A Fading Faith In Capitalism

Wow! It has been several months since I have sat down to write something down. The semester has been very busy, and many events have occurred. There have been moments of great stress and moments of wonderful elation. I continue to grow as a person, teacher, and man. The lessons have been many and varied, but I would not trade them for anything.

Today I have renewed my desire to blog. I have realized that I just need to commit to writing. If I don’t, I won’t. You might ask, why now? What did he read to get himself going again? It was a Wall Street Journal article titled “A Fading Faith In Capitalism.” As I read it, I have to agree. The issue of economic inequality is eroding the confidence we once had in our economic system to the point that many are willing to accept something else. To me this is troubling.

The author, Tim Montgomerie, has created a very interesting argument about the reducing faith in economics. He discussed how other countries see Capitalism. He analyzed data collected by the firm YouGov for the “London-based Legatum Institute.” It appears the people in India have a high level of confidence about their future. 50% of the people surveyed felt that the next generation will “probably be richer, safer, and healthier than the last.” Thailand was next at 42%, 39% in Indonesia, 29% in Brazil, 19% in the U.K., and 14% in Germany. What I found most interesting was the data for the United States. Only 14% of the people surveyed in the United States felt like the next generation will be richer, etc.

However, as Angus Deaton argues in his book, the world is getting richer and healthier. So, is the feeling that the next generation will not be better a reality or is it a figment of a populist belief created by the media?

According to the World Bank Data, 100,000 people are being lifted out of poverty each day. Also, “natural disasters are killing fewer people and fewer crops are failing.” Hmm, in the United States our unemployment numbers are being reduced, and the numbers I saw this morning give an indication that the workforce participation rate has slightly improved. As a result the Fed will probably raise interest rates.

Despite all of this improvement, 55% of Americans think the rich get richer and the poor get poorer. 65% of us “think most big businesses have dodged taxes, bought favors, or polluted.” And only 49% of us “think free enterprise is better at lifting people out of poverty than government.” On one hand I need to ask, what would you replace a system of free enterprise with? But on the other, I have to say that these reflect very real events.

I tend to agree with Winston Churchill who once said “that capitalism is the absolute worst economic system – except for all the others that have been tried time to time.” I also share John Mackey’s concern about the “sustainability of the free enterprise system if large numbers of voters come to think of businesses as basically a bunch of psychopaths running around trying to line their own pockets.”

But what can business leaders do to change this misconception about business? First of all, business leaders need to be concerned about this. There is nothing more ubiquitous than business. As much as people want to deny this, we are all involved with the practice of exchange. Something so critical to our society must be done correctly. Business leader’s actions should reflect ethical practices. Business leaders must demonstrate responsibility to all of its stakeholders. I truly believe that if business worked at limiting pollution, we would have EPA regulation than what we have and we would have a more pristine environment. Business is not some inhuman entity it is organizations run by people.

I believe, as John Mackey does, that business should focus on both maximizing purpose and profit. I do realize that one cannot please everyone, but moving towards this type of business model is the right thing to do. Montgomerie states that Southwest Airlines, Google, and Whole Foods are three companies that are living a mission that represents a triple-bottom-line mentality. Doing and portraying a social and economic purpose will do much to repair the bad press that free enterprise has earned.

There are many examples of very large companies, and their lobbyists, that give free enterprise a bad name. And as Montgomerie properly states, “many big businesses see close connections with government as part of their purpose and as a blessing rather than a curse.” I agree with the writer because crony capitalism destroys free enterprise and its benefits. I also agree with Joseph Stiglitz who has coined the phrase “socialism for the rich,” to describe the process of government protecting the market status of certain businesses.

Montgomerie argues that the first thing needed to change the perception people have in this country about free enterprise is to ensure the same rules apply to all. I agree! “For capitalism to enjoy the public’s confidence, we need a system where the rich can get poorer as well as the poor richer.”

As I read this article I thought about Robert Reich’s movie, Inequality for All. There is this great interview with Warren Buffet who states that his paying of a 13% tax rate for his capital gains is a travesty, which I agree. The deck has been stacked for too long and we need to restore a level playing field system to the market. I do think the rich will play a role in this. They, whoever they are, will need to see their responsibility to their neighbor. Many have.

Montgomerie ends his article with the question, “Which capitalists are still popular?” Each year, YouGov attempts to identify the most popular person in the world. The last two years it has been Bill Gates, who is now known as a “transformational philanthropist.” I really like that phrase.

So what is my take away? First of all, dogmatic arguments of how we are to fix our nation, liberals saying we need to create higher taxes and redistribute income and conservatives saying we need to reduce taxes even more, have got to stop. Both of you are stupid and unless you start talking and figuring out how to do this we won’t improve. Attacking a system that has allowed so many in our country and the world to have better lives is counterproductive, but we must redeem the system from the evils that have emerged. And I used the word evil on purpose. I totally agree with Montgomerie’s concluding paragraph, “Those who are determined to restore faith in capitalism won’t just champion figures like Bill Gates and John Mackey. They will be tough on the crony capitalists who cheat emissions regulators or fix financial markets. When capitalism is seen to be both fair and effective, it can be popular again.”

We have a lot of work to do, but you know what, we can do it. I am very hopeful that we can find free market solutions to social problems, and we can have an effective government that operates as a suitable referee to ensure the game of business is played fairly.

And finally, this is my thought for the day!

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One thought on “A Fading Faith In Capitalism

  1. Great blog, good to see you back!
    The reason that only 49% of you think that free enterprise is the solution is because we need a government that saves capitalism from itself. So, I think, the answer to your question: what would we replace the system of free enterprise with? I would answer: “Democracy”. I’d like to have a similar control to what we had in the 50’s (Republican president Eisenhower) and have a meritocratic system where people can prosper and wealth can’t be passed on as it is in a feudal, royal, or the plutocratic system that leads to oligarchy. (the 0.1 %).

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