First a disclaimer from my side, I am a capitalist and I do believe that capitalism is the best economic system we have today, all other options like socialism and communism are much worse. However, this does not mean that I am not receptive to any criticism of capitalism. Rather, I think capitalism, in its current form, needs a lot of work and it also needs to evolve with time to suit the needs of changing socioeconomic situations. Increasing inequality is one of the most common and valid criticisms that capitalism cannot ignore. It is hard to explain, why women are paid less than men for doing the same work, and how in the same society, some people have so much that they don't know what to do with their resources, and some struggle even for the basic necessities of life.
Inequality was common in ancient times when royals used to live a filthy rich life and many of their subjects used to struggle for basic needs. The royals benefited from the sweat and blood of their subjects and were rarely cared to elevate the social status of the working class. I believe we have moved away from those times, and I hope most readers will agree. I also know that socialism and communism, or any other system do not have answers to this problem, but I expect capitalism to do better than them and look for some solutions to tackle increasing inequality. Also, this is not a theoretical discussion for the sake of discussion. It sucks to struggle for money. I was on the other side, I have experienced what it means to live where money is scarce and the root of all your problems. The income gap is not just an economic issue, it becomes a social and law and order issue if not taken care of.
Until I moved to the USA, I lived in a poor neighborhood in India. Resources have always been scarce and demands were more. I remember that most of the arguments between my parents were about money, almost every problem could be traced to the lack of money. I did not realize back then that it was a structural problem, my parents were trying their best, and they worked really hard, but even after all their efforts, there was not enough to live comfortably. Even buying a tape recorder or a blender was not possible for us for many years. It seems we were trapped in a poverty trap, no matter what we did there was no way out. In our neighborhood, there were households where everyone worked, irrespective of their age and education. Even alcoholic adults and kids of all ages used to do some work that fetched some money, but they were still poor. Back then India was a socialist country and the government controlled almost everything, still, poverty and hunger were rampant, and socialism clearly didn't eliminate or even reduce poverty. There was neither enough wealth generation nor proper wealth distribution.
In most developed countries, income inequality is not the result of poor wealth generation, but a wealth distribution problem. Capitalism does a great job in wealth generation but seems to be failing miserably as far as wealth distribution is concerned. When I say wealth distribution, I am not talking about government handouts. I am not talking about so-called freebies by the government irrespective of any need or due diligence. Any populist scheme launched without proper data and due diligence is an invitation for an economic disaster. In any democracy is easy to launch beneficiary schemes, but it is extremely difficult to withdraw them as there are consequences like losing an election.
Disparate wage structure is a glaring problem with capitalism. Proportional incentives at every level are not part of the existing pay structure. The short-term gain takes precedence due to high personal rewards to executives. Nonsustainable perpetual growth to increase stock prices has become a norm, and rewards of any market success are disproportionately distributed. True, the markets should decide the compensation, but where is the bargaining power with the workers to negotiate? The big fish eats the small fish leaving only a few big players that control and dictate the market. Competition is a hallmark of capitalism, but the presence of just a few big players and a tacit understanding between them hardly create any competition. The hourly rate of any CEO is orders of magnitude higher than the hourly rate of any temporary employee. Health coverage offered to lawmakers at the cost of taxpayers' money is much much better compared to the health coverage of many citizens who work as hard as these lawmakers. It is widely perceived that business and morality do not go together. Why can't we make money and also do the right things? Why can't we increase the stock prices and distribute the income fairly? Why can't there be job stability as well as income growth? Why can't a woman get the same salary as a man for the same work? These are some of the questions for which capitalism has to provide solutions, blaming everything or leaving everything to market is not enough anymore as it is clearly not working. I hope upcoming leaders will address these issues. While being profitable, they won't hesitate to do morally right things. If capitalism remains silent about these issues, then it has no right to complain if the society leans towards socialism, after all, if you don't offer any solution people are free to consider other options. It's not too late, capitalism can address the inequality issue, the only question is does it want to?
Thank you for reading and please share your views on this topic.
© Vinay Thakur, All rights reserved, Vinay can be reached at thevinay2022@gmail.com
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