed to lend an adequate helping hand up to those full of potential but unable or unaware of their ability to climb.
In terms of the structure of industry in America, the sad reality is profit motive, technology and lax enforcement of anti-competitive practices has given way to unbridled growth in business concentration. A 50-year decline in enforcement of anti-monopoly and anti-trust action by the FTC and DOJ has allowed a number of businesses to grown so big they’ve been able to dominate if not crush smaller rivals and keep fresh entrants at bay. The massive buying power, deep pockets, acquisitions, scale of operations, vertical integration, and unregulated anti-competitive behavior of publicly traded companies have often been used to drive up profits for shareholders but at the expense of small business owners. While this has happened in many industries, it’s most noticeable among mom & pop restaurants, hardware stores, bookstores, drug stores and grocery stores. Large chains can acquire or drive out competition, then reduce service and selection, and eventually raise prices. Former President Teddy Roosevelt, stalwart of the Republican Party and progressive architect of the “square deal”, would not only be appalled if he saw how American industry has evolved, he’d spur the FTC and DOJ into action.
Consolidation in the banking industry is probably the largest and most concerning part of our economy. Between 1990 and 2010, 37 large banks consolidated into four mega-banks holding $4.6 trillion in assets. Those four banks, while regulated, have been free to boost profits and bonuses through speculation in risky securities, all the while knowing they will be bailed out by the US Treasury because they are “too big to fail”. To fix this, we need Washington to start putting the good of the people ahead of the greed of the wealthy, reimpose the Volker Rule and an updated version of the Glass-Steagall Act. Reimposing these bank regulations will cause the mega-banks to start spinning back into smaller pieces and rein in the risks they are to the economy.
Finally, the composition of Boards of Directors must be improved to better reflect the interests of all the constituencies corporations serve. CEO compensation, now averaging 300 times their average hourly worker must be reined in. The awarding of stock options far below market prices has been a great disservice to shareholders, a slap in the face of employees, and must be brought under control. To more effectively bend corporate conduct to be more in-line with the greater good of all constituencies, we need to require corporate boards to include a meaningful number of representatives of employees and communities. Industrial powerhouse, Germany has effectively done this for decades and so can we.
Hopefully most of us can agree that one of the prime goals of a free and democratic society ought to be promoting a largely egalitarian society where all have a good opportunity to build a reasonably secure and healthy life for themselves and their families. If that is true, then I hope we can agree that the extreme income and wealth inequality entrenched within our economy, as well as the structural instability lying beneath the surface, warrant meaningful restructuring and supporting elected leadership prepared to make those changes.