The socialist and the economist on capitalism

Two writers from diverse backgrounds have examined capitalism and found it wanting. Seminal books by Naomi Klein and Thomas Piketty warn that the rosy glow is off capitalism.

It was a different picture two decades ago after the fall of communism. Francis Fukuyama triumphantly announced the winner in his book The End of History. The game was over and capitalism had won.

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Not so fast says Klein. In her groundbreaking book, This Changes Everything: Capitalism vs. the Climate, capitalism looks more like a chump than a champ.

“Capitalism is destabilizing the planet’s life support system,” Klein told TV interviewer Bill Moyers. “This system of short term growth and endless profit is responsible for everything that is lousy about our society.”

While fear and greed are undeniable human traits, they are no way to live. Yet fear and greed are exactly what capitalism thrives on. “It’s not the best way to maximize the best possible outcome.”

Combine individualism with capitalism and you have an especially toxic mix. “Green messiahs” like Richard Branson promised to invest $3-billion in renewable energy over ten years in 2006. So far, only one-tenth of that promise has come to fruition.

We are told that if we each do something to save the world, we can make a difference. Yet, do you remember what you individually did to reduce acid rain? Nothing. It was international agreements reduced acid rain. If it were left to individuals to reduce the sulphur in gas, we’d be swimming in dead acid lakes. None of that feel-good, you can save the world crap worked. Changing light bulbs and greenwashing dirty oil won’t work either.

Thomas Piketty is not exactly the darling of the TV talk-circuit but his book Capital in the Twenty-First Century is equally momentous. Professor Andrew Jackson, senior policy advisor for the Broadbent Institute, compares his work with those of Adam Smith and Karl Marx.

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The French economist is no Marxist but he does warn of the inherent dangers of capitalism. While capitalism does achieve higher productivity, it does so at the cost of lower wages.  When consumers earn so little that they can no longer buy stuff, the economy collapses. Cyclical instability part of system.

What goes around comes around. We are returning to the Gilded Age of the late nineteenth century when the top one per cent owned half the wealth. That’s when the unproductive idle rich lived off inheritances passed through generations.

Now corporations sit on piles of cash while the working poor drown in debt.

Pay attention to “capital to income ratio”, says Piketty. That’s total wealth divided by annual income as measured by Gross Domestic Product. In other words, it’s an indicator of how productive global wealth is. In the Gilded age the ratio was high because a few had so much wealth that they didn’t what to do with it.

Such inequality of wealth is not only unfair, it’s inefficient and unsustainable.

Massive change is inevitable. We can be the masters of change through transformations brought about by citizens who understand collective power. Or we can be victims of climate change as we choke in our own squalor.

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